How to Start a Family Office

How to start a family office? This requires you to set clear goals (KPIs), define a long-term vision, build the structures and finally test the systems and procedures. In this article, we examine this more closely. We invite you to read on.

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What Is a Family Office?

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Before we explain how to start a family office, we need to define it. A family office is a small business created to preserve and grow the wealth of a given individual (or their whole family) while maintaining the values and identities of said family. However, even this definition isn’t complete, as it applies only to one type of family office: a single-family one.

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Yet, there are multi-family offices, ones that manage the wealth of several affluent families collaborating in groups. Such offices offer less personalization but are more cost-effective and may later be turned into investment groups.

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How Much Do You Need to Start a Family Office?

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Anyone could start a family office (as long as they have sufficient experience in wealth management). Yet, for this to make sense, there need to be enough funds in play. How much do you or your family need to have in order to start a family office? Typically, over $ 50 million.

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Naturally, the exact amount may be higher or lower depending on the family's complex financial situation and the priorities of its members. You should also remember that running a family office generates costs, usually around 1-2% of the value of the assets handled.

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How to Start a Family Office?

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So, how do you start a family office? What are the steps on the way and potential challenges? Let’s focus on that now.

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Feasibility

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To begin with, you should consider whether you should set up a family office (for instance, is the value of the assets sufficient)—running one isn’t always necessary. With that ready, consider the legal aspects and the complexity of the organization.

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As we underlined (or rather, bolded) before, a family office is a business, like any other. This means that you should also define your goals before setting it up. Consider what metrics to use when verifying your office's results and set clear KPIs.

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Also, at this stage, you should think about the wealth management tools for family offices that you’ll use. This is important on two levels:

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• defining the procedures in your family office,
• calculating the costs (including the systems and the infrastructure to run them).

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Designing structures and procedures

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With all your goals set and the initial decisions made, you need to pay a bit more attention to how your family office should work. This step involves defining the procedures and structures within the office and creating a plan to support the family’s values.

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Once you have all of that in place, you can estimate how many employees you need to hire, what legal regulations you’ll need to adhere to, and what the work of your family office will look like in general. With that in mind, you can create a complete estimation of your costs and proceed with the next step.

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Building the Framework

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With a clear-cut plan, you are ready to start building your family office. This includes everything from polishing the operating model to setting up the IT infrastructure and hiring the staff.

Here, ensure that all your systems are well-prepared for cyber attacks. Cybersecurity is a key priority for family offices; hence, you should choose only those IT solutions that can provide it.

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Testing

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Having designed your procedures, you still need to verify whether they fulfill their role in practice. Therefore, before starting your family office, you must take what you already planned and test it.

Make sure that your IT systems can handle high-stress situations. Once again, ensure that they are well-protected against cyber attacks (perhaps consider penetration testing). Ensure that you have backup plans for any unpredictable situations and disruptions.

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Deployment and Monitoring

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With all of that done, you can start operating in your family office. However, you still need to monitor all the procedures and the performance of your IT systems—you must constantly improve the operational efficiency of your office and add new services when needed.

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The Takeaway

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Knowing how to start a family office, you are ready to do that in practice. Remember that it’s still a business, so you should treat it as one. If you are looking for effective IT solutions for your office, contact us at WealthArc—we will provide you with secure, AI-powered, and data-driven wealth management software tailored to the needs of your family office.

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You may also read: What to consider when choosing a wealth management tool?