After guiding a wide variety of investors ranging from hedge funds to family offices over the years one of the common questions we are often asked is around the difference between a family office operated by a single family and a multi-family office which is many times misunderstood. This blog post hits on that.
Out of the gates it’s important to first clarify what exactly a family office is: Essentially, a privately held company created by a wealthy family with the intention of not only preserving their wealth but also finding creative ways to grow it in the future. This can take many forms ranging from a safe, more protective investment strategy that preserves assets to an aggressive approach looking to capitalize on what’s next.
When it comes to multi-family offices, that’s a different animal and is typically characterized by an outside firm that specializes in managing everything from facilitating deal flow and collaborations between individual family offices, including offering a wide range of financial services (financial advisors/consultants, tax professionals, etc.). More infrequently, though also deserving of the definition, sometimes wealthy families that are close and trusting of each other come together to form an alliance without outside help (aka a second/third party taking a cut that diminishes ROI).
In conclusion, the biggest differentiation between single family offices and multi-family offices is the lack of control and how to have full clarity over your future along with generations to come. If you’re operating independently and reap all of the rewards that literally equates to money in the bank versus jumping through hoops and everyone taking their cut along the way (indicative in the multi-family office world).
Hopefully this post sheds more light on the family office space and if you have any questions we’re always here to help.