Looking after the family silver

If you have a bit of dosh you probably have a savings account, if you have a lot you may have a private banker, but if you have squillions then the only way to go is a private bank - as in one just for you and a few of your seriously rich relatives. 

A study by the Wharton Global Family Alliance, a collaboration of American and European business school researchers, offers a rare insight into the world of the uber wealthy. The researchers write in IESE's Insight newsletter that "Extreme wealth carries with it obligations and privileges. The super rich must often continue to operate their business while managing their mounting wealth and planning for future generations." You could almost feel sorry for them.

The solution is a Single Family Office (SFO). This is a small personal investment bank whose job is to protect a family's investments and assets for current and future generations. According to Knowledge@Wharton there are about 1,000 SFO's around the world catering for families with at least $100 million in assets - although more than half manage family fortunes of more than £1 billion.

Professor Raphael Amit, a management professor at Wharton, says that a family needs at least $100 million in assets to make it worthwhile establishing an SFO because they typically cost about $3 million a year to run.

A survey of about 140 SFOs shows that the average office serves 13 households, 40 family members which span two to three generations. SFO's can range from uncle Bob arranging the family accounts to  a team of professionals focused on investments, accounting, legal affairs and concierge services - one SFO surveyed employed 9 investors, 10 accountants, 1 lawyer and 12 support staff.

The researchers found that reasons for having an SFO include: wealth management; consolidation of accounting, tax and estate planning services; and perhaps oddly "freedom of career choice for family members" - Would you trust your money to cousin Kylie who can't get a job elsewhere?

Many SFOs also offer additional services such as managing private jets, hiring staff, organising philanthropy and providing psychologists - presumably for those for whom money hasn't brought happiness.

If you don't have a spare billion to set up your own SFO - why not go work for one. Private bankers and asset managers may find their pay isn't as high as in the corporate world but there is job security, an improved lifestyle, flexibility, less pressure and the chance of co-investment opportunities, according to Professor Amit.

Comments

[e skelton]

Financial responsibilities a burden?Sell all your jewellry and give it to the poor! (Woodie Guthrie and, I think, someone even more famous).