Aaron Vessels

Capital Watch - July Edition

Words: 1400

Do You Need a Family Office?

When, Why, and How to Set One Up

By: Aaron Vessels

There are three stages to your relationship with money. Stage one, you worry because you don't have enough. Stage two, you stop worrying because you have more than enough. And stage three, you start to worry again because you have way too much. When your personal assets reach a certain level, you stop being a wealthy person and start being an institution. The time and effort required to manage the volume of assets becomes harder than earning them in the first place.

What is a family office?

Before defining what a family office is, it is important to understand the problems that arise with large amounts of wealth. All wealthy people have a relationship with a lawyer, an accountant, and a financial adviser who manage basic tax planning, portfolio management, the management of legal entities, and the occasional dispute. And this setup works fine – up to a point. 

As your wealth grows the amount of time needed to manage these professionals grows proportionally, and worse, they rarely talk to each other. If you do business across multiple countries, it is your job ensure your accountant in Singapore is talking with your accountant in the U.S. It is your job that overseas assets are properly reported in your home country's tax return. It is up to you to ensure that your financial advisor is compliant with trust terms your lawyer set up.

When your assets require the daily coordination of many professionals, centralizing operations becomes efficient. You might bring on a full-time accountant manage credit cards, bills, yacht staff salaries, and taxes. You then might hire an investment officer to oversee public and private portfolios. You then might hire a full-time lawyer to manage trusts and estate planning. Put them all under a CEO and congratulations -- you have created a Single-Family Office.

Family offices offer complete control, discretion, and the flexibility to manage everything from investments and succession planning to household staff and even medical needs. Some large offices even employ family counselors. The average family office has 3–5 employees, but they scale up fast. Jeff Bezos's family office employs over 150 people. Elon Musk's office, Excession LLC, manages capital from Tesla, SpaceX, and The Boring Company — as well as personal obligations.

Singapore has seen explosive growth in the number of family offices in the past five years, making it one of Asia's top wealth hubs. In fact, the Monetary Authority of Singapore reported over 300 family offices were set up 2024.

When Does It Make Sense to Set Up a Family Office

Whether a family office makes sense depends entirely on your needs. As a rule of thumb, single-family offices begin to make sense when assets exceed $100 million. For $25–100 million, a multi-family office might be more efficient. For below $25 million, traditional wealth management and private banking is probably sufficient.

Net Worth | Recommended Structure
$0-25M | Private bank or financial advisor
$25M-100M | Multi-family Office
$100M+ | Single-family office

Certain triggers may push families toward creating a family office, namely large liquidity events like an IPO or business sales. If you are a tech founder that had an IPO, you suddenly have millions of dollars that used to be tied up in stock that now needs to be effectively managed. Others create one as they age and start thinking about succession. Most wealth never makes it past the third generation, but family offices can prevent that.

Lifestyle also plays a role. If you have multiple homes, a yacht, airplanes, philanthropic efforts, or art collections, and if you employ household staff or have complex family dynamics, a family office might bring order to the chaos.

Pros and Cons of a Family Office

Pros: 
• Full Control. Direct oversight over investments, tax planning, and strategy. There is no third-party agenda or profit incentives. 
• Privacy and Discretion. You keep financial matters in house, away from banks or outside institutions. 
• Customized Services. Everything is tailored to your family's needs – from estate planning to concierge services. 
• Long-term focus. Family offices are great for preserving wealth across generations and keeping future generations in check. 

Cons: 
• High Costs. Running a single-family office can cost $1M+ per year – staff, software, advisors, etc. 
• Management Burden. You will be the employer and operator. Technically, you are running a company. 
• Not Always Necessary. For many families, private banks or multi-family offices can offer 80% of the value at a fraction of the hassle. 

Alternatives

Private banks offer bundled services from access to private equity and hedge funds to tax and estate planning. It is less personal and tailored but can be more convenient and cost effective, especially if assets are less than $25 million.

Multi-family offices serve multiple families under one roof, giving you access to institutional-quality service without the cost of going solo. They offer many of the same benefits, but you give up control. You may have to share a chief investment officer or estate lawyers with other families. The office might have to manage competing interests of families or may offer proprietary products. Also, multi-family offices are still more expensive than private banking or DIY strategies.

How to Set One Up

Step one: Define your needs.
Your family office should reflect your goals. If your goal is to donate most of your wealth, you don't need complex estate structures. If you focus is paying bills and avoiding investment headaches, you probably don't need a staff of CFAs and CAIAs. 

Step two: Choose your structure.
Decide between a single-family office or joining a multi-family office. 

Step three: Build your team and legal framework.
Set up governance. Some offices are principal directed, meaning one or two family members adopt an informal fiduciary responsibility for all family members and make all major decisions in the office. Some offices use an elected board of family members like a board of directors of a company. Some offices will opt for a board structure that is a mix of family members and outside directors. Family offices are commonly set up as LLCs or Trusts although they may require a holding company structure.

After the governance structure and a legal entity is created, hire an executive officer to start the office and begin hiring for key roles.

Step four: Operations and Technology
Make sure your office is operational. Ensure that the office has an adequate budget for accounting software, investment research tools, cyber security, office space, and secure data storage systems. 

Step five: Launch and monitor
Start operations and expect growing pains. Not everything is going to run seamlessly right away. Long term, ensure that the office meets your needs. Regularly review costs, performance, and alignment with family goals. It is extremely important to state what role your family office has and hire accordingly. Don't expect your tax accountant to understand the structures of private equity funds or your investment officer to understand the inner workings of trusts.

Other notes:
Clearly define the role of your office and hire accordingly. Don't expect your tax accountant to handle hedge fund structuring or your investment officer to manage trusts. Strong communication, clear delegation, and family engagement are essential.

And be realistic about costs. Most family offices operate at 100–200 basis points annually, depending on complexity.

If you're not sure what structure makes sense for your family, reach out to us at IPP. We'll help you understand your options and what set-up best fits your goals and scale.

Conclusion

A family office can be a powerful tool for preserving and growing wealth across generations, but it's not a one-size-fits-all solution. For some, it offers privacy, control, and customization that traditional options simply can't match. For others, it is an unnecessary expense that could be better served by a private bank or a DIY strategy. No matter what your wealth management solution, the key is to understand your family's needs, goals, and scale and the options that are available. 

Authors:
Aaron is a wealth management intern with IPP's Expat Advisory Group. He previously worked with a team managing $1.2 billion across multiple families in the United States. He is currently a rising senior at Virginia Tech majoring in financial planning and wealth management.

Ian Pryor is managing partner and head of IPP's Expat Advisory Group and provides expert advice to high-net-worth individuals in Singapore.