Single-family offices serving the financial and wealth management interests of rich families have become a growing force in global markets as wealth has boomed.
In the last 10 years, the number of single-family offices managing wealth management, investing and philanthropic needs for families with at least $200 million has doubled to as many as 15,000, according to Citi Private Bank. Yet little is known about how many of these offices—managing several trillion dollars of assets—operate. Even executives who run single-family offices are often in the dark about what their peers do.
One way the veil can be lifted is by getting family office executives together, which private banks and wealth managers that serve them as advisors and bankers, try to do. In fact, many single-family office practitioners, once happy to work alone, are now eager for insights they can gain from their peers and will seek out opportunities to network with the right people, Campbell says.
“We’ve seen a significant pick up in interest in (learning) what’s working, what’s not working and how they can learn from the mistakes of others,” he says.
A familiar adage in financial services is that, “if you’ve seen one family office, you’ve seen one family office,” meaning, no two are alike. But the truth is, the operations of most family offices are very much the same, he says. Most of them have to manage investment portfolios, estate planning and philanthropy, as well as paying bills and handling legal affairs.
“Where they differ is in areas of culture and values, and in the governance biases and practices of the family,” he says.
Campbell’s insights are well-founded: Citi works with 1,100 family offices, most of them serving a single family. Most also use Citi as their primary bank, he says.
How families communicate with the offices that run their wealth management needs is one area that can differ wildly. One of the families Citi works with, for example, established a family office in a separate jurisdiction from where they lived, a practice that can provide tax advantages. The office was set up nine years ago with a staff to run it, but as of today, no one in the family has ever been there, Campbell says.
At the other extreme, a principal member of another family that works with Citi goes into his family office every Thursday, sometimes with other family members, and they cook a meal together with the staff. “Oddly enough, those are both models that work,” he says.
Citi has found families are willing to share what’s worked for them on a range of topics if they can exchange ideas with families of a similar wealth level and degree of sophistication. Two years ago, the private bank began a “family office leadership program” in New York, which includes 125 family-office executives serving the world’s “most affluent families,” Campbell says. The event has now spread to programs in Hong Kong and Dubai, and elsewhere to accommodate demand.
Because it’s difficult to cover all the topics families want to discuss, Citi is now rolling out a series of articles and white papers on nitty-gritty topics, like, “why family offices are increasingly relying upon bespoke remuneration packages to attract top executive talent” and “how grooming tomorrow’s family leaders can help preserve family wealth and influence and prevent discord in the family.”
There are a lot of “how-to” manuals on how to set up and run a family office, Campbell says, but “the nuance is in how and when to apply these concepts, and that’s what we’re tackling with these articles.”