What You Need to Know About Virtual Family Offices

In a virtual family office, most professionals serving the family are not in a physical office, which means the family office team can be situated almost anywhere. Additionally, these virtual family offices can comprise employees, individual professionals, a remotely-based multi-family office, or any combination thereof.

Depending on the complexity of its principals’ needs, a virtual family office can offer a cost-effective alternative to a fully staffed and officed employee structure.

The best family office structure for your situation will consider elements such as the type of family’s assets, net worth, origin, the frequency with which the principals intend to communicate with their experts, the family office budget, and how much specialized knowledge is required.

As a general guideline, the following ranges serve as a practical framework for a family office structure:

  • $10 million to $250 million in assets: A virtual family office will offer the most flexible and affordable approach.
  • $250 million to $750 million: The most common approach is a blend of on-site employees and outsourced services.
  • More than $750 million: A dedicated family office is likely the best approach, supplemented by outsourcing specific deep expertise as required.

Flexible Approaches

If you believe a virtual family office is appropriate, you have considerable flexibility in choosing your structure. For instance, some families are well-served by multi-family offices staffed with experts providing administrative, financial management, accounting and reporting, and other services for many similar families.

A potential advantage of a multi-family office is that specialized expertise or investment ideas can be shared among several families. While the family office team will respect each client’s privacy, they can discuss situations in general terms and exchange ideas in a way that’s not possible within a single-family office structure.

Additionally, the multi-family office structure offers added protection because the family is not relying heavily on just one professional for its administrative needs. Sharing these responsibilities among several people can provide continuity when the family’s primary provider takes a vacation or is otherwise unavailable.

In other situations, a family will combine employing a full-time professional to provide essential services, such as bookkeeping and bill payment, while outsourcing specialized expertise in accounting and reporting, investment management, and real-estate management. This approach allows the family office to manage its administrative, investment, and accounting needs, often for significantly less than the cost of a dedicated professional team.

Coordination and Oversight

Perhaps the most significant challenge a virtual family office presents is coordinating the various professionals and ensuring required services, such as paying bills, preparing financial reports, and the more strategic investment and family issues are being performed and addressed on a timely basis.

In most situations, families rely on an experienced and trusted professional to coordinate and oversee the family office’s team, including their investment, legal, tax, accounting, and administrative professionals. This can be a family member, a full-time employee, or a contracted professional providing services on a virtual or outsourced basis.

Our recent article, Why the Right Quarterback is Critical to Your Family Office, covers this in-depth, but to summarize, this role is critical in ensuring a family office’s operations and responsibilities fit together and are communicated appropriately.

Need help determining if a virtual family office is right for you? Contact our team for assistance reviewing your situation and implementing a roadmap to meet your family office’s goals.