While it’s impossible to accurately calculate the numbers and growth of single-family offices due to their penchant for privacy, there are a lot of indications that single-family offices are growing in number. Additionally, the amount of wealth being managed by individual single-family offices is likely increasing significantly. The boom in single-family offices is being fueled by the tremendous worldwide increase in private wealth. There are a number of reasons for the dramatic increase in personal fortunes from the creation of new tech fortunes to structural economic changes favoring knowledge entrepreneurs to the momentous transfer of wealth between generations. There are other pockets of extreme wealth that are adopting the single-family office model. A number of billionaire hedge fund managers, for instance, such as George Soros and Stanley Druckenmiller, have opted to shed outside monies and turn their hedge funds into single-family offices. At the same time, the single-family office model is being readily adopted by the ultra-wealthy everywhere in the world. One of the biggest factors motivating the ultra-wealthy to turn to single-family offices is the control these structures provide. According to Steffianna Claiden, founder and editor-in-chief of Family Office Review, “If it’s their office run by their people, they aren’t losing sleep over first, who’s running the show and second, what investments and other risks they are exposed to that they don’t know about.” From an investment perspective, single-family offices have tremendous appeal to the ultra-wealthy. For example, there’s little regulation enabling them to make investment decisions while remaining out of the limelight.
“Many families who feel they have not been well served by outside advisors during recent years have increasingly taken steps to upgrade the level of investment competency in their family offices and to take a much more active role in investment decisions,” explains Linda Mack, president Mack International, LLC, “In many cases, this has led to these families building direct investment platforms.” There are other reasons single-family offices are becoming normative for the exceptionally rich. “Single-family offices are very appealing because they can provide tight oversight of the professionals employed, and they often provide expanded access to business opportunities and economies of scale,” explains Richard Flynn managing principal of the family office practice at Rothstein Kass PC. “Single-family offices can also be instrumental in ensuring confidentiality for the family.” Simply put, as the very rich are getting very much richer, single-family offices are likely to multiply in number as well as the monies they control. This has all sorts of implications for professionals, including money managers seeking to do business with the ultra-wealthy, entrepreneurs looking to raise capital and charities interested in major gifts.
