What is a Family Office? A Guide

October 6, 2022

If you have a family and your assets are becoming challenging to manage, it may be time to consider investing in a family office. This structure may help preserve wealth for future generations while providing benefits for your family.

What Is a Family Office?

A family office is a private wealth management advisory firm that serves ultra-high-net-worth families and individuals (HNWI). The family office concept is nothing new, dating back to the 19th century when families of great wealth began to establish in-house teams of advisors.

A family office can be either a single or multi-family office, and it often employs a team of professionals to provide comprehensive financial services.

While some family offices are standalone entities, others are affiliated with larger financial institutions. The size and structure of a family office depends on the specific needs of the household it serves.

Ultra-high-net-worth families often have complex financial portfolios, and a family office can help to manage and grow these assets.

Common Benefits of a Family Office

There are many benefits of working with a family office.

One of the main benefits is that it can help to streamline the process of managing family finances. A family office can often provide expert advice on a wide range of financial matters.

In addition, a family office can provide administrative support for these activities, freeing up time and energy for their clients. 

Finally, a family office can help to ensure that your wealth is distributed according to your wishes and help protect your legacy for future generations.

While there are many benefits, it’s essential to remember that not all family offices are created equal. Therefore, when choosing a family office to work with, it is important to do your research and ensure that the team you select has the experience and expertise you need.

In addition, finding a family office that shares your values and that you feel comfortable working with on a long-term basis is crucial. By taking the time to find the right fit, there’s a better chance that working with a family office will be a positive experience for you and your household.

Common Signs It Is Time to Start a Family Office

There is no single answer to the question of when it is time to start a family office.

The right time will vary and may depend on factors such as:

  • Size and wealth of the family
  • Family’s business interests
  • Needs of the family members

However, there are a few general guidelines that can help families decide when it is time to establish a family office.

First, families should consider creating a family office when they have multiple generations with complex financial needs.

Second, families should also consider starting a family office if they have significant business interests that need to be managed.

Finally, families should consider establishing a family office if they need help managing their day-to-day affairs or if they want to ensure that their wishes pass on their wealth.

By considering these factors, families can determine whether setting up a family office is the right decision for them.

Responsibilities of a Family Office

Family offices are often seen as an alternative to traditional wealth management firms, offering a more personalized and comprehensive approach to managing family finances.

This usually requires a well-coordinated, collaborative effort by a team of professionals from multiple disciplines which could include legal, insurance, investment, estate, business and tax, depending on the complexity of the family’s finances.

Financial services may include:

Legal services may include:

  • Wills and trusts
  • Probate
  • Asset protection

finally, administrative services may include:

By carefully considering the family’s needs, it is possible to create a tailored family office that may provide increased long-term financial security.

Signs to Start a Family Office: Considerations

Families can look for a few common signs to determine whether it is time to start a family office. So let’s take a look.

Lack of Personnel

For many families, the decision to start a family office is motivated by the desire to have more control over their finances. However, another factor to consider is the lack of personnel to manage these complex finances.

In today’s world, finding qualified and trustworthy financial advisors can be challenging. This is especially true for families with complex financial portfolios. By starting a family office, families can have more professionals managing their finances.

In addition, family offices can provide personalized services that are tailored to the specific needs of the family. As a result, the lack of personnel is often an important reason why families choose to start a family office.

Increased Complexity

As families grow and accumulate wealth, they often find that their financial affairs become increasingly complex. This can be due to various factors, such as managing multiple bank accounts, investments, and properties.

In addition, families may have charitable trusts or foundations, and they may also be involved in business ventures. As a result, some families decide to set up a family office.

With so many moving pieces in a portfolio, families may decide they need professionals to step in for a better chance of efficiency and greater control over the family’s assets. 

Loss of Focus

As any successful business person knows, it takes focus and dedication to achieve success. However, even the most successful entrepreneurs can eventually lose their drive and become bogged down in the day-to-day minutiae of running a business.

When this happens, it can be challenging to remember what inspired them in the first place. One way to try to regain that lost focus is to start a family office.

By hiring a team of professionals to handle the business’s day-to-day operations, entrepreneurs can free up their time to pursue new opportunities and venture into new areas.

In addition, a family office can provide much-needed support and structure, helping entrepreneurs to stay on track and avoid getting sidetracked by irrelevant tasks.

Bottom Line

There is no one perfect time to start a family office, but there are some known things you should consider before making the leap. By taking into account your personal and professional goals, as well as the needs of your family, you can create a foundation for increased control and financial preservation. 

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