What is a Family Office?
Understanding the Family Office
The family office is a unique family business created by and for a single family to provide tailored wealth management solutions (from accounting to investments to philanthropy) in an integrated fashion across multiple generations while promoting and preserving the family's identity, unity, and values.
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The scope and manner of services provided by family offices vary significantly across different families, hence the popular adage in the industry: "If you've seen one family office – you've seen ONE family office." |
While no formal data exists, we estimate there are between 2,500 and 6,000 family offices in the United States, and that another 5,000 exist informally inside privately controlled businesses in the U.S. In Europe and Asia, the concept of life and wealth management in a family office is evolving, but new family offices in these areas are still being formed monthly in these areas. |
Why Start a Family Office
Families start an office for a variety of reasons. Many seek to provide economies of scale for the family by leveraging the buying power of the entire group when procuring investment and advisory services. Others exist to control the wealth management process, protect the privacy and confidentiality of family members by deploying dedicated staff, or preserve family unity by keeping multi-generational family members connected. However, in all cases, family wealth owners look to the family office to provide professional, private, and conflict-free management of their affairs and to increase their chances of sustaining and strengthening their human, social, and financial capital for the long term.
Types of Family Offices
- The focus of each family office is defined by the family’s goals, the goals for the office, and the way the staff spends its time. We have identified eight common family office types. Notably, many FOX members describe their offices as a combination of two or more of the ones defined here.
- Supports the activities of business founders running operating companies. Founders offices address questions regarding ownership structure, real estate management and other financial issues outside of the operating business.
- Supports the activities of business owning families who are focused on growing and running the operating business. The office is often embedded in the operating company and provides financial and tax services for family members.
- Supports owners committed to staying together as a family on a broad range of dimensions – business, philanthropy, and otherwise. This office typically focuses on wealth creation as well as wealth preservation, and risk-taking strategies as well as risk management strategies.
- Supports diverse owners from multiple branches of the family or from multiple families. This office is challenging to operate as it supports the broadest range of services and the greatest diversity of clients. Multi-family offices often open their doors to accept non-family clients to increase the purchasing power for the owning family group.
- Supports owners who are focused on both public equity and/or private equity investing. On average, strategic and tactical asset allocation provide the discipline for diversifying wealth across 12-16 asset classes. Family members often pool their buying power through investment partnerships where they agree on time horizons, risk parameters and asset classes.
- Supports diverse owners from multiple branches of the family or from multiple families. This office is challenging to operate as it supports the broadest range of services and the greatest diversity of clients. Multi-family offices often open their doors to accept non-family clients to increase the purchasing power for the owning family group.
- Supports trustees and beneficiaries of family trusts in a fiduciary capacity. Office managers often serve as trustees of these trusts. The focus of the office is on trustee training, trust administration, record keeping and tax compliance for the structures of the family.
Supports the goals of the philanthropically-minded owner whose goal is to distribute the majority of the wealth to philanthropic causes. Family foundations are often at the center of the activity for this type of office. Activities to support the lifestyle needs of the owners are managed separately to comply with non-profit regulations.
- Control of the Assets
- Continuity of the Family
- Objectivity in Decision-making
- Customization of Services
- Confidentiality of Information
- Integration of Financial Strategies
- Education of Owners
- Control of the Assets
- Continuity of the Family
- Objectivity in Decision-making
- Customization of Services
- Confidentiality of Information
- Integration of Financial Strategies
- Education of Owners
