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How to Start a Family Office
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Family offices are a powerful tool for preserving and growing wealth across generations. By setting up a family office, wealthy families can take control of their assets and successfully action an investment strategy. However, it requires careful planning, a clear understanding of costs, and a defined vision.
"The mandate was to invest, get the house in order, and build a world-class, small, and nimble infrastructure. And the portfolio management system is the key to that.” – Daniel Forman, CIO
Key Takeaways
A family office will help you protect your wealth and preserve your legacy across future generations.
Creating an effective family office requires careful planning and dedication.
With the right team members and family office software, such as Masttro, you can streamline operations, gain real-time insights, and ensure efficient, secure management of your wealth.
Family Office Planning Guide
Starting a family office is a complex process that requires strategic decision-making in multiple areas, from selecting the right structure to managing investments, staffing, and technology. This table serves as a decision-making framework, helping you evaluate key factors and choose the best path forward for your family office.
Each section provides critical questions to consider, available options, and key insights to guide your choices. Whether you're determining the right office type, budgeting for operations, or planning for long-term succession, this guide will help you make informed, confident decisions.
1. Understand What a Family Office Is
A family office is a private wealth management firm that serves high-net-worth estates.
Family offices vary by purpose and scope. A Single-Family Office (SFO) exclusively manages the wealth of one ultra-high-net-worth family, offering personalized services like investment management, estate planning, and philanthropy with complete privacy.
In contrast, a Multi-Family Office (MFO) serves multiple families, sharing resources to provide similar services at a lower cost.
A family office can manage a wide variety of responsibilities, such as:
- Investment management
- Estate planning & succession planning
- Tax planning
- Philanthropy
- Travel arrangements
- Legal structures: This will give affluent families true peace of mind and free up time to focus on their careers and family dynamics.
2. Why Single-Family Offices Are Becoming More Popular
The increasing popularity of Single-Family Offices (SFOs) can be attributed to the growing complexity of managing ultra-high-net-worth families' diversified wealth portfolios. Families are increasingly investing in alternative asset classes, such as real estate, private equity, and passion investments (e.g., art, collectibles, yachts, and sports teams). These assets require specialized expertise and meticulous management, which SFOs are uniquely positioned to provide.
For Example:
Consider a multi-generational ultra-high-net-worth family with a $1 billion portfolio that includes traditional investments, such as equities and bonds, alongside a growing allocation to alternative assets.
This family owns a collection of commercial real estate properties spanning multiple countries, a private equity fund with active capital commitments, a fleet of luxury yachts, and an art collection valued at over $100 million.
Managing these alternative investments presents unique challenges:
- Real Estate: The family owns properties in different jurisdictions, requiring expertise in tax compliance, local regulations, rental income tracking, and market valuation updates.
- Private Equity: They need to monitor capital calls, distributions, and performance metrics across multiple funds, all while reconciling this data with their overall portfolio.
- Art Collection: The art collection requires meticulous documentation of provenance, insurance coverage, valuations, and a centralized repository for transaction histories and exhibition details.
- Yachts and Luxury Assets: The family must oversee ongoing maintenance costs, staff salaries, insurance, and operational expenses while tracking these assets’ financial impact on their overall net worth.
3. The Costs of Setting Up a Family Office
Launching a family office requires substantial capital and human resources. This includes direct costs, like hiring dedicated staff (an executive team of Chief Investment Officer, Chief Operating Officer, legal counsel, tax specialist, etc) and purchasing technology. The wealth owner also needs to factor in indirect costs, such as the time and energy required to put your office on the right track and set operational and governance structures. A well-defined budget plan will help you understand what you are likely to need to get started.
Here are some examples of both direct and indirect costs:
1. Direct Costs
- Staffing: Key roles like Chief Investment Officer ($300K–$500K), COO ($200K–$400K), and support staff can cost $1M–$2.5M annually. These costs can vary widely depending on experience, performance, and AUM.
- Technology: Family Office Software like Masttro ($40K–$100K) provides tools for data aggregation, document analysis, wealth tracking, alternative assets, and reporting.
- Office Space: Rent and infrastructure cost $70K–$200K annually.
2. Indirect Costs
- Setup: Governance, compliance, and workflows may cost $75K–$150K.
- Time: Recruiting the right talent and selecting and onboarding systems can take 4–8 months.
3. Estimated Costs
- First-Year Setup: $500K–$1.5M.
- Annual Operating Costs: $1.5M–$2.5M
4. Setting Clear Goals
Establishing clear goals is essential for effectively managing family wealth. These goals should address key areas such as wealth growth, asset allocation policies, risk tolerance, philanthropic ambitions, and legacy preservation for future generations. Regular family meetings, combined with professional advisory services, can help align everyone around shared values and long-term objectives.
Clearly defining your priorities – whether it's expanding your wealth, supporting charitable causes, or preserving assets for heirs – provides a strong foundation for tailored financial strategies. By documenting these objectives in detail, you can create a focused plan that ensures your family’s goals are achieved efficiently and sustainably.
Achieving your goals requires the right tools to provide actionable insights and efficient solutions. Technology plays a vital role in ensuring that family offices can access, analyze, and manage wealth data in real-time.
As Danielle Roseman, Co-Head of Lazard Family Office Services states: "With Masttro, we're able to access client info quickly and efficiently to answer client questions thoughtfully, with accurate data."
Platforms like Masttro make it possible to align your family’s goals with actionable strategies by consolidating all assets – financial and non-financial – into one secure system.
5. Build the Right Team
Complex family office operations require a team of professional staff that understand the investment objectives you have for your wealth. Most feature a variety of roles, such as accountants, tax consultants, investment advisors, and risk managers. Those with more alternative investments might need a dedicated team just to manage these financial assets as part of their estate plan. Consider each role carefully and look for investment managers with the right skills and temperament to collaborate with you to help ensure your family legacy. Outsourcing to external providers and advisors is also common.
6. Choose the Right Tech Partner
Investing in the right technology is one of the most impactful decisions you can make for your family office. The right platform not only helps you track your investment performance but also protects your wealth, reduces reliance on external advisors, and ensures compliance with increasingly complex regulations.
A comprehensive solution like Masttro is specifically designed for ultra-high-net-worth families, providing complete visibility into your wealth across all asset classes, including alternative investments. With features like automated data aggregation, customizable reporting, and advanced estate mapping, Masttro empowers you to make informed decisions with ease. Its industry-leading privacy and security protocols ensure that your data remains fully protected, giving you peace of mind.
By choosing a family office software like Masttro, you eliminate the need for multiple, disconnected systems, saving valuable time and resources. Masttro’s tailored approach ensures that the platform aligns seamlessly with your family’s unique needs, helping you manage your wealth more effectively while safeguarding your legacy for generations to come.
"I don't think there's anything out there that can equal Masttro, and you should absolutely be looking at this platform."
-Jeremy Boynton, Founder of Laureate Wealth
7. Ensure Regulatory Compliance
Compliance professionals will advise that starting a family office involves navigating a labyrinth of complex regulations. From tax obligations to legal requirements, your family office should remain compliant with all relevant regulations. Regularly audit and review your office to identify areas of improvement and ensure compliance. You don’t want to wait until a legal authority contacts you to find out that you’ve been violating regulations.
8. Plan for the Future
As with any organization, a family office must be ready to adapt to future changes. This means keeping up with emerging trends in wealth management and finance, adapting to new regulations, and embracing new technologies. You will also want to anticipate and plan for changes within your family itself, such as shifts in responsibilities or relationships. By creating a flexible, forward-looking strategy, you can ensure your family office remains a robust, effective tool for managing and growing your family's wealth for generations to come.
9. Never Stop Improving Your Family Office
Once your family office is operational, it's essential to establish an ongoing review process. This is not just about ensuring compliance with tax and legal requirements but also about identifying areas that can be improved and ensuring your family office evolves to meet changing needs and circumstances. No matter how strong your family office is at the start, there’s always room for improvement.
Establish Your Family Office on Firm Ground
Creating a family office is a significant decision that involves strategic planning and ongoing commitment. With the right planning, people, and technology, you can set up a family office that safeguards your wealth for generations to come.
How about some help?
Masttro is a wealth tech platform that gives you a fully rounded view of your assets. This platform consolidates all your financial information in one place, allowing you to exercise complete control and enjoy unparalleled transparency. Empowered by accurate, up-to-the-minute data, users can make savvy financial decisions with confidence.
Masttro's comprehensive platform covers everything from liquid and illiquid investments to liabilities and cherished assets. Users benefit from a rich array of features such as data compilation, detailed analysis, and timely reporting, all safeguarded by top-tier cybersecurity measures and stringent data protection protocols.
Masttro originated in 2010 when a family office team of wealth management experts sought to create an improved system for visualizing and tracking net worth. Over the years, it has evolved into a formidable force in the wealth tech sector. With its global outreach, Masttro now serves as a crucial technology ally for numerous family offices, wealth advisors, professional service providers, and large-scale financial institutions around the world.
Want to learn how Masttro can provide you with the best tech setup for your family office practice? Schedule time with one of our wealth tech experts.
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