Family Office

Charting Family Offices' Needs

Tom Burroughes, Group Editor, April 8, 2022

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What should family offices do in-house and what should they outsource? Should certain families create these structures at all, or choose another course? And what do different generations want, and need help with? This news service recently spoke to Cresset's David Fisher to find out more.

Smaller family offices need to be realistic about what they can achieve on their own, David Fisher, who leads family offices services for US-based Cresset, says.

With the profile of family offices rising and ultra-wealthy persons thinking of creating them, there’s a need to figure out whether such entities are viable for them and, if so, what to do in-house and what to outsource.

And with all the talk these days about “diversity,” perhaps the most important form is diversity of viewpoints, experience and insights. But obtaining such a spread of views involves work.

A problem with small family offices is that there aren’t many different viewpoints, Fisher said in a recent call with Family Wealth Report. “Diversity of thoughts can be limited in some cases.” 

A full-service family office, with a chief financial officer, chief investment officer, lawyers, concierge capabilities, and so on, can cost $2 million per year or more. In terms of AuM, that family office would have to run to hundreds of millions of dollars.

With these considerations in mind, some families, even if highly successful in commerce, cannot have a family office for a while, or need to think of a different institution to care for their needs. With family offices very much in the public eye – sometimes uncomfortably so – there is more focus on how and why to create them. The discipline of how to run family offices, and what they should do, is gaining traction in academia and think tanks (see a related interview on the topic here with Silicon Valley Bank). Also, more books and studies outlining what is at stake are coming out (see an example here). 

The popularity of private equity, venture capital and other “alternative” investments has helped fuel attention on the family offices space. These holders of “patient capital” are important investors into such assets. Family offices are having to be more media-friendly and in the public eye if they want to attract the hot investment managers. If they’re too discreet, they won’t be on the red carpet. 

Family offices are becoming a more common subject in the wider financial services space, Fisher noted. “It is a much more common part of the conversation”.

The continued rise of family offices makes plenty of work for Cresset. 

“We help single family offices with diligence on direct deals, whether real estate deals or operating companies. We also help to ensure that the family office is structured in a way that maximizes tax efficiencies,” Fisher said. “In addition, we provide guidance on best practices that we’ve seen across family offices on estate planning, tax planning, family governance, etc. We also provide introductions to top-tier service providers, offering access to an ecosystem for them to plug into and leverage.” 

The business of helping family offices develop now engages a raft of financial services firms. A few days ago, FWR interviewed “Big Four” accountancy and professional services firm EY about its work in the space. EY argued that families must think more like operating companies in order to hold together during upheavals and remember that their internal disagreements don’t magically vanish once a business is sold.

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