For families looking to the UK for family office capabilities, there is a variety of options available
It may be surprising to note that the family office in the UK has been in existence in one form or another for hundreds of years.
The traditional landed estate-owning clients have all maintained an 'estate office.' Examples which readily spring to mind include the Duke of Westminster's Grosvenor Estate where its vast London property empire is run from the estate office in, not surprisingly, Grosvenor Street, London. The Bedford Estate has two estate offices with one being run from Woburn Abbey, Bedfordshire (the home of the Duke of Bedford) as well as its London-based office, which deals with its London-based property portfolio.
While these entities may be called estate offices, they have traditionally provided all the functions seen in many family offices today, in so far as they deal with the principal assets of the family, they deal with family members, they deal with possibly complex holding structures and in some cases with family charitable enterprises.
The single family office
The estate office is a classic example of the single family office. This is the traditional model and for many families, still offers the ideal. It is a tailor-made invention for a single family, offering them personal services, so for the extremely wealthy or families who wish to maintain a discreet profile, it is an attractive option.
The advantages are obvious in that a made-to-measure service can be provided whether this is in terms of investment management capabilities, accounting services or the so-called concierge services (finding properties for family members, dealing with school fees, finding domestic help and so on).
Dedicated staff can be hired therefore ensuring 100% attention ' a feature valued by many families. Above all, it enables a ring of confidentiality to be placed around the family's affairs. The importance of this should not be overlooked as many families are anxious to maintain a low profile.
The disadvantages, however, are that the costs of such an office can be significant. It is not unheard of for some family offices to have annual running costs in excess of $2m plus. It needs a serious amount of wealth to justify that, particularly if the family does not need or want over-specialised services. Another disadvantage is that it is notoriously difficult o find the right calibre staff to run such entities. Families are traditionally looking for people willing to be there on a long-term basis as continuity is key. Serious players in this market often do not want that long-term tie and those who are interested often do not have the necessary management/investment skills. The need to satisfy often complex regulatory (particularly in the field of investment management) and insurance requirements may also deter some from deciding to establish their own self-dedicated offices.
The multiple family office
There are three basic types of multiple family offices.
The first is the family office led by a leading family. Usually these are the family offices set up for the original family which in turn have grown to offer services to other families. The approach adopted by many of these type of offices is that while they are happy to act for other families, such families must accept that their investments will be managed in the same way as the original family's and they will simply be tagging along.
An alternative is the family office which is led by the original family but where, for example, a third-party chief executive might be employed who would act in the interests of all the families and where different investment strategies can be adopted for the different families. An example of a family office in the UK which might fall into this category would be Sand Aire.
The final possibility is a third-party multi-family office. This is where a family office is run by an independent team of professionals with no allegiances to any one particular family. For the most part, such offices appear to be run from outside the UK for example the Marcaud organisation in Switzerland. Such an office may be more geared towards investment management issues rather than the concierge services mentioned above. A disadvantage of this type of office is that while it offers a wide range of financial services, it is not as personal and there may be a loss of the element of confidentiality.
The bank family office
More and more banks in the UK are offering family office type services to wealthy families. They generally seek to offer all the services of a bank including not only day-to-day banking facilities but also more importantly to many clients associated investment management functions.
An advantage of this type of organisation is that it will have a back office capability which may be far superior to those found in the smaller self dedicated offices. Perceived disadvantages include the potential for a conflict of interest with the investment management side of the bank and questions relating to self dealing as well the loss of direct personal service to the family and possibly a loss of confidentiality as well.
The virtual family office
This is included for completeness as such entities may well have no connections with the UK. Virtual family offices offer family office services over the internet and as such are based at sites possibly far removed from clients. The services they are likely to offer include accounting functions, tabulation and monitoring of portfolios. A subscription is paid for the use of these services with the advantage being that clients can pick and choose what services they are interested in.
They are often used in conjunction with a self dedicated family office so that the latter can undertake core family office functions in house but will use the online service provided for some of its more administrative functions. A disadvantage of this type of service is, however, of course loss of personal service and self dedicated facilities.
The optimum option?
As in the US, no single option will suit every family. Different families will have different objectives. While the range of different family offices found in the UK may not be unique, they are becoming of increasing importance to an ever growing number of families who whether for family, business, tax or other reasons want the family to be serviced from the UK.
Different types of family offices exist, each with their pros and cons and each suited to a particular type of client, from the tailor-made to the virtual offering.
An increasing number of banks are offering family office services, with the added advantage of large back office capability.
The move towards online services means global accessibility but at the cost of a truly personalised service.
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