The management of large family financial resources depends on Family Offices. This service is especially dedicated to managing a family’s finances, especially when they are high-income and must be in the hands of specialists who represent all the relatives.
This service is provided by fintechs, offices and other financial groups operating in the market and its role is to ensure that the millions of reais in income are well managed. Among all the elements that can be integrated into Family Offices is tokenization, which brings more practicality and even security to the service.
What are Family Offices?
Family Offices is a service dedicated to the financial management of high-income families. In general, funds are only invested when there is a lot of capital, with an average of 50 million reais. This criterion characterizes the service and the solutions offered by the professionals working in the area.
The service is similar to a consultancy, but much more specialized and focused on assisting the family that owns the fortune in various aspects. It offers not only money management but also advice on how to invest it. Among all the activities related to advisory services are:
- Investments;
- Legal support;
- Financial reports;
- Routine expenses;
- Asset analysis;
- Succession planning.
Various other services can be associated with Family Offices, and it all depends on the agreement between the company and the family. The service can also dedicate itself to finding new technological solutions for financial resources, such as the tokenization of assets and investments in digital resources.
Types of Family Offices
Every Family Offices service can be divided into two different types, which in a way show the scope of the service: Single-Family Offices and Multi-family Offices.
Single-family Offices
The category of Family Offices called Single-Family is created and managed by the family itself, where all processes relating to assets and property are the responsibility of the family members. In this process, it is more common for a company to be set up by family members to control all operations and procedures.
This is the most difficult and complex way of managing family finances, as an in-depth study of the market must be carried out to identify the best method for managing all the assets. One concern, for example, is learning how to be an independent investment advisor.
However, the advantage of this method is that it brings family members closer to the Family Offices, allowing for more personal and family control of all resources. The method also delivers more personalization and allows for certain applications, but requires the family to understand more about the financial and digital market, such as what VASPs are and other nomenclature.
Multi-family Offices
Multi-Family Offices are when a company is hired to provide the necessary advice and manage the family assets. In this way, dedicated, outsourced professionals take responsibility for dealing with all the family’s finances, making the process simpler.
This is not an exclusive service, as it is common for private companies to provide the same advice to several different families – hence the name Multi-Family. But this doesn’t mean that the service is generic or generalized; in fact, the professionals usually offer personalized solutions and a specific service for each client family.
As one of the main advantages, this method makes the process of managing one’s own financial resources simpler for each family. However, members must leave their resources subject to the company, which can be seen as a lack of freedom to use their own assets.
Functions and Services of a Family Office
A Family Office package offers a variety of services, which can vary from company to company. However, there are the classics such as investment supervision and tax advice – other functions and services include:
- Constant monitoring of family assets and how they are spent;
- Transfer for succession, inheritance and intergenerational cases;
- Real estate investment planning;
- Pay attention to tax details;
- Donations and possible philanthropic actions;
- Hiring insurance for assets;
- Search for new investments such as tokens;
- Financial education for family members.
In addition to these services, it is common for professionals to offer various tips and recommendations for family members to optimize the spending of their finances. When done well, the service is complete and offers a wide range of support for the family to protect their finances so that they can make better use of them in the long term.
Challenges in running a family office
Managing large finances is never an easy task, even when there is a Family Office behind it, whose main challenges include market fluctuations, possible disagreements between family members and a lack of investment. All of this must be considered by investment professionals and advisors.
Applying Family Offices is both profitable and challenging, and throughout the provision of services it is essential for professionals to be aware of various challenges. The most common challenges in running a Family Office include:
- Lack of liquidity;
- Investments that don’t offer good results;
- Difficulty aligning decisions with family members;
- Fiscal and tax errors;
- Complexity to create customized solutions.
A respectful Family Office must study each client family to find the most appropriate solutions for their needs. This work requires effort, study and dedicated professionals who care about their clients’ assets.
Family office trends
Because it is a service that deals with the financial assets of numerous people, Family Offices also follows market trends, and does very well to adapt to offer increasingly specialized and personalized services. Among all the trends, it’s worth mentioning technology.
Digital assets are becoming increasingly common on the market, especially tokenization. In the United States alone, the tokenization of Treasury Direct has brought in more than 800 million dollars, which shows how the service is already a considerable reality with various digital currencies such as DREX.
A good Family Offices service should seek tokenization and modernization through digital assets. We at BLOCKBR, a fintech specializing in tokenization, are committed to this mission and offer tokenized solutions that are accessible, practical and capable of expanding your investments. We have our own BBR Management platform and we strive to offer a practical and cost-effective service to all our clients.
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