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Setting Up Your Own Family Office Under an MFO

The Business of Family
Setting Up Your Own Family Office Under an MFO
By Mike Boyd • Issue #23 • View online
According to EY, a full-service Single-family Office will cost a minimum of US$1 million annually to run. For an SFO to be viable, the net worth of the family should exceed US$500 million. The annual expenses of running an SFO ranges between US$2.2 million (for a set-up with two full-time professional staff and four full-time support staff), to US$19.2 million (for larger set-ups involving at least 16 full-time professional staff and 32 full-time support staff). 
Most families who wish to set up a Family Office for the management of their wealth will turn to the MFO structure, where cost-savings are possible through the sharing of services with other families, while maintaining confidentiality.
A fully-integrated MFO provides most, if not all, of the services listed in the image below. MFOs do not hold any assets directly; they manage the family’s assets in structured entities and trusts, via Limited Powers of Attorney.

Running a Family Office that has been set up under an Multi-Family Office (MFO) involves the following:
  • Specify responsibilities 
  • Establish governance within your Family Office 
  • Implement investment governance 
  • Measure performance 
  • Build communication routines 
  • Develop an integrated governance system 
  • Preparing the next generation to oversee your Family Office
Family Offices must define what they will manage by themselves, and what they will outsource to qualified professionals. Once an MFO is engaged, the investment manager within the MFO should set the overall strategy for risk and allocation of financial assets. When necessary, the investment manager can seek expert advice from investment bankers, lawyers, and consultants.
Looking beyond asset management activities, the family should decide whether it wants the MFO to have responsibilities for financial planning, philanthropy, mentoring the younger generation, or tax and legal support. 
Some MFOs also provide management services relating to family homes and other personal assets, which are not investments. MFOs will keep profit-driven investments separate from these assets. 
Finally, to foster effective mentoring of the next generation, Family Offices set up under an MFO can use their governance bodies, such as the board of directors, as forums for sharing the knowledge of experienced family members with younger counterparts. 
For an MFO to run well, the responsibilities of two separate groups, the management group and the family members, must be clarified.
—
Source: EY Family Office Guide: Pathway to successful family and wealth management, Credit Suisse and University of St. Gallen.
“At 1-2% of active assets, don’t discount the cost of running a family office: Citi PB”, Asian Private Bank, 5 June 2018. 
Infographic:
Source: Golden Equator Wealth
Source: Golden Equator Wealth
This Week's Podcast Episode:
Dato’ Loy Teik Ngan is the eldest son of a well-known entrepreneur who built one of the largest business conglomerates in Malaysia. Dato Loy took over the rein of his family company upon his father’s demise.
Within a year, the sprawling business empire that took 35 years to build, collapsed under the weight of huge debts amidst the 1998 Asian financial crisis.
  • Dato Loy informed the bank he was indebted to, that they could either push him into bankruptcy or loan him more money to rebuild and pay back the company debts.
  • Dato’ shares his unique living arrangements, including a Family Compound of 4 family homes, a “Living Together Committee” and the process of planning their Annual Vacations.
  • The concept of a “Personal Portfolio” in creating an education plan for the family
  • Dato’ explains the concept of the “Deathwalk”, an exercise involving walking into our death, looking back at our current age, and giving ourselves the advice we would.
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Interesting links:
GRIT Acquisition Corp.
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How To Decide What Your Family Office Should Outsource
How To Decide What Your Family Office Should Outsource
For any family with $100 million or more in assets, managing those assets can be a full-time job. Having your own family office can be a good solution, but it comes with challenges due to costs. Smart outsourcing of functions and services is essential.
www.forbes.com  •  Share
SFO Conversions To Multi-Family Offices Pick Up
SFO Conversions To Multi-Family Offices Pick Up
There seem to be several main reasons for the increase in SFOs who are looking at joining an MFO. The first is ‘key person risk’. Many SFOs rely heavily on a key staff member who leads the office.
www.familywealthreport.com  •  Share
Family and Business Systems 
 - Good and Prosper Journal
Family and Business Systems 
 - Good and Prosper Journal
I continue to be fascinated by the world in which individuals, through their own initiative or the initiative of previous generations, create and maintain systems of economy that then become thoroughly intertwined with their personal and private spheres.
www.goodandprosper.com  •  Share
Stay in touch
Mike Boyd is the co-owner and CEO of the Vroom Group, Founder of Prosura insurance, Investor at Mudbrick Capital, Host of The Business of Family Podcast and an active member of YPO.
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