A single family office (SFO) is a private, stand-alone business entity created to manage the financial and personal affairs of one wealthy family. It exists to professionalise the management of that family's own wealth, protect it across generations and align every activity to a long-term purpose. Family offices have become a serious force in global finance: recent estimates suggest global family office assets under management have surpassed the one trillion dollar mark. This guide explains what a single family office is, how the structure works, what it costs to run and how to decide whether it is the right model for your family.
Single family offices have always been seen as the gold standard for professionalising private wealth, but they are not the right fit for everyone. You need to think about why you want to do it, what the office is actually going to do for you, how you see it operating and how hands-on or hands-off you want to be. Only then can you decide whether it is the right choice.
Francois Botha, Founder of Simple
The rise of the single family office
The idea behind the single family office is far older than most people assume. It long predates the Industrial Revolution and can be traced back to the households of ancient Greece. The Greek oikos was not simply a home but a complete unit of economic and family life, run by a steward who oversaw its affairs: trade and investments, property, and the education and training of the next generation. This was the stewardship of private wealth as a professional discipline, built around clearly defined roles and a shared, long-term purpose. Seen this way, the modern family office is a new name for a very old idea.
The concept resurfaced through the merchant families of the Industrial Revolution and took its modern, stand-alone form in the twentieth century. The financial capital managed by a single family office is the family's own. Over the past couple of decades, the number of single family offices has grown sharply across the globe. Single family offices may not be as well known, or as well understood, as large companies and brands, but they are becoming a commercial force to be reckoned with. These entities are actively engaged in business and are linked to many of the biggest recent private equity deals. They also play a significant role in the community and society as a whole as they increasingly focus on their legacy and social impact.
The key drivers of single family office growth
The new millennium has given rise to a sharp growth of the single family office sector, with most family offices having been established post-2000. This trend correlates with a surge in new wealth creation in both traditional wealth hubs and emerging markets over the past two decades. A great deal of this new wealth has come online through liquidity events: founders selling industrial and operating businesses and, increasingly, a wave of technology entrepreneurs. Many of these tech founders were themselves backed by family offices, and go on to establish their own once their ventures are sold. Much of this new wealth can also be attributed to the wave of new technologies and digital innovations. But there are other factors at play which have fuelled the family office trend:
Complexity: The business landscape has become far more complex in recent times, especially in the regulatory, tax and wealth management space. Investment strategies have to be more flexible and informed, keeping pace with accelerating change and shifting market dynamics. Over time, families also become more complex and multi-layered and, with new generations entering the mix, succession and wealth transfer challenges have emerged.
Risk: New risks have emerged in the modern world of business, making generational wealth preservation an increasingly challenging task. Low interest rates, volatile financial markets and unstable geo-political conditions all contribute to the need for sophisticated risk management processes. The new era of technological advancement has also been a major disruptive force, wealth being created and lost faster than ever before. In this digitised environment, cybercrime has flourished and social media has become a reputation minefield.
Purpose: In line with a broader global trend towards environmental and social consciousness, families are increasingly focused on achieving a lasting legacy, built around an overarching and unique purpose. Achieving a positive and specific impact requires the right expertise and an active investment strategy that extends beyond traditional investment products.
Privacy: We live in an increasingly digital world where information is shared and spread faster than ever before. Not surprisingly, privacy breaches are often the reason for significant reputation damage to wealthy families. The growing demand for transparency and the heightened interest in the people behind big brands and businesses have blurred the lines between personal and professional and, therefore, families are placing a higher priority on confidentiality.
Is a single family office the right option for you?
Although a single family office structure provides a high level of privacy, confidentiality, customised services and an aligned investment philosophy, it is expensive to run, and there is no single agreed level of wealth at which it starts to make sense. The figures cited across the industry vary widely. In some cases a single family office can be justified from around US$50 million to US$100 million in assets, while other advisers point to US$250 million, US$500 million or more before a fully staffed office is worthwhile.
Two things drive that range. The first is the cost of running the office. Staff, technology, premises and compliance are largely fixed, so the more assets they sit across, the more affordable they become as a share of the family's wealth. These costs are being pushed in both directions at once, rising as families bring more capability in-house and falling as technology and outsourced services mature. The second is the minimum ticket size required for certain investments. Access to top-tier opportunities once meant large commitments to traditional two-and-twenty funds, which pushed the threshold higher. That is changing: ETFs, lower-cost vehicles and the growth of direct investing and co-investment have widened access, so the level of wealth needed to invest well is no longer what it was. Other factors to consider include:
- Complexity of family structure and number of generations served
- Complexity of family investment holdings
- Types of services required
- Level of control required over family investment decisions
- Importance of family legacy and purpose
- Family harmony
A due diligence process is required to assess whether or not to go ahead with creating a single family office. It is recommended that you employ the services of an expert advisor to guide you through this process.
Single family office vs multi-family office
A multi-family office is a business that primarily provides wealth management services to a group of affluent families. It is a good option for affluent families with less complex requirements who are looking for a more cost-effective alternative to a single family office. With this set-up, a family gives up some of the control, independence and personal touch they would enjoy with a single family office structure, in exchange for shared costs and scale. The table below compares the two models across the factors that matter most:
| Feature | Single family office | Multi-family office |
|---|---|---|
| Control | Full control and autonomy; the family sets strategy and makes every decision | Shared control; decisions are balanced across multiple families |
| Cost | Higher; one family bears the full cost, typically US$1m to US$5m+ a year | Lower; costs are shared across families |
| Customisation | Fully bespoke to one family's needs, values and investment philosophy | Largely standardised, with some tailoring per family |
| Economies of scale | Limited; there is no pooling of costs across families | Strong; grouping families creates buying power and lowers unit costs |
| Continuity | Depends on a small in-house team, which can create key-person risk | Institutional structures spread responsibility and reduce key-person risk |
| Technology | The family must select, fund and maintain its own systems | Access to shared, sophisticated platforms maintained by the provider |
| Privacy | Highest; a single family within a dedicated entity | High, but within a shared environment |
Single family office vs multi-family office compared across the factors that matter most.
In short, a single family office wins on control, customisation and privacy, while a multi-family office wins on cost, economies of scale and continuity. The right choice depends on the family's wealth, complexity and priorities.
How much does a single family office cost to run?
One of the most common questions about the single family office is cost, and the honest answer is that it depends. How long is a piece of string? A lean office built around one or two people and largely outsourced services is a very different proposition from a fully staffed operation with an in-house investment team, and the cost reflects that. As a broad guide, single family offices commonly run from around US$1 million to US$5 million or more a year, with many mid-sized offices sitting between US$1 million and US$3 million. As a rough rule of thumb, running costs often work out at somewhere around 1% of assets under management, a figure that falls as the asset base grows.
Three factors drive the bill. Staffing is the largest: a full in-house team of a chief executive officer, chief investment officer, chief financial officer, operations manager and legal counsel, plus support staff, commonly accounts for the majority of the budget. Our family office compensation guide breaks down what these roles typically earn. Technology is the second, covering portfolio management, consolidated reporting, cybersecurity and data systems. Governance, compliance and professional fees make up the third, including legal, audit, regulatory and board costs. Many families manage this by running a lean core team in-house and selectively outsourcing specialist tax, legal and investment work.
The table below compares the typical running costs of the three main models:
| Structure | Typical annual running cost | Best suited to |
|---|---|---|
| Single family office | US$1m to US$5m+ | Families with roughly US$250m+ in AUM who want full control and privacy |
| Multi-family office | US$200k to US$800k | Families wanting sophisticated services at a shared, lower cost |
| Virtual family office | US$100k to US$300k | Families needing a lean, largely outsourced setup |
Typical annual running costs of the main family office models.
These figures are indicative. Actual costs vary widely with the family's size, the number of generations served, the complexity of the investment portfolio and the jurisdictions involved. If you are weighing up the numbers, Simple Select offers a structured way to evaluate service providers and build the right team for your family office.
The core single family office services
Prior to the 1980s, single family offices were primarily focused on investment advisory with little participation in tax planning, estate planning, philanthropy and succession planning. However, they have evolved into more sophisticated entities, shifting specialised resources in-house and offering a more comprehensive and integrated suite of services.
Investment management is still the most important function of most family offices, but established, fully developed single family offices generally offer a lot more. Below are some core services that a mature single family office could provide:
Financial and investment planning
Single family offices offer investment management services including the creation of investment policy statements, manager selection, asset allocation, portfolio construction and management and due diligence, as well as investment record-keeping and reporting. Financial planning services include budgeting and cash flow management along with bill pay and concierge services such as management of family real estate and art.
Strategic wealth management
This involves long-term strategic planning for achieving trans-generational family wealth objectives. In addition to determining long-term investment goals, strategic wealth management also entails the building of family governance structures, including family boards and councils, mission statements and constitutions.
Estate planning
Overseeing the structure and execution of the legal documents required for efficient wealth transfer. The family office is the owner of these documents, often overseeing their administration and working with those serving in any fiduciary role.
Philanthropy
Developing donation strategies as well as creating and overseeing family foundations and charitable funds. Single family offices often leverage philanthropy to engage the next generation and transfer values.
Tax and legal advisory
The services of a single family office include tax compliance, constructing a tax plan and designing investment planning strategies that consider all tax implications. The team often includes a general counsel who will ensure strict compliance with regulations pertaining to investments, assets and business operations.
Governance
Services include the development of policies and procedures as well as decision-making and dispute resolution processes. The family office defines the structures, along with roles and responsibilities, and facilitates the necessary meetings and communication plan to ensure these structures are working effectively. Succession planning is another vital governance function of a single family office, requiring knowledge sharing and training programmes to be set up.
Risk management and insurance services
An increasingly important service that involves robust risk analysis, measurement and reporting. Effective risk management would include scenario planning and response plans as well as hedging strategies for concentrated investment positions. Data security and physical security of family members would also be included in this category. Insurance requirements are assessed and policies acquired.
Other services
Although the core single family office services are usually maintained in-house, others are typically outsourced. That can be beneficial from both a cost and expertise perspective. Common examples include portfolio management, tax and legal advisory, succession and wealth transfer, and technology planning. Increasingly, families also share resources between offices: pooling back-office functions, co-investing alongside other family offices and clubbing together on deals. This sharing of capabilities and deal flow has become one of the most important ways single family offices control costs and widen their access to investments without giving up their independence.
Five practical steps to setting up a single family office
Setting up a single family office is a significant undertaking. The following five-step family office setup process helps translate a family's vision into a working operation.
1. Feasibility and business case
Considering the costs involved in creating a family office, a business case is necessary to inform the decision. A clearly defined long-term vision and purpose guides the overall plan and requirements for the family office. Staffing, governance, technology, advisory services and operations can all be mapped out, with associated costs, in support of the family vision and objectives.
2. Define structures and processes
In this step, the high-level resource plan that emerged from the feasibility study is fleshed out into a more detailed business plan, with a more accurate view of associated costs. Once the specific service requirements are mapped out, staffing requirements can be defined and role requirements outlined. Legal and tax structures as well as governance and reporting protocols need to be defined. Identify facilities, determine technology and system requirements and draw up a budget for operational and capital expenditure.
3. Build the family office
Chart all operational processes and workflows and develop a formal governance framework. Finalise job descriptions, recruit staff and sign up outsourced services. Identify, secure and set up premises. Select and secure the right technology partner for your family office.
4. Test
Ensure that your IT infrastructure, systems and processes have been properly stress-tested with plans in place to deal with cyber threats. Also ensure that your facility is in order. Contingency plans need to be in place for any major disruptions.
5. Launch and review
When testing is complete, the family office can start operating. To ensure that a family office is functioning optimally, periodic reviews of people, processes, vendors and technology are critical. Outcomes need to be regularly assessed against family goals and best practices.
Do the math
The management and preservation of significant family wealth are becoming increasingly complex and require the right leadership and expertise in place. With a clearly defined long-term ambition and a firm view of what services are required now and into the future, families can make an informed decision on whether or not to create a single family office and how best to structure it.
Thinking of setting up a single family office? Speak to our team or learn more about our services to work out whether a single family office is the right move for your family, and how to structure it if it is.