What Are Family Offices?

Family offices are private wealth management advisory firms that serve ultra-high-net-worth individuals (HNWI). They are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family. For example, many family offices offer budgeting, insurance, charitable giving, wealth transfer, and tax services.

Key Takeaways

  • Family offices provide a broad spectrum of private wealth management services to one or a small number of ultra-high-net-worth families.
  • Besides financial services, family offices also offer planning, charitable giving advice, concierge, and other comprehensive services.
  • Single-family offices serve one individual and their family, while multi-family offices serve a few families benefiting from economies of scale.

Understanding Family Offices

A family office provides a wide range of services tailored to meet the needs of HNWIs. From investment management to charitable giving advice, family offices may offer a dedicated team of specialists to service these clients.

Family-run businesses may require structures for succession planning, such as setting up trusts or a foundation for the family assets. Given the complexity of these situations, clients may utilize a family office to help manage the assets and align interests. The family office can also handle non-financial issues, such as private schooling, travel arrangements, and miscellaneous household arrangements.

Family offices are typically either defined as single-family offices or multi-family offices (MFOs). Single-family offices serve just one ultra-affluent family, whereas MFOs are more closely related to traditional private wealth management practices, seeking to build their business upon serving many clients. MFOs are more prevalent due to economies of scale that allow for cost-sharing among the clientele.

Importantly, the range of family offices differs widely. While one client may need high-caliber advice from a range of experts, another client may need a family office to organize their lifestyle needs. 

The Many Disciplines of a Family Office

Providing advice and services for ultra-wealthy families under a comprehensive wealth management plan is far beyond the capacity of any one professional advisor. It requires a well-coordinated, collaborative effort by a team of professionals from the legal, insurance, investment, estate, business, and tax disciplines.

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

Legacy Planning and Management

After a lifetime of accumulating wealth, high-net-worth families are confronted with several obstacles when trying to maximize their legacy, including confiscatory estate taxes, estate laws, and family or business issues. Given this complexity, a comprehensive wealth transfer plan must take into account all facets of the family’s wealth, including the transfer or management of business interests, the disposition of the estate, management of family trusts, philanthropic desires, and continuity of family governance.

Along with this, family education is an important aspect of a family office; including educating family members on financial matters and instilling the family values to minimize intergenerational conflicts. To ensure the family’s wealth transfer plan is well-coordinated and optimized for its legacy, family offices work collaboratively with a team of advisors from each of the necessary disciplines.

Lifestyle Management

Many family offices furthermore act as a personal concierge for families, handling their personal affairs and catering to their lifestyle needs. This could include conducting background checks on personal and business staff, providing personal security for home and travel, aircraft and yacht management, travel planning and fulfillment, and streamlining business affairs.