What Is a Family Office?

What Is a Family Office?

Let me tell you directly: in the personal financial services industry, a family office is a private wealth management advisory company that serves ultra-high-net-worth individuals, or UHNWIs—those with more than $30 million to invest.

These offices go further than most wealth management firms by offering a wider range of services. Besides investment planning and management, they handle your budgets, insurance, charitable giving, wealth transfer planning, tax services, and more.

Key Takeaways

Family offices deliver a broad spectrum of private wealth management and related services to a small number of ultra-high-net-worth individuals and their families.

Beyond financial services, they can provide various kinds of financial planning, charitable giving advice, concierge services, and more.

They also manage non-financial issues, such as private schooling, travel arrangements, and household services.

How a Family Office Works

A family office provides a wide range of services tailored to meet your needs as a UHNWI. From investment management to charitable giving advice, they offer a dedicated team of specialists to service you.

If you run a family business, you might need structures for succession planning, like trusts or foundations for your assets. Given the complexity, you could use a family office to manage those assets and plan for the future.

Family offices can also handle non-financial issues for you, such as private schooling, travel arrangements, and miscellaneous household matters.

Typically, family offices are either single-family or multi-family. Single-family offices serve just one ultra-affluent family, while multi-family offices are more like traditional private wealth management practices, building their business by serving many clients.

Multi-family offices are more common because of economies of scale that allow cost-sharing among clients.

Importantly, what a family office does can differ widely. While one client might need high-caliber advice from a range of experts, another might require organization of their lifestyle needs.

The Responsibilities of a Family Office

Providing advice and services for ultra-wealthy families under a comprehensive wealth management plan is beyond what any single professional advisor can handle.

It requires a well-coordinated, collaborative effort by a team of professionals from legal, insurance, investment, estate, business, and tax disciplines.

Often, a family office provides high-level financial planning through an integrative approach. By combining asset management, cash management, risk management, financial planning, lifestyle management, and other services, they help you navigate the complex world of wealth management.

Legacy Planning

After accumulating wealth over a lifetime, ultra-high-net-worth families face obstacles like estate taxes, estate laws, and family or business issues when maximizing their legacy.

A comprehensive wealth transfer plan must account for all facets of your family’s wealth, including managing or transferring business interests, disposing of the estate, handling family trusts, supporting philanthropic desires, and family governance.

To ensure your family’s wealth transfer plan is well-coordinated and optimized, family offices work collaboratively with a team of advisors from each necessary discipline.

Lifestyle Management

Many family offices act as a concierge for families, handling personal affairs and lifestyle needs.

This could include conducting background checks on staff, providing personal security for home and travel, organizing aircraft and yacht management, coordinating travel, and streamlining business affairs.

Investment Management

For a single family, a family office may manage investment portfolios, commercial real estate purchases, property management, private equity deals, hedge fund investments, and venture capital investments.

Family Wealth Education

A family office educates younger family members about handling wealth properly and how it should be used based on family values. It instills appreciation for the wealth and its demands, helping maintain family unity and prevent discord over money issues between generations.

Fast Fact

John D. Rockefeller is thought to have established the first full-service, single family office in the U.S. in 1882, and the Rockefeller family office still exists today.

Types of Family Offices

Let me break down the types for you.

Traditional Family Office

A traditional family office is an entity you establish to manage your family's wealth. It has a staff of experts who protect and grow the wealth, including financial advisors, tax specialists, estate planners, accountants, and more. All are employed by the family, avoiding conflicts of interest from other institutions. The goal is to serve your family's demanding financial interests.

Multi-Family Office

A multi-family office manages wealth for more than one family, offering the same services as a traditional one. Experts tailor solutions for each family's needs.

Beyond investment management, this might involve bill-paying, wealth transfer plans, philanthropic advice, wealth education, and more. They charge a percentage of assets under management.

They can be less expensive than traditional offices because they serve multiple families, but you have less control as a result.

Outsourced Family Office

An outsourced family office is a network of service providers—financial advisors, lawyers, accountants—who collaborate on your behalf. One professional coordinates everything.

What sets them apart is their authorization to consult each other about your financial business.

They handle matters like philanthropic planning and family wealth education, usually at a lower cost than traditional offices, but with less control for you.

Do You Need a Family Office?

Whether you need a family office depends on the extent and complexity of your wealth, and the demands it places on your family. Certain situations require specialists with access to high-value resources for a long list of issues.

Broadly speaking, if your net worth is at least $200 million, you might consider establishing a traditional family office.

Who Uses a Family Office?

A family office is a private wealth management firm set up by an ultra-high-net-worth family to provide personalized services like investment management, financial planning, estate and tax planning, philanthropic investing, concierge services, and more.

Is a Family Office the Same As a Wealth Advisory Firm?

Not really. Wealth advisory firms offer some services like portfolio and investment management, but they have many clients, while a family office focuses on one or a few. Family offices provide a much larger range of services to address all wealth-related needs of UHNWIs.

The Bottom Line

Ultra-high-net-worth individuals establish family offices primarily to manage and grow wealth, but also to provide other services that help handle the complexities of that wealth.

While appropriate for some extremely wealthy people, most affluent individuals are well-served by professionals at a wealth advisory firm.