In the evolving world of wealth management, the single family office (SFOs) and multi-family office (MFOs) have emerged as tailored solutions for managing wealthy families’ complex financial and lifestyle needs.
While these two structures serve similar purposes – protecting and growing family wealth – they cater to different circumstances and priorities. Below, we explore the pros and cons of each model with insights from industry leaders, including Spear’s recommended Robert Kalff, head of HSBC Global Private Banking’s family office operations, Xavier Bonna, senior private banker at Lombard Odier Group and Mike Tan, global head, wealth planning and family advisory, Standard Chartered.
[See also: Family office executives reveal the 10 biggest trends shaping the industry]
Do I need a family office?
Family offices are becoming increasingly common among HNWs. The number of firms has more than tripled over the last four years, from 1,285 in 2019 to 4,592 in 2023, according to Fundraising from Family Offices: A guide to raising capital by London-based investment data company Preqin. Single-family offices account for 59 per cent of the total.
Managing significant wealth is a highly intricate task. It requires access to top-tier investments, expertise in various financial domains, and the ability to navigate complex regulatory environments.
[See also: Are virtual family offices the future of personalised wealth management?]
Robert Kalff, who as head of family office coverage, head of HSBC Global Private Banking, works with ultra high net worth clients’ family office to help provide a coordinated and comprehensive approach to managing their wealth, says whether an individual choose an SFO or MFO is dependent on the scope of service as well as the associated cost of managing one.
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The needs of the wealthy are also changing Mike Tan, global head, wealth planning and family advisory, Standard Chartered agrees: ‘Ultimately, what a family needs in terms of structure will depend on their objectives and purpose for the family office.
Tan says as wealthy families and their assets become more diverse, family offices are ‘evolving to also become a platform for the family to exchange ideas, interact with each other, align objectives and principles, preserve family values, and develop philanthropic strategies, beyond just managing family investments and assets.’
This is reflected in the increasingly multi-location strategy adopted by families and their family offices.
‘They want to partner with a wealth manager who can support them in navigating local and cross-border financial, wealth planning and succession issues,’ Tan adds.
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Single family office (SFO): Full customisation at a cost
What is an SFO?
An SFO serves a single family, focusing exclusively on their financial, legal, and lifestyle needs. It provides a bespoke approach, allowing the family to maintain full control over decision-making.
A complete SFO setup – where a family hires its own dedicated team of professionals – is expensive and requires substantial assets to make it viable.
The cost of running an SFO averages at around 0.5-1 per cent of assets under management (AuM), meaning they only make financial sense for the most affluent UHNWs.
Xavier Bonna, Senior Private Banker at Lombard Odier Group explains: ‘A single family-office exclusively serves one family, providing highly customised management of wealth, investments, legal affairs, and philanthropy.’
He continues: ‘Dedicated exclusively to one family, an SFO offers unparalleled customisation. With complete control over decisions and policies, the family shapes services around its unique financial needs, values, and goals.’
Advantages of a single family office
Philipp Lennertz, managing partner at Lennertz & Co., highlights the autonomy and focus that an SFO provides: ‘The principal family owns and controls the office, employing a dedicated team whose sole focus is managing the family’s wealth. This offers unmatched customisation and alignment with the family’s values and goals.’
Key benefits include:
- Personalisation: Services are designed exclusively for one family’s unique needs.
- Control: The family oversees operations, investment strategies, and long-term planning.
- Privacy: A dedicated setup ensures confidentiality and minimal external exposure.
Challenges of an SFO
Despite these advantages, the SFO model comes with significant drawbacks. Running an SFO requires a team of experts – investment managers, tax specialists, lawyers – which can cost millions annually.
Families managing $1-5 billion in assets may struggle to match the expertise and deal access of larger institutions. Multi-family office offer collaborative expertise and cost efficiency.
What is an multi-family office?
An MFO serves multiple families, pooling resources to provide a wide range of services. This model is ideal for families looking for expert guidance without the high costs of running an SFO.
Tan says: ‘A multi-family office or MFO is where several families get together to utilise or use a service of a group of professionals running the MFO.
‘An MFO can be established independently by individuals who run it as a professional service for families, or a group of like-minded families can group together and form one themselves. The platform allows the family to benefit from the services of a family office, without having to invest in the personnel and staff by themselves.’
Tan adds: ‘The family can also build a single family office (SFO) for themselves in future if their needs develop and become more complex, or if the family feels that having their own exclusive platform will serve their needs better.’
[See also: Number of family offices triples in four years]
Advantages of an MFO
Families in an MFO benefit from a wide range of expert knowledge, market insights, and network effects that would be difficult to achieve independently.
While establishing an SFO can take years, MFOs are ready to begin operations immediately, providing crucial support during cash events or times of transition.
Tan says: ‘They will often enjoy collaboration and interaction amongst the families served by the MFO, and some economies of scale. This may not be a bad starting point for some families whose needs are relatively straight forward and prefer to have a platform where they can work together with other families and have economies of scale and cost advantages.
Key benefits include:
- Cost efficiency: Shared infrastructure reduces costs, with minimum fees often starting around EUR 250,000 annually.
- Access to expertise: Families gain access to specialised professionals across investment, tax, and legal disciplines.
- Network effect: MFOs open doors to elite private equity and venture capital deals, which smaller SFOs often cannot access. Lennertz points out that MFOs excel in accessing exclusive opportunities: ‘We’re one of three European investors with access to Kleiner Perkins. For smaller SFOs, no one will answer the phone, let alone let you into these top-tier opportunities.’
- Speed of setup: Unlike SFOs, which can take years to establish, MFOs offer immediate operations—a crucial benefit during liquidity events or transitions.
Challenges of an MFO
While MFOs offer compelling advantages, there are trade-offs: Families have limited influence over the office’s broader strategy and investment decisions.
Services are less tailored than in an SFO setup, which may not suit families with unique requirements.
[See also: Private credit most popular asset class for family offices]
Who should choose an SFO or MFO?
Single family offices are best for:
- Families with assets exceeding $100 million and up to $1 billion who prioritise control, customisation, and confidentiality.
- Families with complex structures requiring highly bespoke strategies.
Multi-family offices are best for:
- Families with $30 million to $100 million in assets, seeking access to expert advice and investment opportunities at a lower cost.
- Families in transition or exploring the family office model for the first time.
Finding the right balance
The decision between an SFO and MFO ultimately depends on a family’s unique needs, financial situation, and long-term objectives. For those who value autonomy and have the resources to sustain it, an SFO provides unparalleled customisation. However, families focused on cost-efficiency and access to a broad network of expertise may find an MFO a more practical choice.
In many cases, MFOs can complement SFOs, particularly in scenarios involving club deals or specialised investments.
As the wealth management landscape evolves, so too will the structures serving UHNW families.
