Family offices: wealth for the next generation
A substantial fortune requires a lot of effort, because it is a very responsible task. Are you looking for a party that has more knowledge than just asset management? A party that understands and is aware of the standards and values of a family and takes sufficient account of the future (next generation)? Then a family office is a possibility. This can support you with all your financial affairs. But how exactly does that work? Read it in this blog!
A family office takes into account the financial intentions of a specific private company or wealthy families. This organization will not only perform asset management , but also help with all the important decisions you have to make in the financial world.
What is a family office?
A family office is a financial aid that assists a specific family and helps them make important financial decisions regarding their wealth. They indicate which actions you should avoid and which actions you should take with a view to your wealth. If the company only assists one family, it is called a single-family office (SFO). On the other hand, a family office can also provide assistance to multiple families. Such a family office is a multi-family office (MFO).
A family office is a complete company and therefore there are various employees working within the organization. There is also a legal entity. The services are not predetermined, but are spontaneously devised by the family business. A number of examples of activities that are often reviewed are managing the assets regarding investments on the stock market and maintaining and purchasing real estate.
A family office is not exactly cheap: the costs will amount to about 1% of the total assets of the family business. This is the reason that many family businesses choose to start their own family office, because it is often more cost-effective. There are currently about 7,000 to 12,000 family offices worldwide.
What does a family office do?
A family office has many broader activities that are part of its remit than, for example, a private bank. For example, they also deal with the safety of the family’s assets and also think of ways in which the assets can be increased for the next generation. The family office must also concern itself with the family’s standards and values and check whether these are properly observed.
They often ensure that their clients do not have to worry about their assets and investments on the stock exchange , give sincere advice on various financial matters, and make a plan regarding the assets with a view to the next generations. So you can sit back and relax, while the family office takes care of things. The tasks of a family office can include:
- Maintaining assets and investing in shares
- Capital asset management
- Financial and legal advice
- Successor planning
- Management of assets and other products or Foundation Administration Office
- Assisting the family and monitoring standards and values
- Preparing the next generation
- Acquiring and maintaining real estate and/or art
- Assisting the secretariat
In which cases is it wise to choose a family office?
If you have a considerable amount of wealth (for example through an independent business or an inheritance) and could use some help with this, it may be a wise choice to approach a family office. If you do not manage your wealth well, you may make the wrong decisions and your wealth may decrease in value. A family office helps you invest your wealth responsibly, so that the next generation is also assured of sufficient wealth.
As the old saying goes, a family fortune can be completely used up within three generations. It is therefore crucial that you deal responsibly with your wealth and invest it wisely. It can be useful to seek help with this. After all, it is quite a task to preserve such a large fortune in good order for future generations. An objective family office supports family businesses in this challenge by:
- Putting goals on paper
- To present these objectives to the right specialists and provide this guidance
- Supervise the investments and investments
Expertise, but no financial resources
A family office unfortunately does not have financial resources at its disposal, but can fortunately offer its expertise, capabilities, knowledge and extensive social circle to the family so that the right choices can be made in a well-considered manner. It is therefore not an executive body, but an advisory body that functions as a listening ear and can offer valuable advice. The family office ensures that the right parties are introduced to each other so that the assets can grow even further and even better investments can be made.
There are three different types of family offices, which will be explained further below. There is a single family office, which is an external body that supports only one family and is therefore completely dedicated to this family. In addition, there is a multi-family office, which helps multiple clients. Finally, there is the virtual family office, which consists of an accessible team with various specialists in different areas who are supervised by a manager or coordinator.
Single family office
An organization that manages the assets of just one wealthy family is called a single family office. A single family office (abbreviation SFO) supports just one family. All employees who work at the SFO maintain close ties with the family. All services for the SFO are often provided from a BV, because this way the privacy of the family can be better guaranteed, an important condition.
Anthos Fund & Asset Management is an example of SFOs in the Netherlands. But there are about forty SFOs in the Netherlands, so you do have some choice.
Multi family office
An organization can also support multiple families in investing in shares and making investments. This is a multi-family office (MFO). The service package of such an MFO is in many cases broader than that of an SFO. This type is much newer than an SFO. An MFO ensures that your wishes, requirements and expectations are translated into the MFO’s task package as optimally as possible. The organization helps you manage assets, but can also provide advice in the field of finance. An MFO specializes in one of these services, in order to distinguish itself from other family offices. If you would like to ask an MFO for help, it is wise to clearly indicate your wishes and requirements in advance. This way, the MFO can get started on them right away!
There are a number of concrete examples of MFOs: there is the Commenda Family Office but also the Providence Capital. In addition to these providers, there are other service providers of this type present in the Netherlands.
Virtual family office
An organization can also employ various people with knowledge in different areas, so that they can assist the client as best as possible. These people are supervised by a coordinator. This is a virtual family office (VFO). A team of expert employees and advisors work here and the coordinator guides this team in the right direction. The wealthy family is assisted efficiently. All employees previously worked in various companies and were chosen because they had sufficient knowledge in a specific area. The team was therefore put together spontaneously in order to meet the client’s wishes as best as possible.
There are several reasons to choose a VFO. It is quite expensive to hire an SFO: the costs can quickly add up. In a VFO, you do not directly employ staff, but the employees work per hour and help out when you need them. You can choose which employees you trust sufficiently and consider to be sufficiently skilled: you add them to the VFO. It starts with choosing a suitable coordinator – this can help you find suitable people for your team. With your coordinator, you can put on paper what you expect from the VFO and what objectives you hope to achieve in the future. Together you can then put together your team.
A VFO has several advantages:
- Flexible staff
- Employees with a great deal of knowledge in a specific area
- The employees have a critical eye
However, there are still few VFOs in the Netherlands. In a VFO, the coordinator has a very strong position, and that can sometimes be undesirable in certain circumstances. The family has to make more effort in a VFO, something that not everyone wants.
Netherlands and family offices
The history of family offices originates from America. In the 19th century, the family of John Pierpont Morgan (a bank official) lived here and this family founded the firm Morgan House. This organization focused on the wealth management of various wealthy families. Furthermore, in 1882, the Rockefeller family started a family office, which is still flourishing today.
In the Netherlands, the phenomenon has been going on for about forty years. There are various family offices active, each supporting family businesses in a specific way, each with a unique approach. All family offices aim to manage the wealth of wealthy families and, where possible, to increase it.