With the boom in private wealth and the rich getting richer, the number of new single-family offices is keeping pace. A consequence of the boom in single-family offices is that a percentage of them are being setup badly.
According to Angelo Robles, founder and CEO of the Family Office Association, “A lot of different types of professionals are being attracted to the family office universe because of the considerable revenues they can generate working with them. We’re seeing many of these advisors take steps to help very wealthy families establish single-family offices with poor and sometimes disastrous results. Many professionals claiming expertise when it comes to setting up a single-family office are substandard, and it can be hard to separate them from the talented capable experts.”
Less than capable professionals make numerous mistakes when advising on establishing a single-family office. Often mistake topping the list is not developing a deep understanding of the goals, objectives, and agenda of the ultra-wealthy family when it comes to their single-family office. “The most effective single-family offices are results driven. The super-rich family has determined what they want to accomplish and, based on this determination, often with the help of advisors, specified what the single-family office will deliver, “ says Rick Flynn, managing partner of FFO Business Management & Family Office and author of The High-Functioning Single-Family Office. “Working this way produces a number of benefits including getting desired results, ensuring accountability, and maintaining a high level of commitment to success.”
With concrete and clear goals established, the single-family office needs to be legally established. “The best single-family offices are very structurally flexible. They are able to – with relatively minimal modifications – effectively adjust to many changing circumstances,” says Pat Rufolo, Chairman of the Private Client Services Group, McElroy, Deutsch, Mulvaney & Carpenter, LLP. “We repeatedly see extremely wealthy families needing to adapt because of business endeavors, personal matters, and adjustments to the tax code. Knowing that needs and wants will evolve, we make certain the structures we create for them are as flexible as possible.”