What Is a Single-Family Office? Structure, Costs and Setup Guide

As your family’s wealth grows and your finances become more complex, it can make sense to employ the services of a family office. A family office represents a strategic approach to wealth management for many ultra-high-net-worth (UHNW) families, helping them coordinate investments, planning and administration across multiple generations.

There are two main family office types: single- and multi-family offices. A single-family office is devoted solely to meeting the sophisticated needs of one wealthy family, while a multi-family office serves multiple families that choose to share resources and infrastructure. A single-family office team typically handles all aspects of your family’s wealth, including financial, investing and estate planning needs, saving time and effort and freeing you up to focus on managing your career, business and family obligations.

By using a single-family office, you could benefit from privacy, a high level of personalized service and more-efficient management of your personal finances and investments.

What Is a Single-Family Office (SFO)?

A single-family office is a legal entity that manages the finances, investments and personal affairs of a single UHNW family. The company offers sophisticated wealth management and financial management services centralized under one roof for maximum control, confidentiality and customization.

Single-family office staff typically includes a wealth manager or financial advisor, an estate planning attorney, an accountant, a tax professional and others as needed. The functional areas managed by a single-family office typically include the following:

• Wealth preservation
• Legacy protection and wealth transfer planning
• Tax optimization
• Family financial education
• Investment management and strategy
• Insurance and risk management
• Succession and estate planning
• Charitable giving and philanthropy
• Household budgeting and bill paying

Single-family offices are different from multi-family offices in several key areas. The biggest difference is that a single-family office manages the financial affairs of just one UHNW or high-net-worth family, while a multi-family office manages the financial affairs of a group of families. As a result, single-family offices provide the highest level of personalized service, flexibility and control.

Not surprisingly, this customization comes at a cost: single-family offices are more expensive than multi-family offices. The family is responsible for paying all costs associated with running the family office, including staff salaries and benefits, facilities and business overhead.

Who uses single-family offices?

Traditionally, single-family offices have been used by UHNW families and individuals with highly complex financial and investment needs. These include entrepreneurs, business owners, CEOs, entertainers, athletes and philanthropists.

Cascade Investments (Bill Gates), Bezos Expeditions (Jeff Bezos) and Bayshore Global Management (Sergey Brin) are some of the largest single-family offices in the United States. Using a family office allows individuals to spend more time focusing on their family, business and career interests and less time managing their financial lives.

Due to their high cost, single-family offices are typically used only by families with very high levels of wealth. In practice, they tend to make the most sense for families with at least $100 million in net worth — and often closer to $250 million or more. For families below this range, a multi-family office structure or outsourced family office is usually more cost-efficient.

Benefits of single-family offices

UHNW and ultra-wealthy families can reap a number of benefits by using a single-family office, including the following:

• Enhanced privacy – The single-family office staff works solely for your family and all matters are handled internally, helping protect sensitive personal and financial information.
• Full customization – You can decide which family office services you need, when you need them and how these services are delivered.
• White-glove service – Single-family office employees are focused on serving your family only. Their time and attention aren’t diverted to working with any other families.
• Access to expertise – You’ll have direct access to your wealth advisor, estate planning attorney, accountant, tax professional and other professionals whenever you need to speak with them.
• More control – You can handpick employees who are best suited to meet your family’s wealth management needs while controlling all aspects of family office operations and governance.

Single-family office offerings

Single-family offices provide a wide range of comprehensive services to support UHNW families and help protect their family wealth, including the following:

• Investment strategy coordination –Your investment advisor will work with you to develop and implement investment strategies that align with your family’s goals, risk tolerance and time horizon. Coordination across accounts, entities and structures helps ensure consistent portfolio management.
• Wealth preservation and legacy protection – Single-family offices use sophisticated strategies to help protect and preserve family wealth across future generations. These strategies may include portfolio diversification, asset protection structures (e.g., trusts) and insurance planning, along with succession planning to support any family business interests.
• Tax planning and optimization – Effective tax optimization requires year-round planning, not just a once-a-year meeting. Coordinating income recognition, tax-loss harvesting and charitable giving can all play a role in minimizing tax liabilities for UHNW families.
• Estate planning and wealth transfer – Single-family offices often utilize sophisticated trust structures and wealth transfer techniques to help minimize gift and estate taxes in order to preserve family wealth for future generations.
• Philanthropy and charitable giving – Philanthropy services help you support your favorite causes while aiming to maximize your giving impact and family legacy.
• Family governance and education – A thoughtful family governance framework can sustain family harmony, align family values and help prepare younger generations to become good stewards of family assets. For more detail on governance frameworks for family offices, see Creative Planning’s family governance services.

Single-Family Office Structure, Costs and Team

Single-family office structure will determine how responsibilities are delegated, risk is managed, taxes are optimized and control is enforced. Choosing the right family office structure is critical for regulatory compliance and efficient operations. Single-family offices can be structured as corporations (Subchapter C or S), limited liability companies (LLCs), limited partnerships (LPs) or trusts.

LLCs tend to be the most common legal structure, due to their flexibility and liability protection. Personal and business liabilities are separated, which helps safeguard family wealth. LPs are also popular. With this structure, general partners assume liability while limited partners receive liability protection up to their investment amount.

With a trust, a trustee manages family assets for beneficiaries according to the terms of the trust agreement. This arrangement can offer tax advantages while shielding assets from creditors and supporting long-term wealth transfer goals.

The cost of running a single-family office typically starts at around $1 million per year, which generally makes them feasible for families with at least $100 million in net worth. These costs include operational, administrative, staff, facility and technology expenses.

Single-family offices are usually headed by a managing partner or CEO, who devises and executes strategic plans that support the family’s objectives. Other executive leadership roles include the CFO, who devises fiscal strategies and oversees investments, and the COO, who oversees family office operations. Support and advisory roles usually include:

• Chief of staff
• Executive assistant
• Wealth manager
• Tax advisor
• Trust officer
• Investment advisor
• Philanthropy manager
• Operations manager

Some affluent families also explore a virtual family office or outsourced model, which can offer many of the same services with lower fixed costs and a more flexible team structure.

Setting Up a Single-Family Office: A Guide

While every family’s situation is unique, there are a few common steps involved in setting up a single-family office. These include defining the vision and purpose, determining key stakeholders, setting goals, establishing governance structures, choosing a legal structure, creating an operational framework, testing systems and processes, and launching the family office.

It’s critical to work with experienced advisors when setting up a single-family office to help ensure clear governance and compliance with all laws, rules and regulations. Creative Planning’s overview, Your Guide to Family Office Planning, can be a helpful starting point when evaluating family office services and structures.

1. Assess goals and governance

The first step to setting up a single-family office is to set goals for what you want the family office to accomplish. For example, do you want to preserve family wealth and protect your legacy or prioritize investment growth and wealth transfer? Prioritizing your goals helps identify the focus of your single-family office.

A strong single-family office governance structure can provide rules and collaborative processes that sustain family harmony, steward family wealth, foster unity and support open communication. Your governance approach may include creating a family council, drafting a formal family constitution or organizing family assemblies to give every family member a voice. Creative Planning’s dedicated family governance services can help design these frameworks for wealth management clients.

2. Build a team and establish the framework

Your goals will dictate which staff positions listed above you’ll need to fill for your single-family office. You’ll also need to determine what kinds of facilities, technology solutions and outsourced contractors you’ll need to operate your single-family office successfully.

Drafting a formal business plan can help you build out the framework for your single-family office. Your plan should define your mission, outline operational processes and workflows, project costs, detail job descriptions for key staff members and address risk management, tax reporting and compliance.

3. Implement and launch

Before implementing and launching your single-family office, stress-test your infrastructure and systems to make sure everything works properly. This is especially critical for your IT systems, which should include strong protections against cyberthreats and support accurate reporting and consolidated asset views.

Once testing is complete, it’s time to launch your single-family office, perhaps using a phased approach. Review your people and processes regularly, and make changes as your family’s circumstances and needs evolve over time. In some cases, you may find that combining a single-family office with thoughtfully outsourced advisory services or risk management support is the most efficient way to meet your objectives.

Challenges of Single-Family Offices

Single-family offices today must navigate various challenges ranging from regulatory compliance to cybersecurity. Here are a few of the top challenges faced by single-family offices:

• Succession planning – Ensuring a smooth leadership transition from one generation to the next can be complicated, especially when one or more businesses is involved. It’s important to begin the succession planning process early so that the next generation is well prepared for their responsibilities.
• Governance and family dynamics – Strong family governance promotes transparency in reporting and management, helps reduce conflicts among family members and helps preserve family wealth for future generations.
• Education and engagement – It’s critical to get the next generation of your family actively engaged in the wealth management process so that they’re prepared for future responsibilities.
• Regulatory compliance – You must remain knowledgeable about rules and regulations governing family offices. Depending on your structure, you may be subject to a range of requirements, and failure to address them can threaten your family’s assets.
• Data security and technology – Cyberthreats continue to evolve. To stay ahead, your single-family office must invest in appropriate technology and cybersecurity measures to help protect sensitive personal and financial information.

For additional perspective on efficiency and risk, Creative Planning’s insights on enhancing family office efficiency with outsourcing and broader risk management can be helpful.

Frequently Asked Questions About Single-Family Offices

How much wealth do you need to start a single-family office?

Due to the high cost of operation, single-family offices are typically used by only the most wealthy UHNW families. This is generally defined as families with at least $100 million in net worth, although $250 million in net worth can make running a single-family office more cost-effective.

What does it cost to run a single-family office?

The cost of running a single-family office generally starts at around $1 million per year. For a larger single-family office with broad capabilities, the annual cost may reach $10 million or more. This cost generally ranges between 30 and 120 basis points of assets under management. Common expenses include staff, physical infrastructure, legal and compliance fees, and technology.

How is a single-family office structured?

We’re Here to Help

Creative Planning understands that family office planning represents one of the most important steps your family can take to secure your financial future and legacy. Our experienced team offers comprehensive wealth management and family office services, providing coordinated advice, specialized expertise and access to resources that can help you evaluate whether a single-family office, a multi-family office or Creative Planning’s family office-style advisory relationship is the right fit for your situation.

Schedule a private consultation today to explore how Creative Planning can help you clarify your options, coordinate with your legal and tax professionals as needed, and align your overall wealth strategy so that it supports your family’s needs across generations.