What is a family office?
A family office is an organisation that serves the interest of a family or a number of families. It may be a single family office (SFO), which is focused on managing the affairs of only one ‘ultra wealthy’ family, or a multi-family office (MFO), which focuses on the affairs of two or more families and managed by a management team that may not be linked to any of the families that it advises. While a SFO is usually driven by the preferences of its sole 'client', the MFO would typically be structured around the services provided by and the skill set of the professional management running such MFO, and the needs of more than one family.
Family offices tend to provide broadly two types of services or a combination thereof: (i) those centred on financial planning and investments; and (ii) those centred on the family and supporting its day to day needs. The first category would typically include investment and asset management, asset monitoring, trust services, tax and legal services, and under the latter category, concierge services, travel planning and administrative functions may be included.
There is no standard way in which to structure a SFO; it could range from an organisation that only focuses on family investments, to offering a very elaborate and broad platform and range of services.
Why consider establishing a SFO?
There are a number of reasons for setting up a family office, and these essentially will centre around the family's vision, plans and needs. The fundamental objective would be to protect and preserve family wealth through generations, and to ensure that this objective is given a structure that caters to that family, and evolves as the family grows or changes.
Options for establishing a SFO in DIFC and DMCC
Family offices in the Middle East may not be formally structured as family offices but perform, in essence, very similar functions. Certain offshore jurisdictions have been chosen by families based in the Middle East as the base for their family offices. Examples include Geneva or London. Reasons for this phenomenon included security issues and lack of expertise and legal frameworks in 'home' jurisdictions. However, as a need for family offices grows, and the number of families who are considered 'ultra wealthy' grows, so does the legal landscape and availability of professional services and expertise catering to this demand.
The regulations promulgated by each of the Dubai International Financial Centre (DIFC) Authority and the Dubai Multi Commodities Centre (DMCC) Authority support the creation of a SFO, to serve the interest of one wealthy family. Set out below is a comparative analysis of the options presented by each of these free zones.
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No two families are alike. It is therefore up to each family to consider whether the creation of a SFO would enable it to further achieve its goals and long term plans. For families based in the Middle East, there may be additional comfort in knowing that there are options closer to home, that support their objectives, whilst also offering a legal framework that makes it mandatory for a standard that is comparable to other parts of the world, to be maintained.