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Family Offices

Definition

The term family office can refer to a family controlled investment group, and also the two major terms: single family office or multi-family office. The distinction is important since, despite the similar names, they provide significantly different services. This article refers principally to single family offices, which are the predominant forms of family offices today.

What are 'Family Offices'

Family offices are private wealth management advisory firms that serve ultra-high-net-worth investors. 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, family-owned businesses, wealth transfer and tax services.

Explaining 'Family Offices'

There are two types of family offices: single family offices and multi-family offices sometimes referred to as MFOs. Single family offices serve one ultra-affluent family while multi-family offices are more closely related to traditional private wealth management practices, seeking to build their business upon serving many clients. In addition, the family office can also handle nonfinancial issues such as private schooling, travel arrangements and miscellaneous other household arrangements.

The Many Disciplines of a Family Office

Providing the 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 to provide the scale of planning, advice and resources needed. Most family offices combine asset management, cash management, risk management, financial planning, lifestyle management and other services to provide each family with the essential elements for addressing the pivotal issues it faces as it navigates 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, complex estate laws, and complicated family or business issues. 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. Family education is an important aspect of a family office; this includes educating family members on financial matters and instilling the family values to minimize intergenerational conflicts. Family offices work collaboratively with a team of advisors from each of the necessary disciplines to ensure the family’s wealth transfer plan is well-coordinated and optimized for its legacy desires.

Lifestyle Management

Many family offices 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.

Family Offices FAQ

How do family offices work?

A family office serves to manage the family's assets, to oversee investments, and make required payments to family members. Family offices sometimes provide management services including education about finances and investments, family governance, succession planning, and philanthropy coordination.

How do you structure a family office?

The structure of a family office is determined by the number and size of assets, goals, and needs of the individual family. A family office can be set up as a limited liability company, or LLC, or as a limited partnership. Services provided could include management of taxes, investing, accounting, and management of various entities, such as trusts, partnerships, and foundations.

How is a family office structured?

A family office may be structured as a limited partnership or a limited liability company (LLC). Services may include tax preparation, management of investments, accounting, and management of trusts and partnerships.

What is a family office SEC?

“Family offices” are entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services.Nov 21, 2011 Wealthy families may set up a family office to manage assets and investments, provide tax and accounting services, oversee estate planning, and manage trust, partnerships, and foundations.

What is meant by family office?

A family office serves to manage the family's assets, to oversee investments, and make required payments to family members. Family offices sometimes provide management services including education about finances and investments, family governance, succession planning, and philanthropy coordination.

When should you set up a family office?

Sometimes, a family may set up a family office due to the sale or liquidation of assets. Other times, a family office is set up as specific needs evolve.

Further Reading


One size does not fit all: Entrepreneurial families' reliance on family offices
www.sciencedirect.com [PDF]
… (1) Family offices (FOs) are organizations that manage the wealth of business families by taking actions (ie, investments) to sustain and grow their wealth (Gilding, 2005; Gray, 2005) … Family office, 59, (7.9%) … Education: business/economics, 0.776, 0.794, −0.018 …

Family offices and the contemporary infrastructures of dynastic wealthFamily offices and the contemporary infrastructures of dynastic wealth
www.rivisteweb.it [PDF]
… (1) Family offices (FOs) are organizations that manage the wealth of business families by taking actions (ie, investments) to sustain and grow their wealth (Gilding, 2005; Gray, 2005) … Family office, 59, (7.9%) … Education: business/economics, 0.776, 0.794, −0.018 …

Family Offices and Institutional Change in Europe: A Comparative AnalysisFamily Offices and Institutional Change in Europe: A Comparative Analysis
oro.open.ac.uk [PDF]
… (1) Family offices (FOs) are organizations that manage the wealth of business families by taking actions (ie, investments) to sustain and grow their wealth (Gilding, 2005; Gray, 2005) … Family office, 59, (7.9%) … Education: business/economics, 0.776, 0.794, −0.018 …



Q&A About Family Offices


Who are the clients of a typical family office?

Ultra-high-net-worth individuals and families.

What is a family office?

A family office is a private wealth management advisory firm that serves ultra-high-net-worth investors.

How do you address pivotal issues faced by high net worth families?

With comprehensive wealth management plans, which combine asset management, cash management, risk management, financial planning, lifestyle management and other services to provide each family with essential elements for addressing pivotal issues it faces as it navigates complex world of wealth management.

What does a family office offer?

Family offices offer total outsourced solution to managing the financial and investment side of an affluent individual or family.

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