Jess S. Morgan & Company, Inc

Business Managment & Invesment Advisory Services

Family Office Formation Considerations

By: Jeremy D. Stahl, CPA

Earlier in the year I described what a family office is, namely an organization created for the purpose of supporting the financial needs of a specific family.  Over the last months we have spoken with several wealthy families who have asked us if it would be more appropriate for them to form their own office or to rather become part of an existing family office that already has an established infrastructure to operate and administer family activities.

The answers to these questions are usually based on the size, type, complexity, activity, revenue of the assets, and sophistication of a particular family.  Generally, the larger the overall asset size (usually in excess of $100mm), the more complex the investments, ( i.e. real estate & active businesses vs. more passive market investments) the more likely it  would be that a family would opt to set up its  own family office with many of the required professionals and associated costs ( i.e.  accountants, investment professionals,  real estate administrators and other experts capable of managing the specific assets of the family).  Clearly, families with comparable asset and revenue profiles could combine efforts in an attempt to synergize and economize associated costs.  But this can become a difficult endeavor because often privacy concerns come in to play. So the result is to go it alone or outsource some  of the less specific activities to an outside organization such as an existing multi-family office or business management firm with an expertise in many of the areas needed.

Families with a less complex and smaller revenue generating asset base (i.e. under $100mm and more passive type investments), may want to focus on a multi-family office for their family office endeavors.  This would include a family with very large but passive assets ( i.e. $250mm plus investment portfolio and/or concentrated positions) as well.  Privacy concerns aside, this usually is the most efficient and convenient way to go because costs of formation, management and administration, etc. have already been spent.  In this circumstance, the family desirous of a family office can consider becoming a member or even a client of an existing multi-family office.  A multi-family office of course being a family office that handles the affairs of many or several families at once.  The benefit is that established multi-family offices have the infrastructure, financial management experience, and often long serving professionals to handle the diverse needs of a family including sensitivities to privacy, discretion and intra-family issues.

Perhaps the best first initial step for an aspiring family office family is to discuss their family profile with professionals from an existing multi- family office or business management firm to explore what makes sense. The professionals at Jess S. Morgan & Co., Inc could certainly be one such first step.


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5900 Wilshire Boulevard
Suite 2300
Los Angeles, CA 90036

Tel: 323.634.2400
Fax: 323.937.6532