When I first heard of a family office, I thought it was a fancy way of saying a family business. Boy, was I wrong! Family offices are a way for families to manage their wealth – as if that wealth was a business. This can include managing family investments and companies, estate planning, education planning, vacations, and philanthropy.
While family offices are not new, they are definitely growing. Preqin, a data company, reported family offices increased from 1,285 in 2019 to 4,592 in 2023, according to a Family Wealth Report article. Reports differ on the number of family offices in the world. KPMG reported 20,000 global family offices and Family Office Exchange reported 6,000-7,300 family offices in the US.
One thing is clear: fundraisers need to know more about this Ultra High Net Worth wealth vehicle to help grow their organization’s major gift programs.
Following are three reasons why:
Reason 1: It’s a significant wealth indicator.
The general rule is that a family needs to have $100M in investible assets to have a single-family office. The cost of running a personalized wealth management office is significant. Ernst & Young reported that it can cost $500K-$3M annually to run a family office. Thus, there must be enough in the proverbial bank to justify the cost. Even multi-family private offices, which are not commercial and limited to a select few families, tend to have at least $25M-$30M in investible assets. Either way, it’s a definitive indicator of significant wealth.
Reason 2: It helps us better understand the prospects our nonprofits are trying to cultivate relationships with.
As fundraisers, we spend a lot of time trying to understand our wealth prospects. Since this is a vehicle used by the some of the wealthiest people, that alone justifies the time to take to understand it. Why would someone elect to have a family office instead of separately managing the family business, foundation, and other interests? Why not work with a traditional wealth management firm?
Family offices offer a high degree of flexibility and go beyond preserving and even increasing wealth. A family office can bring growing generations of family members together under the same family brand, keeping competing priorities in sync and facilitating with education, philanthropy – whatever needs that family is experiencing. Especially for a single family office, there is also an element of privacy that can’t be matched by a wealth management firm or other third-party options.
Reason 3: Three quarters of family offices make donations.
While family offices are not strictly philanthropic vehicles, The North American Family Office Report 2023 published by Campden Wealth reported that “Three quarters of North American family offices make philanthropic donations, with an average value of US $12M.” Plus, the flexibility means that family offices can have different philanthropic vehicles under its umbrella such as a family foundation, a donor advised fund, impact investing, and more. This level of philanthropic activity is really important to beef up an organization’s major gift programs.
If you want to learn more about family offices and philanthropy, this Aspire Research Group author, Elisa Shoenberger, has written a report called ALL IN THE FAMILY: A Guide to Family Offices and Other Wealth Vehicles to help people learn more about family offices, how they work, advantages and disadvantages, as well as the different corporate structures and philanthropic vehicles. There are also sections to help fundraisers conduct prospect research to find those hidden treasures in their database or spheres of influence.
Bonus Alert! If you sign up for the Wealth and Family Offices with Special Guest Erik Hoover Workshop in July, you’ll get a free copy!
Additional Resources
- ALL IN THE FAMILY: A Guide to Family Offices and Other Wealth Vehicles l Aspire Research Group | Buy Now
- Family Opportunities: UBS Global Family Office Report 2023 l Aspire Research Group 2023
- Wealth and Family Offices with Special Guest Erik Hoover l Workshop | Prospect Research Institute | July 18, 2024
- Talking Family Offices with Erik Hoover l Chatbytes | July 1, 2024