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June 2008 Newsletter - Advisor's Corner: Introduction to Today’s Family Office Marketplace

Introduction to Today's Family Office Marketplace

The family office in America finds its roots in the wealth generation spurred by the American Industrial Revolution.  Families such as the Mellons, Rockefellers, & Carnegies established in-house professional teams and charged them with privately managing family wealth, time, and generational complexities. 

The fundamental reasons that families establish family offices are control and stewardship; no one cares as much about the well-being of a family as the family itself. Today, however, the term “family office” is used to describe a growing number of entities, each with a different origin, design, and cost/benefit.

Single Family Offices

Currently, Single Family Offices (SFOs) number in the thousands and are very similar to their early American counterparts. They are often designed as captive professional organizations charged with the functions of accounting, traditional investment management, direct or private investing, operation of closely held businesses, estate and tax planning, risk management, philanthropy, & various concierge services.  Frequently, they are composed of teams of seasoned professionals as most traditional household staff members lack the procedures, operational organization, and training required to successfully manage complex financial affairs.  Establishment of the office and recruitment may cost upwards of $1,000,000 initially and hundreds of thousands of dollars each year in ongoing operational expense. 

Multi-Family Offices

In recent years, Multi-Family Offices have become increasingly available as a means to reduce expenses while still benefiting from best in class service.  Multi-Family Offices (MFOs) are currently established in three different ways.  First, SFO’s often open their locked doors and invite new families in with the goal of creating operational efficiency and achieving economies of scale related to increasing assets under management.  Additionally, MFOs can be created by teams of experienced advisors specializing in all relevant areas of the trade.  These firms are built to outsource to client families much like fractional share of private jet corporations. Finally, traditional banks, brokerage firms and insurance agencies are beginning to offer upscale private solutions designed to attract the wealthiest of American families.  In any Multi-Family Office scenario, dilution of power and control potentially inhibit the concept of stewardship because of the introduction of the simultaneous goal of creating a profit center while serving the family.

Family Office Technology

Families that are not yet ready to make the step toward an MFO or SFO, or are looking for a means to improve operational efficiency of their current Family Office, may consider integrating and implementing family office technology. This technology is centered upon a centralized website designed to enhance collaboration within the family, business, or with trusted third party advisors.  Private and secure electronic mailboxes can be established to accept paper invoices or financial statements and gather electronic data feeds from available sources. From this location, current and historical records are accessible - including, but not limited to all family/business invoices, present and past copies of bills, up to date accounting software, consolidated investment account performance, a two way working online filing cabinet for personal documents and legal & tax files.  Current technology enables a family to make payments and track transactions from an unlimited number of accounts at any financial institution. These tools and the related procedures have been designed by Multi Family Offices to effectively manage financial complexity, increase efficiency, add mobility, and enhance security as demanded by their clients.  Effectually, family financial information is always up to date, instant, and available across the globe without the cost or commitment of buying into or building a Family Office.

Whether a family chooses to go the route of “do it yourself,” outsource to an established Family Office or create its own captive office, the current market place offers a wide breadth of ever evolving services that are designed to increase the ability of the family to meet its mission of furthering personal or professional pursuits.

 


Prepared by Peter Maher, Director of Family Office Services at Apogee Family Office.  For more information, visit www.Apogee360.com or contact Peter Maher at PMaher@Apogee360.com.
 
About Apogee Family Office:  Apogee is a Multi-Family Office assembled by seasoned advisors that provide services that take a truly holistic perspective. We pride ourselves on combining next-generation technology and specialized services from experienced professionals to help clients achieve financial value and peace of mind in all aspects of their business and personal lives. 
 
Our clients range from first generation entrepreneurs to financially sophisticated, multi-generational families.  Yet, as diverse as they are, they all share a commitment to investing in their families through strategic wealth planning on behalf of the current and future generations. We are honored by our client’s trust and we are dedicated to living up to it in every way.
 

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