There are two types of family office: a single family office (SFO), which acts for one family, and a multi-family office (MFO), which acts for more than one family. Both have the same rationale, namely to preserve and enhance a family’s wealth through the generations and, very often, to provide a mechanism or family constitution for resolving any conflicts which may arise among family members and assisting in the making of significant business decisions.
To achieve such goals, a family office will employ a range of experts, professionals and consultants dedicated to the success of the family and its business. Often the fundamental service is that of wealth management and it is frequently the case that the wealth management company acts as the core service provider, complemented by financial planners, property managers, accountants, tax advisors, charity advisors, lawyers and compliance practitioners backed up by a team of administrators to handle the day to day running of the various family businesses.
Clearly all this comes at a cost. Accordingly, to justify the cost of running a SFO, the value of family wealth (with commensurate income), will typically need to be in excess of US$200 million. Over time, families may wish their SFO to branch out and to offer financial and other services to third parties. This not only spreads the annual cost of professional fees and overheads but also adds to the diversification of the business and potentially provides an opportunity for younger family members to take responsibility for and to develop a new source of business.
Consequently, a SFO can take on the mantle of a MFO where, depending on the services provided, the starting value of the family or individual’s wealth can be as low US$30 million.
Family offices provide a coordinated and centralized approach to wealth management which enables ultra-high net worth families to keep track of their investments, and to ensure their tax, accounting, corporate governance and international compliance reporting obligations are met in full. More and more vital for a successful family office is the use of the latest information technology to provide a data base of financial and other essential information which the client family can access. This centralization of knowledge is enhanced by having a relatively tight circle professional firms and individuals involved with the family, able to develop long-lasting relationships with and knowledge of the family business.
Capricorn Capital, which is a family-owned international private investment business, started out as a single office in South Africa back in 1994. It now has offices in London, Johannesburg, Malta and Hong Kong, but has more recently been offering its services to third parties. In essence, it has evolved from a SFO to a MFO, opening its office in Hong Kong in 2015 and, through Asia-Pacific Accounting and Secretarial Services Limited, offering such services as trust and company establishment and administration, payroll, bookkeeping, accounts preparation and advising on Hong Kong immigration and work permits issues.
Capricorn’s investments include Clientele, a leading direct insurance business; Nando’s a well-known international restaurant group; Auto & General, today known as Budget Group in the UK, South Africa and Australia; a wine farm and luxury game lodges in South Africa and an interest in Hollard Insurance, South Africa’s largest privately-owned insurance company.