Should I Start a Single-Family Office? Why the Math Usually Doesn’t Work

For many ultra-high-net-worth families, creating a single-family office (SFO) can appear to be the natural next step after significant wealth creation: greater control, enhanced privacy, and a team dedicated exclusively to the family. But a critical question to consider is not just whether a family can create an SFO; it is whether a single-family office is a smart choice—namely, whether the economics, staffing requirements, and investment scale make sense.

At SCS, where clients have an average of more than $100 million oversee by us, we regularly advise families who are deciding whether to build a single-family office, hire an ultra-high-net-worth wealth manager, or use a hybrid model that insources select functions while outsourcing others.

While we provide advice to clients on all the topics that go into creating a family office like those in the nearby box, one of the gating questions families should ask first is: do we have enough assets to make the math work on a single-family office? A simple prompt from an LLM suggests that with assets of $50 to $100 million, a “lean family office can be viable,” and with assets of $100 to $250 million, “many families begin establishing a true single-family office.” The details of what an SFO entails matter a lot, but in most cases, if the single-family office wants to manage investments in-house, we believe that the asset levels must be meaningfully higher than what was just cited as an entry point. What the LLMs and search engines won’t tell you is: if a single-family office wants to manage its own investments, including alternatives like private equity, and have a world class investment program, it may need to have well over $5 billion in assets, depending on its focal areas.

This article focuses on two related questions: first, whether the fixed costs of a single-family office are reasonable relative to assets, and second, whether a standalone family office has enough investment scale to compete for talent, access, and diversification.

How Much Does a Single-Family Office Cost?

The cost of a single-family office depends on the services provided, the family’s complexity, the degree of insourcing, and the composition and seniority of the staff. That said, midsize single-family offices often have a CEO, Chief Investment Officer (CIO), and CFO at a minimum. In one prominent study, the average annual compensation for those positions at a midsize SFO with assets under management of $250 million to $1 billion is $500,000, $450,000, and $340,000, respectively, which is a total cost of $1.3 million on those roles alone. Average total costs for a mid-size single family office in this particular report are $2.4 million.¹

Those costs create two important implications. First, the staff budget is likely insufficient to attract a very talented CEO and Chief Investment Officer—certainly not an institutional quality CIO that could otherwise oversee investments at a multi-billion-dollar wealth manager, endowment, foundation, or private investment firm. While not all salaries are public, the average compensation of the top 100 university endowment CIOs is likely north of $1 million,² and the average for the top 15 university endowments is approximately $5 million.³ The highest performers also seek employment opportunities for which their compensation increases every year, so the numbers are not static. Additionally, a high-caliber CIO is going to want a talented team to support their efforts.

This leads to the second implication. A total cost of $2.4 million, where just three roles consume over half of the price tag, does not leave much money for the many other potential costs, including the technology stack, additional investment team members, operations professionals, a legal and compliance function, administrative support, reporting capabilities, relationship managers to serve the family, tax experts, trusts and estates professionals, philanthropic advisors, benefits, real estate, and other overhead.

One way to frame the question is to consider the single-family office budget as a substitute for wealth management advisory fees. The area shaded blue in the nearby table shows dollar costs and assets under management (AUM) where the fee equivalent is at or below 50 basis points. At lower asset levels, the fixed-cost burden can be very high compared with a fully outsourced or hybrid model and will not cover the expenses required to have an institutional quality single-family office—even though it might be a billionaire family. One related point is that billionaire families typically do not have all of their wealth in investable assets, or AUM. In fact, oftentimes, multibillionaires own most of their wealth in concentrated and/or illiquid assets, which might be reported on but would not be managed by an investment team.

So, what does an SFO cost? Let’s consider three examples. If a single family office is not responsible for investment management, and perhaps has a few non-investment focused employees, the economic threshold for creating it will be lower: likely hundreds of millions in assets and a couple of million dollars in costs or less. But families should still compare the cost and capabilities of an SFO against what a strong ultra-high-net-worth wealth manager can provide in that example. If a single-family office has $1 billion or more in assets and offers non-investment services to the family and has a couple of investment professionals but largely outsources investing to an ultra-high-net-worth wealth manager or OCIO, costs will be higher than the prior example but can be in the $3-5 million range. If a single-family office seeks to build a world class investment function, it would likely need over $5 billion in assets and be willing to spend well over $5 million and potentially over $10 million per year as a baseline with increases expected every year. But costs only tell one part of the story. Investment scale requires even more in assets in order to achieve a world class investment program that competes with the best ultra-high-net-worth wealth managers or outsourced CIOs.

How Much Does a Single-Family Office Cost?

Even if a family is comfortable absorbing the operating cost, the more important question for a single-family office seeking to build an institutional quality investment function, inclusive of private equity and venture capital allocations at a minimum, is whether the family office has enough investment scale to execute well. We believe that clients with nine to 10 figures in wealth often benefit from having a robust private investment program (not necessarily self-built). At higher wealth levels, families typically require less liquidity and have longer investment time horizons. As a result, they can often lock up a greater level of assets in illiquid investment strategies like private equity, venture capital, private equity co-investments, distressed debt, private real estate, private energy, and other opportunistic private assets in exchange for higher expected returns.

Private markets, however, are not simply a matter of deciding to allocate capital. Take private equity as an example. Manager selection, access, pacing, vintage-year diversification, co-investment opportunities, operational due diligence, and portfolio construction all matter. Additionally, the dispersion between top-performing and median private equity managers has been substantial historically, which is why access to and selection of high-quality managers is often one of the most important determinants of long-term results.⁴ Because of this dispersion, top quartile funds can usually select their clients—making access very challenging unless allocators have strong relationships and ample capital to invest.

To build a strategic private equity allocation with vintage and fund diversification, investors typically need to be invested in 20 or more funds with five to seven years of consistent annual commitments across multiple vintages. Meaningful self-funding generally takes longer—sometimes 10 plus years—and depends heavily on realization activity, portfolio performance, and the pace of future commitments. The table below shows a more aggressive private equity allocation of 35% at various asset levels and the implied pro rata commitment across 20 and 25 funds. While the per fund investment becomes more significant at the larger asset levels, and there are funds that will take check sizes at even the smallest amounts, oftentimes to gain access to the strongest private equity funds, investors need true scale. Smaller check sizes also limit information flow, the ability to participate in limited partner advisory committees, negotiating leverage, and access to meaningful co-investments.

This brings us to three additional considerations that can lower fund allocations from what is shown in the simple chart nearby at the same AUM levels. First, in our view, strong private equity programs take advantage of co-investment opportunities, which can strengthen returns and lower fees when executed well. Second, if an SFO’s private equity program includes strategic allocations to both buyout and venture, the number of funds can be meaningfully higher than 20-25, especially across vintages. Third, we believe many of the strongest private equity funds are managed by emerging managers, who often have pedigrees from well-established firms. Gaining access to these opportunities generally requires greater diversification across funds to manage risk and participate in smaller vehicles, as well as strong relationships with established managers who can facilitate introductions to emerging managers.

A family office with several billion dollars of investable assets may still be at a meaningful disadvantage if it is attempting to build a stand-alone private equity program while competing for access against larger institutional investors with dedicated and talented teams, longstanding manager relationships, and substantially greater commitment capacity. Our view: at $5 billion or less of assets, a single-family office is typically better off hiring a few investment professionals and largely outsourcing investments to a strong ultra-high-net-worth wealth manager. To have in-house investment management that is truly institutional quality and have a strategic private investment program, the entry level for assets is likely more than that, and depending on the objectives of the investment program, potentially over $10 billion. Capital alone enables participation, but scale and expertise are needed to do it well.

Conclusion

A single-family office can make sense when a family has sufficient assets, complexity, and desire for control to justify the cost and infrastructure. However, for families seeking to manage investments in-house, the math often does not work without substantial scale and expertise. The challenge is not only the annual operating budget; it is the ability to attract investment talent, access high-quality managers, build a diversified private markets program, and sustain the organization over time.

Families that are focused primarily on non-investment services—such as bill payment, family governance, next generation education, trust and estate advice, tax planning, philanthropy, and consolidated reporting—may find that a small or hybrid family office can be appropriate. In many cases, however, an ultra-high-net-worth wealth manager can provide many of these services as part of an integrated advisory relationship, often with greater scale and less operational burden.

The takeaway: our view is that assets below $1 billion may support a light or non-investment family office; assets of $1 billion to $5 billion may support a hybrid model; assets above $5 billion can support greater sophistication but may still favor outsourcing; and truly institutional quality, in-house investment management may require $10 billion or more, depending on the family’s objectives. Evaluating “whether the math works” is an important consideration, but the decision to create a single-family office is complex and should include a careful review of purpose, structure, services, insourcing versus outsourcing, staffing, governance, succession, technology, and operations—in addition to cost. SCS advises families through each of these decisions. Please reach out to jturner@scsfinancial.com if you would like to schedule a conversation.

Endnotes

¹ Source: Campden Wealth. The Family Office Operational Excellence Report 2025.

² Source: Charles Skorina; Pay and Chief Investment Officers: Good Money While It Lasts – Charles Skorina & Company

³ Based on the latest publicly disclosed Form 990 compensation for CIOs, excluding significant outlier compensation arrangements.

⁴ Notes: Source: Burgiss, Morningstar, MSCI, PivotalPath, JPM AM.