I know of only two organizations that are truly “multi-family offices”: organizations that follow the same lineage as the single family-office model. (If you don’t know what a family office is, read Part 3 of this series.) This blog post continues The Inheritance Project series of organizations that serve the financial (and other) needs of Ultra High Net Worth (UNHW) families.

The Family Office Exchange, or FOX, is the original multi-family office. FOX is a second layer of the original single family-office concept: it is a membership organization for family offices, with over 500 members. Founded in 1989, FOX has offices in Chicago and London. This is how FOX describes its purpose and role: “For 20 years, FOX has provided hundreds of family offices with research, education, networking and advisory services. By leveraging FOX’s member benefits, family office executives and their family members benefit from access to office best practices, direct exposure to other family offices member experiences and solutions, and engagement with industry-leading experts.”

Some perks of membership include: annual forums, senior executive roundtables, member-based roundtables, advisor online forums, and an online advisor directory.

Unlike FOX, GenSpring serves families, not family offices. In this sense, it is the truest multi-family office. Based in Palm Beach Gardens, was founded the same year as FOX—1989. It has a very different and more dynamic flavor, as this statement from its web site reveals:
“[GenSpring founders,] Hap and Ellen Perry, along with a handful of legacy families, founded GenSpring in 1989 as a multifamily office to provide wealth management advice to wealthy families across all aspects of their wealth. They were driven in no small part to create GenSpring by their intense dissatisfaction with traditional wealth management providers: private banks, financial services firms, trust companies, etc. Though great advisors existed within those institutions, the institutions themselves had grown into a hub for the distribution of financial and investment products sold under the guise of advice. …
GenSpring does not earn any incremental revenue as a result of the advice we give or the solutions we utilize. GenSpring’s growth translates into more choices, market power and resources for our client families because we use our size only for their benefit. GenSpring has been built with a purpose—to be aligned with families and serve their individual needs and objectives.”
Currently, GenSpring operates 19 offices in the United States and several more offices internationally.
Please return in about a week to read the next in this series: Networking Groups.

The phenomenon known as the “family office” is not widely known—most likely because family offices fly below the radar. They are very, very private. However, family offices are in increasingly important phenomenon: Joseph Reilly, president of the Greenwich, CT based Family Office Association, estimates that there are currently between 2,500 and 3,000 family offices worldwide.

The most common initial reason for starting a family office is the sale of a large business. The head of the company, as well as other family members, wants someone who can park the assets received from the sale of the business in a way that they will earn good returns. (John D. Rockefeller started the first modern family office.)

According to Reilly, “There is really only one type of family office: a dedicated, staffed investment office owned by one family of lineal descendants.” He explains that this structure is desirable because the office answers only to the family itself. When a family has outside advisors managing their assets, there is always the possibility of conflicts of interest. (See a future blog post for clarification of the role of banks and trust companies in offering “family offices”—are they truly family offices??) An outside advisor—for example, an officer at a bank or trust company—is not likely to spend as much time and attention on the family’s needs as a dedicated family office.

Another reason for starting a family office is that it is hard to get objective advice from someone who works for a company or who has his own business. There is always an “angle,” which makes it difficult to find people you can trust. Although family offices are expensive to operate, they are worth the expense. The investments are often in hedge funds, which require large minimum bids; this allows tremendous clout with banks.

The human side of family offices

Here is an abbreviated version, excerpted from The Legacy of Inherited Wealth: Interviews with Heirs, of one heir’s response to being a member of an extended family with its own family office. When Kate Shepherd (a pseudonym) was 16, she was taken to the Shepherd family office, which was managed by her uncle. She was informed of her net worth and of the trusts that were intended to protect her from “gold diggers.” “The whole financial structure of the Shepherd family is built on enabling,” says Kate. “The system is presented under the auspices of being a compassionate and valuable protection, but what it really means is that nobody has to take control of their lives—financially or in any other way. When you’re rich, nothing matters because you can always pay away your mistakes. You don’t even have to get into that risky territory where you might make a mistake. The whole system is infantilizing.”

The Shepherd family office is not unusual in this respect: a family office does just about everything financial for the family members: it pays their credit cards; it collects their income and expense information and files their tax returns; it handles legal issues, like prenuptial agreements; it even balances their checkbooks. And so on. It is infantilizing. Even more so than other inheritors who are not part of a family-office system, these heirs can avoid growing up.

In about a week, please take a look for the next part of this series: Multi-family offices.

Part One (please read the previous post) provides information on a variety of institutions, organizations, and other services created specifically to provide services to the Ultra-High Net-Worth, or UHNW (whether they are individuals, nuclear families, or extended families). These include: private banks, other banks with private-banking divisions, trust companies, offshore banks (including Swiss banks), and the low-profile, off-the-radar family offices. A more recent form of service is called the “multi-family office.”

It helps to know at least a little about each of these instruments in order to begin to understand the world of Ultra-High Net-Worth (UHNW) individuals.

Private banks have been around for a very long time—since the 19th century in several nations in Western Europe. According to Wikipedia, private banks have “cater[ed] only to high-net-worth individuals with liquidity over $2 million, although it is now possible to open private banking accounts with as little as $250,000 for private investors.” [Disclaimer: The Inheritance Project cannot guarantee that all information provided by Wikipedia is completely accurate.]

Other banks with private-banking divisions. In recent years many large banks accessible to the general public have opened private banks with the same kinds of restrictions as banks that are only private. Wells Fargo Private Bank is one such example; it is just one of many. In Canada, RBC and most other big banks have private banking divisions.

Both private banks and banks (in general) with private banking divisions offer a wider range of services than other banks. Wells Fargo Private Bank, for example, offers “A personalized approach, bringing together our people, philosophy, and wealth planning process to create custom-designed solutions for your most complex financial needs.”

Trust companies. One good example is Fiduciary Trust (Boston) Besides its role in creating and managing trusts, Fiduciary also offers family office services: “Fiduciary Trust was founded as a family office almost 125 years ago. We understand the complex issues that can arise in the process of setting up a family office. We will help you define your family’s mission, and develop a multifaceted financial plan. As requested, we will provide day-to-day services, such as bill paying, help organize family meetings, and assist you in the education of the next generation regarding the obligations and opportunities of wealth.” Although not advertised on its web site, Fiduciary also organizes “client meetings where the focus is investments or various issues effecting family finances such as caring for elderly parents.”

Part 3 of this series will explain the nature and role of family offices and multi-family offices.

This post from The Inheritance Project is the first of a series of blog posts on this subject, which has essentially two parts:

Part One provides information on a variety of institutions, organizations, and other services created specifically to provide services to the Ultra-High Net-Worth, or UHNW (whether they are individuals or nuclear families or extended families). These include: private banks, other banks with private-banking divisions, trust companies, offshore banks (including Swiss banks), and the low-profile, off-the-radar family offices. A more recent form of service is called the “multi-family office.”

Part Two is an exploration of privacy in the lives of the very, very rich. This part might be described as a “soft” subject: there are no facts and figures, nothing concrete, but plenty to reflect on.

This blog post is just an introduction. There will be much more to say in subsequent posts. I can’t resist the pun: it is a rich subject. Although I am a member of the 1%, as defined by the Occcupy Movement, I am not a member of the UHNW club. I have never been a member of a private club. Yes, I do have investment accounts, but I do not have the umbrella type of service known as a family office or a private bank. I live on an upper-middle-class street in a smallish home. I did go to a private school starting in 7th grade; I went to an elite college and an elite graduate school. I have deliberately kept my distance from other wealthy people. Therefore, my experience with UHNW people is nonexistent. I have a few acquaintances who could be described as living at the low end of the High Net Worth (HNW) range.

For several years in the mid-1990s I interviewed close to 100 HNW individuals, and possibly one or two UHNWs. Other than that, the information these posts will provide comes from books, newspaper reports, and articles posted on the internet.

My next post will be a primer of the various types of instruments (listed above) that provide services to UNHW individuals and families.