There are numerous Family offices in India. But do you know there are different family office models too? Well, in this excerpt, we will look at the various models of family offices in India and their roles.
Family Office Models – Single Family Office
In its purest sense, a “single-family office” is a private company that manages the overall affairs of a single-family, including wealth management. Usually, a fully functional Single-family office will engage in all. It can even be part of those businesses, investments, fiduciary, legal, taxation, trusts and estate management of a family. This includes personal managing services such as handling household employees, purchases to the family and making travel arrangements. Most Single-Family Offices also possess a concierge function.
Family Office Models – Multi-Family Office
A multi-family office will handle the financial affairs of numerous households, who aren’t necessarily connected to one another. Just like a single-family home office, a Multi-Family Office may also manage the fiduciary, trust and estate affairs of numerous households, in addition to their investments. Some will even offer concierge services. Many Multi-Family Offices are industrial, as they market their solutions to other large families. Very few are personal multi-family offices, whereby they’re exclusive to “some selected households”, but not available to other people. As time passes, Single Family Offices frequently become Multi-Family Offices. This transition is often because of the performance of this single family office, prompting different families to push for accessibility.
Family Office Models – Virtual Family Office
Some families seek to achieve the benefits of a family office managing their own personal, business, financial and other affairs but do not wish to set up an actual company. In this case, they can opt for a virtual family office. This can be achieved by outsourcing all services to external service providers or Family Office Firms. This is more like a virtual CFO platform.
Setting up a family office in India is a difficult decision and a complicated procedure. Some families need the services of a family office. But would not have made their mind up on which among the various family office models to adopt. In such scenarios, it is typical for wealthy households to appoint an independent” Family Office Advisor”. They work with this family office advisor for the first few years so that they can derive the benefits of a family office without having to structure one.
This also works out to be the most cost-efficient among various family office models for the initial years. A good “Family Office Advisor” can be an effective bridge between the family, family’s businesses, senior management employees across geographies, auditors, lawyers, tax consultants, doctors, business associates and so on. Depending on the requirements, Family Office Advisors (FOA’s) take part in business affairs like participating in board meetings and giving their inputs or taking part in strategy meetings etc. As concerns about family struggles, unhappy separations, wealth preservation and succession planning in household businesses continue to rise, wealthy families are increasingly evaluating the benefits of appointing family office advisors for the household.
Traditional Stewardship Model
It’s believed that at least 500,000 family offices across the world still operate under the traditional stewardship model even today. While many of them are making attempts to transition themselves into the modern-day models of Single/Multi-Family Office or Virtual Family Office, it might take more time for the conservative families to evolve into the new model.