Family-run businesses are beginning to find value in operating family offices to direct their investment decisions and manage the family wealth. Family offices are structured, and operate in, a number of different ways depending on their deliverables and the preferences of the wealthy families they serve. As family businesses are the means by which many families become exceptionally affluent, coupled with the fact that family offices can, in themselves, be family businesses, it should not be surprising that there is a strong correlation between the two types of organizations.
In an international survey of 336 middle-market family firms, fewer than eight percent presently have their own family office. All of those who do report being extremely satisfied with the services they provide the family. Seven of these family offices are domiciled in the United States with the remaining 19 of them catering to non-U.S. families.
What is very telling is that more than half the families in the survey have their family businesses performing some of the services that a family office provides. According to John Bowen, founder of BSW Inner Circle, “Some wealthier families, instead of setting up a separate entity to help them address a variety of personal financial matters, use the resources of their family business. While this can be a cost effective approach, it can also potentially lead to complications. We see that, over time, with increasing demands placed on the resources of the family business, these services are spun out into a self-standing family office.” If this trend continues, over time we can expect to see more and more family offices cropping up.
What is also very telling is that subtracting out the families with family offices, about 70% of those surveyed are interested in their families having a family office. “We find that many wealthy individuals running family business are intrigued by the idea of having their own family office,” explains Rick Flynn, Co-CEO and founding partner of LVW/Flynn, and author of The High-Functioning Single-Family Office. “As we’re often asked to determine the feasibility of setting up and managing a single-family office, we find that many families would be better served by a multi-family office or a well coordinated team of elite advisors.”
It is clear that family offices have a strong appeal among the family members of successful family businesses. Very likely a relatively small percentage of these affluent families will establish their own family offices. Many more will likely engage multi-family offices. Either way, family businesses will continue to foster the boom in family offices.
As the family office world expands, get a hold of the growing family office data set with our FINTRX Family Office Platform.