When you have spare billions, you usually don’t bring your money to your bank. You build your own bank, or, in other words, your own single family office. But: why do high net worth individuals like Jeff Bezos or the German Quandt family use family offices for their investments?
#1: Mistrust in banks and trust in the personal family office
With an increasing amount of money in the bank account you get more and more interesting for banks, asset managers and other market participants who want to have a share of your wealth. Understandably, you will also get more and more skeptical towards fee-hungry advisors. As a consequence, many HNWIs are relying on trusted companions to manage their wealth. In German single family offices whose wealth developed from traditional family-owned businesses, you can often watch how the ex-CFO gets the new “Head of Family Office”. That’s also the reason why you see many lawyers – who are generally a trusted professional group – in the family office business.
#2: Realization of own investment strategy
When working with banks or asset managers, you are often exposed to limited investment opportunities. It’s hard to get your own private equity vision realized by banks or to develop your own real estate portfolio. That’s the reason why many ex private equity, real estate or venture capital professionals are joining family offices. In family offices, leading family members are often only a phone call away or even occupying top positions.
#3: The highest degree of secrecy
Two things are the most important for many family offices: value preservation and secrecy. Lots of HNWIs want to remain hidden from the public eye. So the way to go is to establish your own family office. Thereby you can control what comes to the public and what stays under the radar. That’s also the reason why many sfos are in countries with high standards of secrecy like Switzerland, Luxembourg or Liechtenstein.
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Picture Source: Nikola Knezevic