Entrepreneurs increasingly outsourcing family investment offices

Entrepreneurs are increasingly choosing outsourced family investment offices rather than creating fully staffed single-family offices, according to Stonehage Fleming.

The multi-family office noted that families were seeking investment offices that provided investment oversight and governance without the operational burden of running their own internal team.

It argued that, as more entrepreneurs sell their businesses or realise large liquidity events, many were finding that managing wealth following these events can be “just as challenging” as building the business.

Families are often faced with a range of decisions regarding governance, asset allocation, and long-term wealth management following a significant event, which Stonehage Fleming investment partner, Caspar Helmore, said can be “overwhelming”.

“Families can quickly find themselves inundated with offers for help,” he stated.

“At the most complex end of the spectrum they might consider building their own investment office, hiring a CEO, a CIO and putting operational structures in place. But the administration and burden of that structure can become overwhelming.”

Helmore therefore argued that outsourced family investment offices provided an alternative that offered investment oversight and governance without families needing to build and manage their own internal structure.

“For some families, portfolios become very complex: private assets alongside public markets, sector interests such as real estate or technology, and different parts of the portfolio working together,” he added.

“Our role often starts with designing the framework around those objectives.”

Although some families initially consider establishing their own single-family office, Helmore said that the reality of running one can be unexpectedly demanding.

Once a successful business has been sold, entrepreneurs may find themselves having to hire and manage a CEO, CIO and other staff for a single-family office, effectively building another business, Helmore noted.

Families may therefore choose outsourced structures to provide these services without running the organisation themselves.

Stonehage Fleming said that one of the greatest risks to family wealth was how wealth is passed down the generations, rather than poor investment decisions.

It therefore urged wealth holders to encourage younger family members to get involved early to help them build experience and develop a long-term approach to managing wealth.

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