A family office is the most practical solution when the net worth of your family business is high and you want all your personal information in one place rather than working with several professionals. It helps safeguard privacy as you get to interact with one individual instead of a host of advisors or teams handling the information pertaining to individual family businesses.
Family offices have now become a preferred way to plan taxes and manage donations, and this necessitates knowing about the different types of family offices and seeing which one would best suit your situation. With that said, here are the common types of family offices.
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Single Family Office
A single-family office is a single team of experts that a family hires to manage, structure, and plan the wealth of the whole family. Given how it becomes extremely easy to manage family matters as a whole with the assistance of a separate team, this is definitely the most common type of family office. While the prime focus area of the single-family office is investment management, they can also help with philanthropy management.
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Multi-Family Office
While a single-family office is completely dedicated to handling and managing the wealth of single families, some families may not want to spend so much on hiring professionals for the purpose. This is when working with a multi-family office can help. A multi-family office manages the wealth of multiple families, as the name suggests, and therefore the costs are lower when compared to a single-family office while the benefits remain more or less the same.
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Virtual Family Office
The virtual family office, which is relatively a new concept compared to the other types, is quite a versatile solution. When there are several areas of concern pertaining to your family business, you can outsource different functions to separate family office consultants based on their expertise. For instance, you can look for someone with experience and expertise in investment management while outsourcing estate or tax management to a different individual with expertise in that area.
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Embedded Family Office
One of the most common types of family office consultants, an EFO basically means working with individuals that each of the family members has known well. These individual advisors collaborate with each other for the overall portfolio management. As every family office advisor is an expert in handling the wealth of the concerned family member’s business without requiring much change in how things work, this is one of the preferred types of family offices.
While all the different types of family offices have their own advantages and disadvantages, the one that you opt for depends on your requirements and how many resources you would want to devote to family wealth management. When you choose a family office advisor, it will ease the burden of having to collectively take care of the wealth of each individual and make a unified investment, tax management, and estate management decisions, which is a common benefit associated with all types of family offices.
