Q: Why is the first step toward using a family office often such a challenge?
Jan van Bueren (JVB): There’s not just one, but several challenges that a family faces when considering setting up or using a family office for the first time. Managing free investable wealth is a completely different ballgame compared to managing a family business. It’s important that the family define the type of services they need, establish which goals they are seeking to fulfill by using a family office and find out whether the right solution is a singlefamily office (SFO) or a multi-family office (MFO). A lot of different issues come into play in this type of scenario. Thomas Ming (TM) A lot of wealthy families also have latent needs. They’re not aware of all the services a family office can offer or the requirements that should be covered by the family office. At the start of the process, it’s often unclear to them which role “their” family office should fulfill.
Q: What are the main risks to avoid when dealing with a multi-family office? How regulated are they?
TM: Especially where investment management is involved, which is usually the case, families should be aware that there are two main types of MFOs: MFOs that manage the assets themselves (this is the majority), and MFOs that only select, control and monitor external parties to manage a family’s assets. These two types are fundamentally different. MFOs are less regulated than private banks and families need to understand that it is possible that they might, at some point, not be satisfied with the investment performance of their chosen MFO.
Q: How wealthy does a family need to be to consider setting up a family office?
JvB: As there are so many kinds of family offices, it’s impossible to answer this question. It would be better to carefully consider the services you really need and how much you’re willing to spend on those services. You can find MFOs that are prepared to take clients with a global wealth of €20 million, which I personally believe to be quite low. Most families using an SFO have at least $200 million in assets.
Q: Why did Union Bancaire Privée (UBP) launch a family office “advisory and selection” service?
TM: Through conversations with numerous families, we learned that almost every family considering an SFO solution struggles with finding experts to support them with the first steps in that direction. The families who try to hire an MFO find the market exceedingly opaque. Most MFOs are defined by their discretion, so it’s not an easy task for a family to find and select the proper provider. Contrary to the insurance market, where it’s common practice to use an insurance broker for larger contracts, independent guidance in the MFO sphere didn’t exist. As there was clear demand and no conflict of interest (UBP itself doesn’t offer family office services to its clients), we decided to launch this sort of advisory/intermediary service ourselves.
Q: In recent years what type of family office trends are you seeing?
TM: As are most players in the industry, we’re seeing ever-increasing interest from affluent families in SFOs. On top of this, MFOs are multiplying. Every week new service providers are appearing all around the world, although we do feel that South and Central America are lagging a bit behind.
Q: Do you expect this trend to continue?
JvB: Yes, definitely. Our conviction that this trend would continue was one of the main reasons for launching our family office advisory service in 2014. An increasing number of international families are considering setting up some type of SFO; Switzerland alone already has more than 450 MFOs, with new providers constantly entering the market.
Q: You have started out with a focus on the Swiss market. Can you tell us a bit more about the specificity of MFOs in Switzerland and why you have initially launched the service in this market?
JvB: There are several reasons why we started with a focus on the Swiss market. Numerous SFOs are in Switzerland, because it is considered a safe haven, and because, after the United States, Switzerland is home to the highest number of MFOs. What sets Swiss MFOs apart from MFOs in most other jurisdictions is the fact that a huge number of Swiss providers focus on international clients rather than just domestic ones. The experience and expertise offered by Swiss wealth management professionals is among the highest, if not the highest, in the world.
Q: Do you have plans to extend your reach?
TM: Since completing the start-up phase of our service, we have now commenced advising families on establishing SFOs. Family offices also have been a growing trend in Asia for several years. Although SFOs have so far been in focus, more and more MFOs are being established in that region. Most of those are found in Singapore and Hong Kong and are focusing primarily on investment services. To assist families from Asia, we are increasingly dedicating time to that area of the world.
Jan van Bueren and Thomas Ming are Senior Wealth Planners at Union Bancaire Privée, and founders of UBP’s award-winning family office advisory service, FOSS Family Office Services Switzerland.
FOSS Family Office Services Switzerland
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