Creating a fortune is a challenge. But preserving it over many generations is often an even greater task.
To overcome this challenge, forward-thinking families seek the support of family offices.
In general, family offices offer comprehensive financial and administrative services ranging from asset investments to tax planning and succession issues.
The choice between a Single Family Office (SFO) and a Multi Family Office (MFO) depends on several factors, including the amount of assets, the desired level of control and exclusivity, and the willingness to invest in independent management.
In the following article we look at the key features as well as the advantages and disadvantages of both models.
Single Family Offices (SFO)
An SFO is run on behalf of a single family and is tailored to their specific needs and objectives. Services often include investment management and monitoring, inheritance and succession planning, and lifestyle services, all individually tailored to the family's requirements.
Advantages:
Tailored Solutions
Because the SFO works exclusively for a family, it can tailor services to the family's specific needs and values while maintaining long-term, personal relationships.
Full Control and Flexibility The family has complete control over investments and can directly influence strategic decisions without external influence. This allows for targeted and sometimes riskier decisions to be made that seek long-term returns without being dominated by the pressure of short-term results.
Utmost Discretion Since an SFO does not serve external clients, discreet and confidential transactions are better guaranteed.
Disadvantages:
High Costs The administrative costs of an SFO are significant, especially when the assets under management are smaller. The fixed costs of an SFO often amount to around 1% of total assets and increase significantly with more comprehensive services.
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Operating Expenses and Resource Requirements An SFO requires extensive infrastructure and skilled staff, which requires regular investment in staff and technology to keep pace with changes in asset management.
Multi Family Offices (MFO)
An MFO offers a wide range of services to multiple families. It is often a specialized platform with experienced professionals in areas such as investment management, legal advice and tax planning. These services are efficiently distributed across multiple clients, resulting in lower operating costs per mandate.
Advantages:
Cost Savings Because services and resources are shared among multiple families, an MFO often offers a more affordable option than an SFO, especially for families with medium to high net worth but who do not have very specific needs.
Diversified Expertise Families benefit from a team of experts offering broad expertise in various areas of asset management. In addition, MFOs often have access to special investment opportunities such as private equity, real estate funds or hedge funds that may be difficult for individual SFOs to access.
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Scalability and Flexibility By serving multiple clients, an MFO can expand its range of services and available experts as needed, thus responding to the individual needs of its clients.
Disadvantages:
Less Exclusive Control Because multiple families are served, the services provided are standardized and there is less flexibility in customization. The family must adapt to the MFO's overall decisions and processes and therefore has less influence.
Potential Conflicts of Interest In an MFO, larger mandates may receive more attention. In smaller MFOs, this may mean that other families receive less support and the relationship is less personalized.
From What Assets Does an SFO Become Worthwhile?
The decision to establish a single family office (SFO) is only worthwhile if assets exceed approximately 100 - 150 million Swiss francs. The high operating costs, which amount to around 1-2% of the assets under management each year, require a certain minimum size in order to be able to work efficiently and cost-effectively.
Conclusion
A single family office serves a single family and provides exclusive, customized services. This type of family office is particularly suitable for families who are willing to allocate substantial resources to the management of their assets and want to retain full control over their decisions.
A multi-family office, on the other hand, serves multiple families and offers specialized services distributed across multiple clients, resulting in lower costs and a diversified offering of experts and investment opportunities.
Most clients with assets of up to around CHF 150 million are in excellent hands in a multi-family office.
Alternatively, independent asset managers are also an option - a topic that we will cover in detail in one of our next insights.
Do you have any questions or would you like personal advice on the topic of single family office vs. multi family office? Get in touch, we will be happy to advise you.
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