If you’re wondering whether a family office is right for you, here’s the short answer: It’s not just about how much money you have; it’s about the complexity of your financial situation. A family office – a dedicated team managing wealth, investments, and more – usually becomes practical at $100M or more, but exceptions exist based on specific needs.
Key considerations include:
- Complexity: If you manage businesses, real estate, or assets across multiple jurisdictions, a family office may help streamline operations.
- Recurring Income: You need steady cash flow (e.g., dividends, distributions) to cover the $3M–$10M annual cost of running a family office.
- Long-Term Goals: Planning for multi-generational wealth or creating a 50+ year legacy often justifies the setup.
- Control vs. Cost: A family office offers full control but is expensive. Alternatives like multi-family offices or wealth management services may suffice for simpler needs.
For $25M–$50M, multi-family offices are often a better fit. At $50M–$100M, crunch the numbers carefully. Once you exceed $100M, a single-family office may make sense, especially for complex setups.
Quick Tip: If your wealth is straightforward (e.g., index funds, a couple of homes), stick with wealth management or a multi-family office. For intricate portfolios, consider a family office.
Why the $100M Threshold Isn’t the Full Answer
The $100 million benchmark exists for a reason – it’s the point where the math generally starts to make sense. But focusing solely on this figure overlooks what truly drives the need for a dedicated family office. Sometimes, a smaller but more complex portfolio can justify the need for a family office more than a larger, simpler one.
What a Family Office Actually Costs to Run
Running even the leanest single-family office comes with a hefty price tag, ranging from $3 million to $10 million annually. On average, family offices spend about $3.2 million per year, but for those managing around $1 billion in assets, that annual cost rises to $6 million. These expenses are unavoidable.
Staffing alone – covering positions like Chief Investment Officer, analysts, and tax or legal experts – accounts for roughly 60% of the budget. Beyond salaries, there are additional costs: office space ($200,000-$500,000 annually), professional liability insurance ($100,000-$300,000), compliance and regulatory expenses ($50,000-$200,000), and technology platforms. For a $100 million portfolio, a $3 million annual cost represents 3% of total assets – manageable, but not insignificant. However, with $50 million in assets, that same expense balloons to 6% of wealth annually, which quickly becomes unsustainable.
"The cost of running a true single family office, managing substantial wealth of $1,000,000,000 or more is about $6 million annually. So it’s a substantial investment to create a true standalone single family office." – Elisa Shevlin Rizzo, Head of Family and Family Office Advisory, J.P. Morgan Private Bank
Some experts suggest the threshold for a full-fledged single-family office should be even higher. Paul Ferguson from Charles Schwab argues that a single-family office with eight or more employees only makes sense for families worth at least $1 billion. Rising costs for specialized talent – family offices now compete with hedge funds and private equity firms for top-tier professionals – have driven this shift.
These financial realities underscore a key point: it’s not just about how much money you have, but how complex your financial situation is.
When Complexity Matters More Than Net Worth
The high costs of running a family office are only justified when the complexity of managing your wealth requires specialized oversight. Research from Northern Trust highlights a truth that wealth managers often avoid discussing: complexity can outweigh the importance of total net worth. For instance, a straightforward $1 billion portfolio may not need a family office. But a $75 million portfolio with multiple operating businesses, international tax obligations, and diverse family service needs? That’s a different story.
Consider the factors that add layers of coordination: assets spread across multiple jurisdictions, businesses requiring active oversight, real estate holdings that need management, trust structures needing administration, and family members with varied needs. If your portfolio includes alternative investments like private equity, venture capital, or direct real estate (which account for an average of 45% of family office holdings), the administrative workload increases exponentially, regardless of your total wealth.
Cybersecurity is another critical concern. Twenty-four percent of family offices have experienced a cyberattack or fraud, yet 40% lack in-house cybersecurity capabilities. If you’re managing sensitive business data across multiple jurisdictions with high privacy demands, traditional wealth management services may fall short – even if your net worth doesn’t meet the usual family office threshold.
4 Questions to Determine If You Need a Family Office
Instead of simply asking, "Do I have enough money?", consider these four questions to better understand whether setting up a family office aligns with your needs. By addressing these, you can assess if the costs and complexities of a family office make sense for your situation.
Question 1: Do You Have Enough Complexity?
Start by evaluating the complexity of your wealth management needs. Count the number of jurisdictions, businesses, real estate holdings, trusts, and family service requirements you manage. If this adds up to more than 15 distinct touchpoints, traditional wealth management may struggle to handle the coordination effectively.
Create a detailed inventory of your family’s capital, including operating businesses, financial investments, real estate, trusts, and recurring income streams like dividends or distributions. The challenge grows when multiple households, generations, and assets spread across different countries are involved. If alternative investments make up a large chunk of your portfolio (e.g., 45% or more), a dedicated team becomes essential for the detailed monitoring and reporting such assets require.
Question 2: Do You Have Recurring Liquidity?
Running a single-family office is akin to managing a private business – it comes with significant annual overhead. To sustain these costs, you’ll need a steady cash flow from dividends, business distributions, or investment income. Without this, you risk asset erosion, where fixed costs eat into your wealth over time.
For example, selling a company for $50 million might prompt you to consider a family office, but without a reliable income stream to cover expenses, maintaining it could deplete your core assets. Compare your recurring income to your annual fixed costs, such as taxes, lifestyle expenses, and philanthropic commitments, to ensure the math works year after year.
Question 3: Do You Have Multi-Generational Intent?
Your long-term goals play a crucial role in deciding whether a family office is right for you. If your focus is on the next 5 to 10 years, traditional wealth management may suffice. However, if you’re planning a 50- to 100-year legacy, a family office can provide the governance and structure needed for such long-term planning.
Seventy percent of family offices prioritize preparing future generations and succession planning. With $84 trillion expected to transfer from baby boomers to younger generations by 2045, family offices often serve as hubs for educating heirs, instilling family values, and ensuring financial literacy. Around two-thirds of families have adopted formal governance or education frameworks to prepare younger members for leadership – tasks that go beyond the scope of traditional wealth management.
Question 4: Do You Value Control Over Cost Efficiency?
Family offices typically come with higher operational costs compared to multi-family offices or traditional wealth management services. However, this premium grants you complete privacy, fully customized services, and direct control over hiring and team management – without the potential conflicts of interest present in standard advisory models.
Ask yourself if the benefits of exclusive control and tailored services outweigh the higher costs. Interestingly, even some families with over $1 billion in assets choose multi-family offices, appreciating their professional infrastructure and shared expertise over the autonomy of a dedicated family office. Ultimately, the decision hinges on whether the added control and customization are worth the price for your family.
These questions offer a framework to help you align your wealth management needs with the right structure, setting the stage for the next steps in evaluating your options.
What to Do at Each Wealth Level
Using the earlier four-question framework as a guide, here’s how your wealth management strategy should adapt as your assets grow. Each stage calls for different structures, evolving from basic private wealth management to more tailored office setups.
$10M-$25M: Stick with Private Wealth Management
At this level, creating a family office just isn’t practical. For example, if you’re spending $3.2 million annually to manage $20 million in assets, the math simply doesn’t add up.
Instead, focus on working with advisors whose fees range from 0.5% to 1.5% of your portfolio. Your main goals should include tax-efficient investing, basic estate planning, and possibly setting up a trust structure. Think of this as a "Virtual Family Office" approach – outsourcing everything to external experts without forming a dedicated entity. The coordination effort is manageable and far less expensive than hiring a full-time team.
$25M-$50M: Explore Multi-Family Offices
Once your wealth reaches this range, multi-family offices start to make sense. You have enough assets to justify professional oversight, but not enough to sustain a standalone operation.
Multi-family offices offer access to specialized expertise in areas like tax planning, philanthropy, and trust administration, pooling resources across multiple families. Investment management fees typically range from 0.30% to 0.70% of assets, with additional charges for non-investment services. This shared model provides about 80% of what a single-family office delivers, but at roughly 30% of the cost. Benefits include institutional-grade reporting, alternative investment opportunities, and coordinated planning – all without the heavy expenses of running your own office.
As your assets grow closer to the next threshold, the decision becomes more nuanced.
$50M-$100M: Crunch the Numbers
This is the pivotal point where the decision could swing either way. A detailed cost-benefit analysis is essential, tailored to your specific circumstances.
Start by calculating annual operating costs. For instance, if your expenses are $4 million per year on $60 million in assets, that’s 6.7% annually – still too steep. But if you have $90 million, strong recurring income (like business distributions or dividends), and high complexity (multiple jurisdictions, operating businesses, or a large family), the numbers may work in your favor. Industry data shows that 38% of family offices managing between $50 million and $500 million outsource their investment management entirely, indicating that even at this level, a hybrid model is often more practical than a standalone operation.
Balance your fixed expenses – like taxes, lifestyle needs, and philanthropy – against the costs of running an office to ensure your wealth remains intact.
$100M+: A Viable Option for Complex Wealth
Once you surpass $100 million in net worth, a single-family office becomes a financially feasible choice. Annual operating costs of $3.2 million represent just 3.2% of a $100 million portfolio, which falls within the sustainable range of 1% to 3% of total assets.
However, even at this level, a family office isn’t always necessary. As Elisa Shevlin Rizzo, Head of Family and Family Office Advisory at J.P. Morgan Private Bank, explains:
"Family offices reflect the families that they serve… they vary widely in the types of investments they make, the types of services that they provide, how they’re organized."
Some families with over $1 billion in assets still prefer multi-family offices, valuing the professional infrastructure and shared expertise over complete control.
If your situation involves a straightforward portfolio with a couple of homes and liquid investments, a dedicated office might be overkill. But if you’re managing businesses across multiple countries, overseeing real estate in several jurisdictions, coordinating complex trust structures, and planning for multi-generational wealth transfer, then building a dedicated infrastructure becomes more justifiable. Interestingly, half of global family offices employ five or fewer people, regardless of wealth size. This suggests that even ultra-wealthy families often favor lean, focused teams over sprawling organizations.
Ultimately, the decision comes down to the complexity of your wealth and your long-term goals.
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The Hidden Costs Nobody Tells You About
When it comes to running a family office, salary expenses often take center stage in discussions. But the reality is, the annual operating costs go far beyond just payroll. These expenses can be divided into two main categories: direct costs, such as salaries and infrastructure, and indirect costs, like insurance, compliance, and cybersecurity.
Direct Costs: Salaries and Infrastructure
Salaries alone can account for more than 60% of a family office’s budget. For a family office managing around $1 billion in assets, this translates to about $6 million annually, with $3.6 million allocated to compensation and benefits. The competition for top-tier investment professionals – who are also courted by private equity and venture capital firms – only pushes these numbers higher.
Infrastructure adds another layer of expense. Office space and technology systems typically cost between $200,000 and $500,000 per year. These systems include advanced tools for accounting, performance tracking, secure document management, and data backup. The complexity of managing alternative assets, which now make up 45% of family office portfolios, further drives up technology costs. Handling private equity and real estate investments requires sophisticated reconciliation processes that can’t be overlooked.
Indirect Costs: Insurance, Compliance, and Training
Beyond salaries and tech, there are additional fixed costs that can’t be ignored. Office infrastructure alone can run between $200,000 and $500,000 annually. Then there’s professional liability insurance, which costs $100,000 to $300,000, and regulatory compliance fees, ranging from $50,000 to $200,000 – especially for offices managing alternative investments across various jurisdictions.
Cybersecurity is another major expense that’s often underestimated. According to recent data, 24% of family offices have already experienced cyberattacks or fraud, yet 40% admit they lack in-house cybersecurity capabilities. Jamie Lavin Buzzard, Head of Family Office Investments and Advice at J.P. Morgan Private Bank, highlights this gap:
"40% [of family offices] also reported that they don’t have this cyber protection capability in-house."
This means many family offices either outsource their cybersecurity needs or invest heavily in building internal systems – costs that were virtually unheard of a decade ago. Add to this the expenses for ongoing staff training, recruitment of specialized talent, and hiring external legal or tax consultants for complex matters, and it’s easy to see why operating costs typically range between 3% and 10% of assets under management.
Comparing Your Three Main Options
Family Office vs Multi-Family Office vs Private Wealth Management Comparison
Now that we’ve broken down the costs, let’s take a closer look at the three main wealth management structures: private wealth management, multi-family offices, and single-family offices. These options vary widely in terms of cost, level of control, and degree of personalization. Choosing the right fit depends on the complexity of your financial situation and your specific needs.
Private Wealth Management ($5M–$50M)
If your assets fall between $5 million and $50 million, private wealth management might be the most practical choice. This option provides professional oversight without the hefty expenses tied to running a dedicated office. Annual fees typically range from 0.5% to 1.5% of assets under management, which means managing a $30 million portfolio could cost anywhere from $150,000 to $450,000 per year.
While this is a more affordable route, it comes with trade-offs. Customization is limited, and there’s a potential for conflicts of interest. Advisors often juggle multiple clients and rely on pre-designed strategies. Additionally, many wealth managers earn commissions from selling specific investment products, which may not always align with your best interests.
Multi-Family Offices ($25M–$100M+)
Multi-family offices strike a balance between cost efficiency and access to expert resources. By pooling resources across several families, they lower costs, with investment management fees typically ranging from 0.3% to 0.7% of assets under management. This makes them a more economical option compared to single-family offices.
With a multi-family office, you gain access to a team of specialists, advanced technology, and expertise in areas like alternative investments and tax planning. However, the shared structure means less privacy. As Michael D. Selfridge, Head of Client and Family Office Solutions at Bessemer Trust, points out:
"A single family office is almost never as cost efficient as a multifamily office due to lack of scale."
Single-Family Offices ($100M+)
For families with $100 million or more in assets, a single-family office provides unmatched control and customization. However, this comes at a steep price. Operating costs typically range from $3.2 million to $6 million or more annually, depending on the services provided. Elisa Shevlin Rizzo, Head of Family and Family Office Advisory at J.P. Morgan Private Bank, explains:
"For family offices that have about $1,000,000,000 in assets under supervision. The average operating cost is about $6 million a year. So it’s a substantial investment to create a true standalone single family office."
Running a single-family office is akin to managing a separate business, complete with responsibilities like HR, IT, payroll, and legal compliance. The upside is a dedicated team focused solely on your family’s needs, with no competing interests. However, attracting top talent can be challenging, as you’ll be competing with hedge funds and private equity firms for the best professionals.
Here’s a quick side-by-side comparison to help you weigh your options:
| Feature | Private Wealth Management | Multi-Family Office | Single-Family Office |
|---|---|---|---|
| Typical Net Worth | $5M–$50M | $25M–$100M+ | $100M+ (often $250M+) |
| Annual Cost | 0.5%–1.5% of assets | 0.3%–0.7% (investment only) | 1%–3% of net worth |
| Control | Low (Standardized) | Moderate (Shared) | High (Complete) |
| Privacy | Standard | Moderate | Maximum |
| Customization | Limited | High | Total |
Each option has its strengths and weaknesses, and understanding your financial goals and the complexities of your wealth will guide you toward the best choice for your situation.
Making the Right Decision for Your Situation
Choosing whether to establish a family office isn’t just about reaching a certain net worth – it’s more about the complexity of your financial situation, the nature of your income, and your long-term goals. For instance, a founder managing $75 million in intricate, international operations will face significantly different challenges compared to someone overseeing $500 million in straightforward investments.
"The most effective family offices are established well before a major liquidity event, such as a business sale or generational wealth transfer." – BNY Wealth Global Family Office
When deciding, consider not only your current assets but also where you want to go. Managing wealth effectively requires the same forward-thinking and structured planning that helped you build your business. Start discussions with multi-family offices early, especially if you anticipate a liquidity event, to ensure a seamless transition.
Your structure should reflect your family’s legacy. Ask yourself, “Who are we, and how do we want to be remembered?” If your vision involves a legacy spanning 50–100 years with clear governance for future generations, a family office could be the right fit. However, if your focus is on a shorter horizon, say 5–10 years, traditional wealth management might be a better match. The structure should support your strategic goals – not dictate them.
It’s also important to look at the numbers. For example, if you have $90 million, strong recurring income from business dividends, and complex financial needs across multiple jurisdictions, a family office makes sense. But if you’re managing $30 million from a one-time liquidity event with straightforward investments and no recurring income, a multi-family office or private wealth management might be more appropriate. The key is aligning your approach with your goals rather than chasing a specific net worth milestone.
These principles provide a foundation for fine-tuning your wealth management strategy.
FAQs
When should you choose a family office over a multi-family office?
A family office becomes a practical choice when your financial circumstances call for greater control, privacy, and services tailored to your unique needs – justifying the associated costs. Here are some key considerations:
- Balancing wealth and expenses: Running a single-family office typically costs between $3 million and $10 million annually. To keep these expenses below 5% of your total wealth, you’d generally need at least $100 million in investable assets.
- Managing complexity: If your financial world spans multiple jurisdictions, includes businesses, real estate, or trust structures with over 15 key touchpoints, a family office provides the governance and oversight required to handle these complexities effectively.
- Steady income streams: Families with consistent income sources, such as business dividends or investment returns, are better equipped to cover the fixed costs of maintaining a family office.
- Long-term generational planning: For families aiming to preserve and grow wealth across generations, a family office offers the privacy, governance, and alignment necessary for strategic, long-term goals.
If your priorities include complete control, personalized attention, and absolute confidentiality – and your financial situation can comfortably support the associated costs – a family office might be the right solution for your needs.
How can I determine if my financial situation requires a family office?
To determine if a family office is the right choice for you, start by examining the complexity of your financial landscape. This includes factors like the number of jurisdictions where your assets are held, the businesses you own, any real estate properties, trust arrangements, and the unique financial needs of your family members. If these elements add up to more than 15 distinct "touchpoints", traditional wealth management may struggle to manage everything efficiently.
Next, consider whether you have consistent cash flow sources, such as dividends, business income, or returns from investments. These steady inflows are crucial because running a family office comes with fixed costs, typically ranging from 3% to 10% of the assets under management.
Lastly, reflect on your long-term objectives. Are you aiming to support future generations, or do you place a high priority on privacy, control, and personalized services? If your financial situation is highly intricate and you value a tailored approach, a family office might offer the level of customization and oversight you need.
What unexpected costs should I consider when running a family office?
Running a family office involves more than just managing wealth – it comes with a range of expenses that might not be immediately obvious. These include costs for office space and technology infrastructure, professional liability insurance, and meeting compliance and regulatory standards. On top of that, there are ongoing expenses like staff training and education and subscriptions or upgrades for technology platforms.
Though these costs might seem small in comparison to the overall budget, they can add up fast – especially for offices that provide a wide array of services, such as bill payment, philanthropic management, or overseeing household staff. Taking these factors into account is crucial when deciding if a family office aligns with your financial goals.
