Lean family office vs multi-family office
Built on Chapter 18 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A family that does not want a full single family office usually weighs two options. It can build a lean office of its own and outsource most work, or it can hire a multi-family office that serves several families. Both can work. They suit different families.
What each one is
A lean family office, sometimes called a virtual family office, is still a single family office. It serves one family and answers only to that family. A small core team hires and manages outside providers for most of the work.
A multi-family office is a firm that serves several families with a shared team. The family gets a ready-made staff and set of services without building anything.
Where the lean office wins
Control. If one provider is not working, the family replaces that provider. With a multi-family office, you take the whole team, the people you value and the ones you do not.
Flexibility. A lean office can rebuild around a new goal quickly. If the family decides to do more co-investments, it can add the right advisors without waiting for a larger firm to change.
Alignment. A lean office works only for one family. There is no balancing your needs against other clients.
Best of both. Some lean offices hire a multi-family office or an outsourced CIO to manage part of the money. That brings in lessons from many families while the family keeps control.
Where the multi-family office wins
Speed of setup. A family can be fully served almost immediately.
Breadth. A good multi-family office has specialists the family could not afford to hire one by one.
Peer insight. Advisors who work with many families see what is working across them.
Less management. The family does not have to manage a set of providers.
The trade-offs
A lean office puts more weight on the family's own judgment. Choosing providers well is critical. Response times can be slower, since outside firms juggle other clients. And privacy needs care, since many outside parties see the family's holdings.
A multi-family office trades some control and alignment for convenience. Fees can be higher than expected, and the family's priorities compete with those of other clients.
How to choose
Ask a few questions.
- How much does control matter to us?
- Do we have, or want, someone in the family to coordinate providers?
- How complex are our holdings and our family?
- How private do we need to be?
- Do we want to build something that can grow into a full single family office later?
Families with a capable family member willing to coordinate, a strong desire for control, and a plan to grow often lean toward their own office. Families that want simplicity and broad service often prefer a multi-family office.
Questions to ask a multi-family office
If you lean toward a multi-family office, interview several. Ask how many families each advisor serves and how quickly they respond in a crisis. Ask how they are paid and whether they earn anything from products they recommend. Ask to speak with two or three long-standing client families. And ask what happens to your data and your team if the firm is sold.
You can change later
Neither choice is permanent. Some families start with a multi-family office and later build their own lean office. Others start lean and grow into a full single family office as wealth and complexity rise.
What to take from this
- Choose a lean office for control and alignment.
- Choose a multi-family office for simplicity and breadth.
- Consider a hybrid that uses a multi-family office for part of the money.
- Revisit the choice as the family's needs change.
This page is general information, not legal, tax, or investment advice. Speak with qualified advisors before setting up or changing a family office structure.
Questions and answers
What is the main difference? A lean office serves one family with outsourced help. A multi-family office serves several families with a shared team.
Which offers more control? A lean single family office.
Which is simpler to set up? A multi-family office.
Can a family combine them? Yes. Some lean offices hire a multi-family office to manage part of their assets.