US Family Offices: Best Practices in Providing Financial Services to America's Most Privileged Households

September 29, 2008

Abstract

New York, NY, USA September 29, 2008

US Family Offices: Best Practices in Providing Financial Services to America’s Most Privileged Households

Family offices have been a part of the wealth management landscape for a long time, and this is not expected to change in the near future. Specific families may grow or disappear, fortunes may increase or waste away, but family offices, once established, appear to stay on the wealth management scene for an extended period of time.

In a new report, US Family Offices: Best Practices in Providing Financial Services to America’s Most Privileged Households, Celent discusses the keys to success in developing and maintaining single family and multi-family offices. The report also examines family office service providers that meet the needs of America’s wealthiest households.

The exceedingly rich are very different from the mass affluent and high net-worth households that populate 99% of America's wealth. The reason for this is the degree of their wealth. They use different products to protect and enhance their wealth compared to the less-wealthy, and are served by different delivery channels. The most unique of those delivery channels is the "family office."

This report explores the role of family offices and the wealth management community’s understanding of the family office delivery channel. Family offices come in two distinct and very different models: the single family office, serving one family of extraordinary wealth, and the multi-family office, which utilizes its infrastructure to help families of slightly less-stratospheric degrees of wealth.

So what is it that distinguishes a family office from any other species of investment manager or wealth advisor? Celent spoke with several single and multi-family offices and found that the major differentiator is the family office’s focus on multi-generational aspects of wealth. This focus is achieved by:

  • Ensuring that wealth is available to support the economic and philanthropic aspirations of ongoing generations--not just those of the immediate family of the wealth creator.
  • Supporting an abiding interest in non-financial aspects of wealth, including philanthropy and social policy.
  • Understanding and directing the entirety of the wealth--not just investments but also real estate, yachts, planes and other non-liquid elements of a top-tier lifestyle.

"While investment management may be the main focus, it is not the only reason for the family office," says Robert Ellis, senior vice president of Celent’s Wealth Management group and author of the report. "Family offices stay relevant by instilling the family with a sense of pride and mission--from the first founder through multiple generations. The causes the family adopts and espouses, the political positions the family takes, and the arts and sciences the family supports all become integrated with the family office," he adds.

This report begins by nailing down some definitions and statistics concerning the family office channel in the US, which consists of somewhere between 500 and 1,000 SFOs and 2,500 and 3,000 MFOs. It explains the rapid growth and increased attention paid to the space by a variety of wealth management organizations.

The report then identifies key capabilities and attributes that are integral to the single family office and the multi-family firm, as well as details regarding the products and product providers available to wealthy families. It discusses family office service providers, many of which are global or private banks which serve as an outsourcer for the guardian organizations of these fortunes.

The report also examines the unique technology demands of the family office. This section includes a brief review of 19 different platform systems utilized by different family offices and family office service providers. It concludes with hypotheses regarding the future of family offices in the US, as well as their impact on the entire wealth management industry.

The report is 62 pages and contains 12 figures and 12 tables.  A table of contents is available online.

Members of Celent's Wealth Management and Retail and Business Banking research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA  September 29, 2008

US Family Offices: Best Practices in Providing Financial Services to America’s Most Privileged Households

Introduction 1
Summary 6
Definition of US Family Office Delivery Channels 8
Single Family Offices 16
Multi-Family Offices 24
Family Office Service Providers 37
The Role of Technology in Family Offices 45
The Future of Family Offices 52
Conclusions 58

 

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