These entities look out for a family's interests and allow for the continued stewardship of a business, while also providing direction for the next generation.
Family offices may help manage complex financial and estate needs of high-net-worth (HNW) families, as well as build the foundation for an orderly business succession.
At their core, these operations are private companies focused on providing financial services for high-net-worth families, with a dedicated staff anywhere from one or two, to dozens. The concept has become increasingly popular in Asia as the region’s wealth has expanded. In Singapore, the number of single-family offices jumped from 400 at the end of 2020 to 1,100 in 2022, according to the Monetary Authority of Singapore .
The financial needs of high-net-worth families have also grown in complexity as individuals travel abroad for education or launch their own business in an increasingly fluid marketplace. In this environment, a family office may provide a measure of stability and organization, and help ensure the estate is managed in its best interests.
Family offices often are associated with those whose wealth is generated by a shared business, but they may also be appropriate for people who just want dedicated experts to manage their finances. For those who own a business, this type of enterprise may provide peace of mind, regardless of an individual’s interest level in the entity itself.
Typically, a family office may be a wholly separate unit from the family business, or may have a role in governance – providing services such as reporting on assets and record-keeping, says Iggy Chong, head of Enterprise Private Clients at RBC Wealth Management in Asia.
“Usually the family has a business affecting multiple generations, and is sizeable enough that they want a family office that can look after its governance, but not the operations,” says Vivian Kiang, managing director and head of Wealth Planning and Fiduciary Services at RBC Wealth Management in Asia, based in Hong Kong.
When differences of opinion arise, the office may serve as a neutral arbiter, ensuring major decisions are made in the best interests of the family.
“When you’ve got a very complex family, the office can be the one mandated to manage everyone equally and fairly,” says Chong. “You’ve got some security or comfort that the family business won’t suddenly be going rogue because of an individual taking it over and running it a different way.”
Families contemplating this structure should first determine what level of service they require. A single-family office is focused on the needs of only one family and may provide services beyond financial management. For instance, a simple operation providing basic estate- and wealth-planning services may require just one or two employees.
The starting point is usually hiring an investment manager, says Chong. “You want someone dedicated to your wealth. And you want that person to be employed by you. They’re not managing other people’s money, they’re managing your money, and that’s all they’re doing.”
Another key role to consider is a concierge, or all-purpose assistant, who can ensure the family’s wishes are carried out for the benefit of the growing enterprise. For those who have a smaller office, the concierge may take on several duties, including managing international travel arrangements.
A big operation would provide more extensive financial services and include more specialists, says Kiang. “For multi-generational, high-net-worth families, the single-family office may also have lawyers, an accounting department and trustees to look after different generations.”
It can also provide non-financial services, such as someone to manage philanthropic matters, someone else to oversee the real estate portfolio, or maybe an expert to curate a personal art collection. Other employees may focus on educational opportunities for younger generations, or on governance rules for family members wanting to engage with the business.
“A family office can be especially beneficial for large families – it can help keep people aligned on legacy, how the business is run and at what point people can branch off,” says Chong.
This structure can help develop a family’s human capital – the knowledge, skills, health and education possessed by the group’s members, which are useful in ensuring the continuity of the family office – and prepare the next generation of stewards, whether they seek a role in the business or not.
“Some of the descendants might get involved in the family office in order to gain experience in finance, learn the ropes and get involved in wealth management,” says Chong. An heir, for instance, might take over the philanthropic wing.
Chong also sees younger generations in Asian families seeking opportunities and education abroad – a direction family offices are increasingly headed in.
“As people cross borders, managing their wealth becomes more complicated. That’s where a family office can really help,” he says. “For example, when one of the kids goes to school in the U.S. and ends up staying there.” This may involve creating an estate plan which considers the residency status of each family member.
One solution is to have multiple offices in various locations depending on the functions of the core business and where the family is based. For example, a family office could have its headquarters in Singapore and a satellite location in the U.S.
While these structures are often used as financial services companies, they are not banks. Working with a lender allows them to access capital and investment products for their clients.
Regardless of its size, and whether it serves one family or several, family offices may support individuals achieve their objectives and prepare for the future while ensuring their assets and legacy are protected.
The material herein is for informational purposes only and is not directed at, nor intended for distribution to or use by, any person or entity in any country where such distribution or use would be contrary to law or regulation or which would subject Royal Bank of Canada or its subsidiaries or constituent business units (including RBC Wealth Management) to any licensing or registration requirement within such country.This is not intended to be either a specific offer by any Royal Bank of Canada entity to sell or provide, or a specific invitation to apply for, any particular financial account, product or service. Royal Bank of Canada does not offer accounts, products or services in jurisdictions where it is not permitted to do so, and therefore the RBC Wealth Management business is not available in all countries or markets.The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user, nor as a recommendation of any particular approach. Nothing in this material constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this material. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. This material does not purport to be a complete statement of the approaches or steps that may be appropriate for the user, does not take into account the user’s specific investment objectives or risk tolerance and is not intended to be an invitation to effect a securities transaction or to otherwise participate in any investment service.To the full extent permitted by law neither RBC Wealth Management nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or the information contained herein. No matter contained in this material may be reproduced or copied by any means without the prior consent of RBC Wealth Management. RBC Wealth Management is the global brand name to describe the wealth management business of the Royal Bank of Canada and its affiliates and branches, including, RBC Investment Services (Asia) Limited, Royal Bank of Canada, Hong Kong Branch, and the Royal Bank of Canada, Singapore Branch. Additional information available upon request.Royal Bank of Canada is duly established under the Bank Act (Canada), which provides limited liability for shareholders.® Registered trademark of Royal Bank of Canada. Used under license. RBC Wealth Management is a registered trademark of Royal Bank of Canada. Used under license. Copyright © Royal Bank of Canada 2024. All rights reserved.
We want to talk about your financial future.