single family office business plan

Do I Need a Family Office? A Guide for the Rich and Not So Famous

Ultra-wealthy people, including Bill Gates, have family offices, but so do about 10,000 others. What is a family office, and is it right for you? Get the answers and take a quick quiz to see if you’re a candidate.

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Several years ago, I spent an entire day with a client walking the opening round of the Byron Nelson Golf Tournament. I enjoy time like that with my clients, and it makes for the perfect op­portunity to hear what’s really on their minds. As we watched the best players in golf hack their way into the second round, he asked me his one, and only, business-related question of the day: “Should I start a family office?”

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Most wealthy families eventually face this question, often as the result of peer pressure. Like va­cation homes and private air travel, forming a family office seems to be something that friends and neighbors are doing. If your business and career have brought you significant net worth, someone in your circle may eventually suggest forming a family office.

This paper, and the questionnaire that accompanies it, is meant to help you and your family de­cide whether such an organization is right for you. This is the starting point for families asking them­selves the question. The execution of the idea, however, is a longer topic best discussed with experienced advisers. It is important to note that each story truthfully illustrates a concept, but specific details have been changed to protect client confidentiality.

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What Is a Family Office?

According to Ernst & Young, there are more than 10,000 family offices globally, and some estimates put the figure in the U.S. at 6,000 . The largest family offices are well known: Bill and Melinda Gates’ Cascade Investment, Sergey Brin’s Bayshore and David Rubenstein’s Declaration Partners Capital are just a few examples. With large office spaces, dozens of employees and seemingly un­ending resources, these family offices are easy to spot. Thousands of family offices are much smaller, with most employing as few as one or two people to help the principal manage their wealth.

There are three categories of family office:

• The traditional family office. The concept is straightforward. A wealthy principal forms a legal entity, and then hires a staff whose job it is to invest and protect the family’s wealth, manage the family’s assets and assist with their lifestyle.
• The multifamily office. The rapid growth of family offices has been accompanied by new, creative variations. One of the most common is the multifamily office. These outside firms are set up to perform most of the functions of a fully staffed family office: They help set investment strategy, perform due diligence on private investments, assist with tax and estate planning, interface with investment managers and advise on family governance. They charge a fee, typically a percentage of total net worth, and have dozens of client families. These models are more affordable than a traditional family office, but because you share resourc­es with other families, they lack the same level of control as a traditional family office.
• The outsourced family office. Finally, an outsourced family office isn’t an office at all, or a single organization, but a collaborative effort across several supporting players. A financial adviser handles the investment portfolio, an attorney handles the estate plan and a CPA handles tax strategy and pays bills. Concierge services, next-generation education and family governance advice are types of services often included in the fees at large wealth advisory firms. Creating an outsourced family office lacks the total control and coordination of a traditional family office, but it is the least expensive approach.

How is an outsourced family office different than your current financial adviser/CPA/attorney trio? The principal will need to give authorization for the parties to communicate at any time, and then he/she chooses a “quarterback” to coordinate most family financial matters. This is often the financial adviser, who will now guide the family on much more than asset allocation and portfolio management. Topics such as family meeting coordination, next-generation financial education and philanthropic planning become routine conversations.

Who Needs a Family Office: 3 Factors to Consider

Do you need a family office? If so, which model should you use? It is unfortunate that most financial advisers answer this question with a simple range of personal net worth. Your balance sheet is an important factor, but there are many other questions that should be answered about income, diversification, staffing, overhead, geographic disparity, family dynam­ics, philanthropic interests and time commitments. This longer, more thoughtful discussion can be grouped into three categories: the size of your wealth, the complexity of your life, and the priorities of your family.

No. 1: The Size of Your Wealth

The client I mentioned at the golf tournament was a serial entrepreneur who was successful across multiple industries. Al­ready wealthy by any standard, his largest business was on the verge of selling. The transaction would multiply his personal liquidity, and nearly end his day-to-day business responsibilities. Large-scale liquidity events are usually the catalyst for someone to start considering a family office.

How much wealth justifies a family office? Most advisers will offer a balance sheet measure. However, the most important measure is income, not assets or net worth. Either from private investments or from a large liquid portfolio, a family’s sus­tainable income — after paying all lifestyle needs — has to be enough to pay the overhead of the staff they want to hire. When a principal burns into their liquidity to pay for the office, they have transformed the family office concept into a business venture that requires excess market returns to fund itself. This is called a private equity firm — not a family office.

Even small offices can be very expensive. Citibank estimates that a small family office with two professionals and four support personnel can cost $1.5 million to $1.8 million per year. Morgan Stanley and Botoff Consulting routinely publish a family office compensation report. In 2019, their survey found that the average small family office in Chicago can expect to pay a chief investment officer over $300,000, and a general counsel over $200,000. These figures are base salaries and do not include benefits, bonuses or carried interest compensation.

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Many clients still think in terms of total net worth, and it can be a quick back-of-the-napkin measure. I usually advise clients that you should only consider a traditional family office if your total net worth is above $100 million minimum and most will need more than $250 million. This is simply a practical matter: Total assets below $50 million can easily be served by a more traditional group of advisers for a much lower cost.

No. 2: The Complexity of Your Life

In my early days I met a successful entrepreneur who owned a very large, well-known business. His accountant shared his personal balance sheet to help us formulate a solution for him. The man was worth almost $500 million, and nearly all of it was in the value of the company. In fact, his personal liquidity was less than $3 million, held entirely in cash. His entire balance sheet could be summarized across three line items: the business, the cash and the house. In his case, his income and total net worth more than qualified him for a family office. But the lack of complexity meant he could lean on his company’s management team and a single financial adviser without having to build out a family office.

A single, large portfolio of stocks and bonds, regardless of the enormity, is not complicated nor is it time consuming. Finan­cial advisers who specialize in the ultra-wealthy can easily manage this portfolio according to your goals and risk tolerance. In addition, if your entire wealth is held in a single, family-owned business, you don’t need a family office staff to help grow your wealth. Your management team at the business is already helping you drive value.

Depending on age and personal preference, some clients sell their primary business and “go to the farm,” leaving their financial advisers with a portfolio to manage. This straightforward approach rarely requires full-time employees, HR over­sight and a long-term office lease. Other clients, however, build more businesses on the foundation of their early financial success. One client parlayed his early victories as a real estate developer into a diverse portfolio of closely held businesses across a dozen industries. Another client, in his early 60s, is on his third wildly successful career in as many indus­tries. Choosing to manage a myriad active, private investments takes a staff, and not just management teams at each business. In these cases, family offices will look like single-investor private equity firms, with staff members sourcing deals and performing due diligence.

An overweight of personal assets can also create complexity. One of my clients, who did not have a family office structure, owned four vacation homes in addition to his primary residence. “One for every season!” he once told me. He, his wife and their grown children would use private aviation to spend as much time at each vacation property as they could. After a few years, he admitted that the properties were “just too much,” and he sold all but one. The sheer breadth of his properties — the upkeep, property taxes, scheduling and in some cases staffing — warranted a full-time employee. He chose to simplify his life rather than make the long-term investment of a family office.

It’s worth noting one of the most controversial subjects in the family office conversation: paying household bills. I’ve known many clients who achieved tremendous financial success and wonder, justifiably, why they’re still the person to write their lawn crew a check every Thursday. One of the advantages of a traditional or multi-family office is the outsourcing of the bill pay function. If your personal receipts and expenditures look more like a small business than a small household, you should consider a multi-family or traditional family office.

Another factor to consider is the complexity of your estate plan. The plan itself and its various legal entities should never, on their own, factor into the choice to form a family office. The best estate plans, however, reflect the principal’s desires on how best to leave a legacy for the next generation. Simple wills and remainder trusts describe an approach that requires very little interpretation when you’re gone. If, instead, you find yourself with multiple family limited partnerships, family foundations and an array of trust structures, you might require a professional staff to help implement your strategy. Many of the nation’s largest family offices have existed for multiple generations and continue to carry out their founders’ wishes.

No. 3: The Priorities of Your Family

It is hard to discuss the formation of a “family office” without discussing the family. It is entirely possible for a single individ­ual with no heirs to have the resources and requirements to create a family office. But most family offices are built around a family, or at least the legacy that the family wants to leave the world.

One of the advantages of the formal structure of a family office is the flexibility it gives the parents when it comes to their grown children. If the wealthy individual wants his or her children involved in the daily business of managing the family’s wealth, the office has built-in roles for their children. One client had considerable success in the aviation business. His grown son was competent and hardworking but had no interest or inclination to work in the airline industry. By giving his son a role in the family office, he helped his son grow and mature and kept him involved in the family’s financial picture.

This same flexibility can also go the other direction. One of my early family office clients was five generations removed from the founders. Decades ago, the descendants who controlled the business made the decision that no family members were allowed to work in the family office; instead, each was expected to blaze their own way. This approach is sometimes easier than having to decide which child or grandchild is qualified enough to earn a paycheck. It also allows the office staff to focus on growing and protecting the wealth without the drama of family politics.

You should also understand and acknowledge the issues of trust and confidentiality when considering the formation of a family office. Every wealthy family takes risks of confidentiality when they hire any outside firm. Using a CPA, attorney or financial adviser means sharing details that you hope will remain confidential. On one hand, building a traditional family office gives the principal a higher level of oversight and control over the flow of information. On the other hand, principals need to know that their new employees will become extremely close to the family, exposing them to personal information that the principal might otherwise want to keep private.

Finally, you and your family should weigh the benefits of the office against the time and emotion spent managing this new enterprise. Regardless of your staff size, hiring people means interviews, job offers, benefit plans, security protocols, per­formance evaluations, office politics, vacation time, raise discussions and much more. You will become the chief executive of the new enterprise, and ultimately will be responsible for all the people you employ. Creating a family office is intended to make the principal’s life easier, but it still requires personal responsibility.

A Quick Test to See Where You May Stand

The questionnaire below encompasses these concepts in 10 questions. I urge you and, if you’re married, your spouse to take the test and discover if your opinions are aligned and if the outcome is the same. Answer each question by checking the appropriate box. If none of the answers apply to you, leave that row unchecked. Give yourself 1 point for every check in column 1; 2 points for each check in column 2; 3 points for checks in column three; 4 points for checks in column 4; and 5 points for checks in column five.

Evaluating Your Score

If you scored fewer than 20 points, a family office is likely not for you. Continue to lean on your financial and other advisers to help protect and grow your wealth. You should have the time and inclination to coordinate your financial matters across your advisers.

If you scored 20–29 points, you should consider an outsourced family office. Unlike a traditional family office, this structure is a collaborative effort across several parties, usually with the financial adviser as quarterback. Sit down with him or her and show them the results of this questionnaire. Share your desire to broaden the type of advice you want them to provide beyond portfolio management, including, for example, financial education, estate advisory or family governance. Ask if their firm has expertise in these matters, and what accessing that expertise would cost. Discuss how they would coordinate these services between your accountant and attorney.

If you scored 30–39 points, investigate the benefits of an outsourced family office and the multi-family office. In ad­dition to asking your current financial adviser about their outsourced family office services, interview several multi-family offices. Confirm fee schedules, ask for client references, and spend time getting to know the people who you will trust with your family’s wealth.

If you scored 40 points or more, you have the resources and the requirements of a traditional family office. Your financial adviser and CPA are good resources to gather information about forming a family office. Take your time, meet with other family offices, and choose your staff carefully. This is a big step; one that is meant to last for generations.

My Final Words of Advice

The decision to form a family office requires plenty of thought and consideration over topics that some principals haven’t considered before. The framework above is just one tool to help you discover whether this endeavor is a fit for you and your family. Never forget that this wealth is yours, and the family office should be a help, not a hindrance.

You may be wondering what happened to my client at the Byron Nelson tournament. When he asked if he should form a family office, I didn’t hand him a survey or pepper him with questions. I just replied, “Well, do you want one?” He answered, “No, not really.”

Decision made.

This material has been prepared for Illustrative purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax adviser for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.

Morgan Stanley Smith Barney LLC. Member SIPC. CRC 3405626 01/2021

Legacy Planning: Create a Lasting Legacy

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

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Matthew Smith is an Investment Adviser at Morgan Stanley .  He works with high net worth families to create and implement strategies that include investment management, estate planning, and cash management. Matthew was previously a Managing Director at the J.P. Morgan Private Bank, where he most recently was Market Manager for the High Net Worth Market in Dallas. 

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A Simple guide to single family office structure

Table of Contents

The rise of the single family office

The key drivers of single family office growth, is a single family office the right option for you, single family office vs multi-family office.

• The core single family office services
• Five practical steps to building a single family office

Do the math

The emergence of new wealth and an increasingly complex business environment have driven the recent growth of single family offices. Although costly, the single family office concept is a sophisticated and effective vehicle through which to professionalise the management of family wealth and protect it for generations to come, whilst also aligning all activities to a long-term purpose.

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Looking for family office software.

We track over 200 service providers and are determined to help you find the right one.

A single family office (SFO) is a private, stand-alone business entity, created to exclusively manage the financial and personal needs of a single wealthy family. The financial capital managed by the single-family office is the family’s own wealth. The single family office concept has been around for a long time, first emerging during the Industrial Revolution. In the past couple decades, there has been a significant increase in the number of single family offices across the globe, recent estimates suggesting that global family office assets under management have surpassed the one trillion Dollar mark. Single family offices may not be as well known, or understood, as large companies or brands may be, but they are becoming a commercial force to be reckoned with. These entities are actively engaged in business and are linked to many of the biggest recent private equity deals. They also play a significant role in the community and society as a whole as they increasingly focus on their legacy and social impact.

The new millennium has given rise to a sharp growth of the single family office sector, with most family offices having been established post-2000 . This trend correlates with a surge in new wealth creation in both traditional wealth hubs and emerging markets over the past two decades. Much of this new wealth can be attributed to the wave of new technologies and digital innovations. But there are other factors at play which have fuelled the family office trend :

Complexity: The business landscape has become far more complex in recent times, especially in the regulatory, tax and wealth management space. Investment strategies have to be more flexible and informed , keeping pace with accelerating change and shifting market dynamics. Over time, families also become more complex and multi-layered and, with new generations entering the mix, succession and wealth transfer challenges have emerged.

Risk: New risks have emerged in the modern world of business, making generational wealth preservation an increasingly challenging task. Low-interest rates, volatile financial markets and unstable geo-political conditions all contribute to the need for sophisticated risk management processes. The new era of technological advancement has also been a major disruptive force, wealth being created and lost faster than ever before. In this digitised environment, cybercrime has flourished and social media has become a reputation minefield.

Purpose: In line with a broader global trend towards environmental and social consciousness , families are increasingly focused on achieving a lasting legacy, built around an overarching and unique purpose. Achieving a positive and specific impact requires the right expertise and an active investment strategy that extends beyond traditional investment products .

Privacy: We live in an increasingly digital world where information is shared and spread faster than ever before. Not surprisingly, privacy breaches are often the reason for significant reputation damage to wealthy families. The growing demand for transparency and the heightened interest in the people behind big brands and businesses have blurred the lines between personal and professional and therefore, families are placing a higher priority on confidentiality.

Although a singe family office structure provides a high level of privacy, confidentiality, customised services and aligned investment philosophy, it is expensive to run and is most suited to families with more than $250 million in assets under management. Other factors to consider include:

• Complexity of family structure and number of generations served
• Complexity of family investment holdings
• Types of services required
• Level of control required over family investment decisions
• Importance of family legacy and purpose
• Family harmony

A due diligence process is required to assess whether or not to go ahead with creating a single family office. It is recommended that you employ the services of an expert advisor to guide you through this process.

A multi-family office is a business that primarily provides wealth management services to a group of affluent families .  It is a good option for affluent families with less complex requirements and who are looking for a more cost-effective alternative to a single family office. With this set-up, a family loses the control, independence and personal touch that they would enjoy with a single family office structure. However, to provide a balanced view, here are a few arguments to consider:

Expertise: Larger organisations, like multi-family offices, tend to attract more talented personnel and are able to employ more specialists .

Economies of scale: The grouping of families within one organisation can result in enhanced buying power and reduced costs.

Continuity: Larger institutions have the structures in place to mitigate the risks associated with putting too much responsibility in the hands of a couple individuals.

Cost: The multi-family office route is generally significantly cheaper than creating and maintaining your own single family office.

Technology: Larger organisations have the resources and expertise to select, set up and maintain more sophisticated systems.

5. --> The core single family office services

Prior to the 1980s, single family offices were primarily focused on investment advisory with little participation in tax planning, estate planning, philanthropy and succession planning etc. However, they have evolved into more sophisticated entities, shifting specialised resources in-house and offering a more comprehensive and integrated suite of services

Investment management is still the most important function of most family offices, but established, fully developed single family offices generally offer a lot more. Below are some core services that a mature single family office could provide:

Financial and investment planning

Single family offices offer investment management services including the creation of investment policy statements, manager selection, asset allocation, portfolio construction and management and due diligence, as well as investment record-keeping and reporting . Financial planning services include budgeting and cash flow management along with bill pay and concierge services such as management of family real estate and art.

Strategic wealth management

This involves long-term strategic planning for achieving trans-generational family wealth objectives. In addition to determining long-term investment goals, strategic wealth management also entails the building of family governance structures, including family boards and councils, mission statements and constitutions.

Estate planning

Overseeing the structure and execution of the legal documents required for efficient wealth transfer. The family office is the owner of these documents, often overseeing their administration and working with those serving in any fiduciary role.

Philanthropy

Developing donation strategies as well as creating and overseeing family foundations and charitable funds. Single family offices often leverage philanthropy to engage the next generation and transfer values.

Tax and legal advisory

The services of a single family office include tax compliance, constructing a tax plan and designing investment planning strategies that consider all tax implications. The team often includes a general counsel who will ensure strict compliance with regulations pertaining to investments, assets and business operations.

Services include the development of policies and procedures as well as decision-making and dispute resolution processes. The family office defines the structures, along with roles and responsibilities, and facilitates the necessary meetings and communication plan to ensure these structures are working effectively. Succession planning is another vital governance function of a single family office, requiring knowledge sharing and training programs to be set up.

Risk management and insurance services

An increasingly important service that involves robust risk analysis, measurement and reporting. Effective risk management would include scenario planning and response plans as well as hedging strategies for concentrated investment positions. Data security and physical security of family members would also be included in this category. Insurance requirements are assessed and policies acquired.

Other services

Although the core single family office services are usually maintained in-house, others are typically outsourced. That can be beneficial from both a cost and expertise perspective. Common examples include: portfolio management, tax and legal advisory, succession and wealth transfer, and technology planning.

6. -->Five practical steps to building a single family office

1. feasibility, 2. define structures and processes, 5. launch and review.

Considering the costs involved in creating family office, a business case is necessary to inform the decision. A clearly defined long-term vision and purpose guides the overall plan and requirements for the family office. Staffing, governance, technology, advisory services and operations can all be mapped out—with associated costs—in support of the family vision and objectives.

In this step, the high level resource plan that emerged from the feasibility study is fleshed out into a more detailed business plan, with a more accurate view of associated costs.

Once the specific service requirements are mapped out, staffing requirements can be defined and role requirements outlined.

Legal and tax structures as well as governance and reporting protocols need to be defined.

Identify facilities, determine technology and system requirements and draw up a budget for operational and capital expenditure.

Chart all operational processes and workflows and develop a formal governance framework. Finalise job descriptions, recruit staff and sign up outsourced services. Identify, secure and set up premises. Select and secure the right technology partner for your family office.

Ensure that your IT infrastructure, systems and processes have been properly stress-tested with plans in place to deal with cyber threats. Also ensure that your facility is in order. Contingency plans need to be in place for any major disruptions.

When testing is complete, the family office can start operating. To ensure that a family office is functioning optimally, periodic reviews of people, processes, vendors and technology are critical. Outcomes need to be regularly assessed against family goals and best practices.

The management and preservation of significant family wealth are becoming increasingly complex and require the right leadership and expertise in place. With a clearly defined long-term ambition and a firm view of what services are required now and into the future, families can make an informed decision on whether or not to create a single family office and how best to structure it.

Further Reading

Understanding business continuity plans for family offices

Ensuring the safety and continuity of your family office's operations during uncertain times is of utmost importance. Our latest guide highlights the importance of a comprehensive business continuity plan, detailing significant elements to ensure you safeguard your wealth and protect your legacy.

A Simple guide to family office recruitment

This guide provides a deep dive into the unique aspects of recruiting for family offices. Drawing on insights from Simple’s experts and online research surveys, it suggests actionable tips and proven methods to navigate the recruitment process. With the purpose of providing an overview of the landscape, it covers all the basics, starting from identifying specific talent needs to implementing effective onboarding and retention strategies.

How to choose a family office advisor

As family offices evolve and become more complex, their advisors continue to play an important support role. Here is our guide to successfully selecting the right advisor for your specific needs.

A Simple guide to family office service design

This guide to family office service design explores the essential elements of design thinking for family offices, offering a comprehensive approach to enhancing their efficiency and impact.

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• Setting Up a Family Office

Setting Up a Family Office: Steps for Wealth Management

Setting up a family office is a comprehensive process customized to manage and preserve the wealth of high-net-worth families. It involves lots of time and higher costs so it requires careful planning, strategic decision making and meticulous organization. Here’s a step-by-step guide to establishing a family office:

Step 1: Define Your Objectives

Identify goals.

Clearly outline what you want to achieve with your family office. Common goals include:

Wealth preservation

Growth through investments

Estate planning

Philanthropy

Ensuring privacy and security for family members

Assess Needs

Evaluate the specific services your family requires, such as investment management, legal advice, tax planning and concierge services.

Step 2: Assess Your Wealth

Evaluate your family’s total assets to determine if a family office is the most efficient way to manage your wealth. Typically, families with assets of $100 million or more can justify the costs associated with a family office.

Step 3: Determine the Type of Family Office

Single Family Office (SFO) : If your family’s needs are extensive and you prefer exclusive control, consider setting up an SFO.

Multi Family Office (MFO) : If you’re open to sharing services with other families to reduce costs, an MFO might be suitable.

Hybrid Family Office (HFO) : Combines elements of both SFO and MFO, providing tailored services with some cost-sharing benefits.

Step 4: Establish Governance Structures

Develop a family charter.

This document outlines the family’s vision, values and mission for the family office, serving as a guideline for future generations. It typically includes:

The core principles and goals that guide the family and its wealth management strategies.

High-level policies regarding family governance and the operation of the family office.

The family’s approach to philanthropy, social responsibility and how they wish to leave a lasting impact.

Commitments to family member development and education about wealth management .

The family charter is more about the why and what — it’s a statement of intent and principle that provides a foundation for the governance framework to build upon.

Create a Governance Framework

Decide on the decision-making processes, including:

Who will be involved in strategic decisions?

What would be the governance structure like having a family council, executive team and advisory boards?

What would be roles, responsibilities and authority levels for all involved in the family office, from family members to employees and advisors?

What accountability mechanisms will be used to monitor performance and make adjustments?

How decisions will be made (including which require consensus among family members and which can be made by the executive team)?

How conflicts will be resolved (either using mediation or arbitration mechanisms)?

What financial management policies and guidelines will be built to manage investments, spending and risks?

How family members will be educated about financial literacy and governance skills?

How all stakeholders will be updated and engaged?

How leadership roles will be transitioned within the family office?

How future generations of the family will be involved?

How philanthropic or charitable activities will be managed?

How sensitive family and financial information will be protected and so on.

The governance framework is more about the how of managing a family office and its wealth, focusing on operational effectiveness, risk management and ensuring that the office runs smoothly and efficiently.

Step 5: Create a Business Plan

Outline Services: Detail the services your family office will provide, based on the needs and objectives identified.

Budget Planning: Estimate the operational costs, including staffing, office space and technology needs. Ensure your family’s assets justify these expenses.

Financial Projections: Develop financial projections for the office, considering the costs versus the benefits it will provide.

Step 6: Assemble a Professional Team

Hiring Staff: Recruit experienced professionals, including a Chief Financial Officer (CFO), investment advisors, tax experts and legal counsel. Consider the need for administrative and personal service staff.

External Advisors: Identify areas where external consultants may be required, such as specialized legal advice or international investment opportunities.

Step 7: Develop an Investment Policy Statement (IPS)

Craft an IPS that outlines your family’s investment objectives, risk tolerance, asset allocation and guidelines for selecting investments. This will serve as a roadmap for managing the family’s wealth.

Step 8: Legal and Regulatory Compliance

Legal Structure: Decide on the legal structure of your family office (e.g. LLC, trust and corporation) with the help of legal experts to ensure asset protection and operational efficiency.

Regulatory Compliance: Ensure compliance with all relevant financial and legal regulations, including SEC regulations if your family office will be managing investments.

Step 9: Implement Technology Solutions

• Invest in Technology: Adopt financial management software, cybersecurity measures and communication tools to support the efficient operation of your family office.

Step 10: Develop Investment Strategies

Asset Allocation: Develop a diversified investment strategy that aligns with your family’s risk tolerance and growth objectives.

Risk Management: Implement risk management practices to protect your family’s assets from market volatility and other financial risks.

Step 11: Implement Wealth Management Strategies

With your team in place and your IPS as a guide, begin actively managing your family’s wealth. This includes investment management , tax planning , estate planning and addressing any specific needs outlined in your objectives.

Step 12: Set Up Philanthropic Endeavors

If philanthropy is a core objective, establish structures for charitable giving, such as private foundations or donor-advised funds. Define your philanthropic goals and how they align with your family’s values.

Step 13: Plan for Succession

Develop a clear succession plan to ensure smooth transitions of wealth and leadership within the family office. This includes estate planning, trusts and educating the next generation about wealth management.

Step 14: Establish Reporting and Evaluation Mechanisms

Performance Tracking: Set up systems for tracking the performance of investments and the overall efficiency of the family office.

Regular Reviews: Schedule periodic reviews of the family office’s performance, including financial audits and assessments of the office’s alignment with family goals.

Establishing a family office is a strategic decision that offers numerous benefits for managing the wealth and affairs of ultra-high-net-worth families. By following above step-by-step instructions, you can create a family office that not only meets your current financial management needs but also secures your legacy for future generations.

Remember, the key to a successful family office lies in clear objectives, strong governance, expert advice and the flexibility to adapt to changing circumstances. As you embark on this journey, keep your family’s values at the core of your decision-making, ensuring that your wealth management strategy reflects not just financial goals, but the broader aspirations of your family.

Frequently Asked Questions

How do you start a family office.

To start a family office, begin by clearly defining your family’s financial goals and the services you require. Conduct a thorough assessment of your assets and decide on the type of family office. Create a detailed business plan, choose the appropriate legal structure, recruit a skilled team and establish governance policies to ensure smooth operations.

How do you start a multi-family office?

Starting a multi-family office involves defining the scope of services, identifying potential client families, creating a comprehensive business plan, selecting a legal structure, recruiting a team of professionals with expertise in wealth management, investment and legal matters and setting up robust governance and operational frameworks. It’s essential to focus on providing personalized and scalable services to multiple families.

How much wealth is required to set up a family office?

While there’s no strict minimum, setting up and operating a family office is usually cost-effective for families with investable assets of at least $100 million. For MFOs, the threshold can be lower due to shared costs.

What are the first steps in setting up a family office?

Start by defining your family’s objectives and what you hope to achieve with a family office. Then, assess your family’s total assets to ensure a family office is a viable option. Next, decide on the type (SFO or MFO) and the services you need.

How do I choose the right jurisdiction for my family office?

Consider factors like the political and economic stability of the jurisdiction, legal and regulatory environment, tax regime and privacy protections. Common jurisdictions include Switzerland, Singapore and certain U.S. states like Delaware.

What is the ideal corporate structure for a family office?

The structure should align with your family’s goals, tax considerations and regulatory requirements. Options include trusts, limited liability companies (LLCs) or partnerships. Consulting with legal and financial advisors is crucial.

Should I setup my family office as a Trust or Private Company?

Setting up a family office as a trust or a private company depends on various factors, including the family’s goals, privacy needs, tax considerations and the level of control they wish to maintain. If the primary concern is asset protection, privacy and succession planning without immediate need for high liquidity, a trust might be more suitable. Trusts are particularly advantageous for families focused on legacy preservation and intergenerational wealth transfer since assets can be transferred smoothly to beneficiaries without going through probate. On the other hand, if the family values flexibility, control over investments and operations and potential tax advantages, setting up a private company could be the preferred route. This is especially relevant for families actively involved in business activities or those who prefer direct management of their assets.

How do I build a team for my family office?

Identify the core competencies needed, such as investment management, legal, tax planning and estate planning. You can employ in-house professionals and/or outsource certain functions to specialized firms.

How long does it take to set up a family office?

Setting up a family office can take several months to over a year, depending on the complexity of the family’s needs and the chosen structure. This includes time for planning, assembling a team, establishing legal and governance frameworks and setting up operational infrastructure.

What ongoing costs are associated with running a family office?

Ongoing costs for a family office include salaries for in-house staff, fees for external advisors and consultants, technology and infrastructure expenses, regulatory compliance costs and general operational expenses. These costs can vary widely based on the size and scope of the family office.

How do family offices measure performance and success?

Family offices measure performance and success through key performance indicators (KPIs) tailored to the family’s goals, such as investment returns, cost efficiency, client satisfaction and achievement of strategic objectives. Regular reporting and reviews help track progress and make necessary adjustments.

What legal considerations should be addressed when setting up a family office?

Legal considerations when setting up a family office include choosing the appropriate legal structure, ensuring compliance with tax and regulatory requirements, drafting governance documents and setting up trusts or other vehicles for asset protection and estate planning. Consulting with legal experts is essential to navigate these complexities.

What are the key considerations for governance in a family office?

Establish clear governance structures that outline decision-making processes, roles and responsibilities. This may include forming a family council and developing policies for investments, succession planning and conflict resolution.

What is a family office business plan?

A family office business plan outlines the strategic framework for establishing and managing a family office. It includes defining the family’s goals and objectives, the services offered, the structure and governance of the office, the staffing requirements and financial projections. This plan serves as a roadmap for ensuring the family’s wealth is effectively managed and preserved.

What is the family office business model?

The family office business model is designed to provide comprehensive wealth management services tailored to high-net-worth families. This model includes investment management, estate planning, tax optimization, risk management and lifestyle services. The goal is to offer personalized solutions that align with the family’s long-term financial and personal objectives.

How can I ensure the sustainability of my family office?

Focus on long-term strategic planning, including succession planning, regular financial reviews and adapting to changing family needs. Also, invest in educating future generations about wealth management and governance.

What are the major challenges in managing a family office?

Challenges include aligning family interests, managing costs, navigating complex tax laws and regulations, ensuring privacy and security and making strategic investment decisions.

How do family offices handle regulatory compliance?

Compliance strategies depend on the jurisdiction and the services offered. Family offices may need to navigate financial regulations, tax laws and reporting requirements, often with the help of specialized legal and financial advisors.

What technological infrastructure is needed for a family office?

A robust technological infrastructure is crucial for effective management and security of family office operations. This includes advanced software for portfolio management, risk management and financial reporting. Security measures should also be implemented to protect sensitive information and assets from cyber threats.

How should a family office approach investment management?

Investment management in a family office should begin with a clear understanding of the family’s long-term financial goals and risk tolerance. It often involves a diversified approach across multiple asset classes to balance potential returns with risk management. Regularly reviewing and adjusting the investment strategy in response to market changes and family objectives is also vital.

What are the benefits of having a dedicated family office compared to using other wealth management services?

A dedicated family office offers personalized and comprehensive management of a family’s financial and personal affairs. Unlike traditional wealth management services, a family office can provide higher customization, privacy and a holistic approach to managing wealth, lifestyle, legal and tax issues. It also ensures that all actions are closely aligned with the specific values and needs of the family.

Related Pages

• Family Office Governance: Best Practices & Strategies
• Single Family Office Structure | Best Practices & Key Roles
• Multi Family Office Structure: Roles, Governance & Best Practices

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Starting a Family Office

The first step in opening a single family office is to think of it as a business. As such, you’ll need to develop a business plan. Here are some of the questions you’ll need to answer while formulating your plan:

• Why do we want to work together as a family to manage our wealth?
• How will we make decisions together as a family?
• What are our goals (and mission) for the family office?
• How will the family office be owned and structured?
• How will the office be organized and managed?
• What roles and responsibilities belong to the owners, and what roles/responsibilities will below to the family office’s executives?
• What services will these family office provide?
• What technology will the office need?
• How will we pay for the family office’s services?
• How will we measure the success of the office?

What are some family office FAQs? Read on to find out>>

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Key Considerations When Establishing a Family Office

A family office is more than a cost-effective solution to managing great wealth. when done properly, it provides customized services and support that fosters a shared experience of wealth stewardship..

Key Considerations When Creating a Family Office PDF

Though families with great wealth have many options for wealth management solutions, those with assets over $250 million often choose to build their own private wealth management firms, called “family offices.”

Family offices provide customized services and support for a single family. They are increasingly used by those seeking to create a cost-effective wealth management process that provides quality, transparency, privacy and control. Additionally, a family office can provide the structure to strengthen family bonds through the shared experience and responsibility of wealth stewardship.

When done properly, a family office can provide tremendous benefits. Establishing a family office should be approached the same way as creating any other successful business: start with a good plan.

Laying the Foundation for Your Family Office

Well-prepared families set up their family office months in advance of a specific need, such as a liquidity event associated with selling a business or the need to transfer wealth between generations. In some cases, this means transferring a family office that was embedded in the operating company into a new entity. For most families, it means building a new office from scratch.

In either case, it is prudent for the office to start by overseeing core services and outsourcing as much as possible in the initial phases. Then, over time, the office can add services and take solutions in-house as the family completes their due diligence and cost-analysis studies.

When anticipating a significant liquidity event prior to creating a family office, it’s critical that you find a safe place for your wealth to be held, and determine by whom and how the wealth will be managed for at least the first 12 months.

Most large families use a master custodian to hold and protect all marketable securities and cash, settle manager-directed trades into custody accounts, and provide independent, consolidated accounting for all of the family’s assets. By selecting the family office’s master custodian early in the process, the assets can go straight into the accounts that the family office oversees.

Ownership of a family business is often spread across multiple trusts and legal entities and setting up new accounts to receive the proceeds can take weeks. As a result, families often end up using existing retail solutions to receive the proceeds rather than a preferred, secure master custodian. After the liquidity event, the retail providers exert tremendous pressure to keep and manage the assets. Unraveling this situation can be time-consuming, involve unnecessary meetings and result in overall confusion as the family office begins to assume their responsibilities.

If the transaction proceeds are cash, it may be wise to have a short-duration fixed income manager in place to conservatively invest the assets while a long-term asset allocation plan is being developed. If the transaction proceeds are stock in a new company, this may mean exploring hedging strategies to manage market-volatility risks while decisions related to diversification and taxes are evaluated.

Key Questions When Creating a Family Office

When embarking on the creation of a family office, you and your family should work together to answer these key questions to ensure things start off on the right foot:

Why Is the Family Office Being Created?

The answer to this question should serve as a mission statement that guides how all future decisions regarding the family office will be made.

We always ask our clients why they created their family office. While every story is different, most focus on the desire for a process that their family can trust and control and that keeps the family working together toward a common purpose.

When asked for greater details about the office’s mission, responses typically include:

• To identify and manage an array of risks from investment risk to reputational risk

• To access and process investment, tax and family information more effectively than any family member could do on his or her own

• To control costs while delivering quality and value to the family

• To protect family members from untrustworthy individuals, organizations and, if necessary, from themselves

Who Will Be Involved in the Family Office?

For wealth creators, this question is often easy to answer, as the family office is usually intended to serve them and their children.

If the family office is established for the long run, however, future participants should be identified as well. Many family offices define their clients as the wealth-creation generation, their children, their grandchildren and so on.

While simplicity is often the right approach, many offices must contend with the reality of managing expectations related to spouses, adopted family members, stepsiblings, former spouses, and, in some cases, in-laws and other non-family members (although this may trigger additional regulatory filings). Having clear guidelines related to who can be a client of the family office will help to navigate these issues.

There is no wrong answer when defining a family office client base. What is important is to understand your needs and to build a mix of services that address them.

What Services Will the Family Office Provide?

The most common services provided by family offices are based on collective access to professional advisors. When it comes to investment, legal or tax advice, the family office can leverage its collective assets to find and retain the best providers through a thoughtful due diligence process. Those providers will be able to offer tailored advice in a cost-effective fashion through their immersion in the unique situations and needs that span across all family members.

The next most common service is related to information management. Wealthy families have complex investments, trusts and estate plans. Providing timely data and analysis to family members and family office executives becomes an important function of the office.

In general,family offices offer some mix of the following:

• Investment management and/or investment oversight

• Financial reporting to family members and investment committees

• Coordinating tax filings and tax planning

• Portfolio accounting and the processing of cash transfers

• Coordinating estate planning, administration and fiduciary matters

• Family foundation and philanthropic oversight

• Managing family properties, such as aircraft, boats and households

• Overseeing the family’s insurance coverage

• Lifestyle services such as paying bills, travel, assistance buying a house, etc.

• Leading family governance initiatives

The family office may need to add new services or deliver existing services differently as generations age, the client base changes, technology evolves and the investment landscape shifts.

What Is the Appropriate Legal Entity for the Family Office and Where Will It Be Located?

The legal entity you create is driven by the family’s unique jurisdictional, regulatory and tax considerations. Legal and practical considerations can influence where the family office is headquartered. Restrictions on foreign currency exchange or the sharing of client information in some jurisdictions can pose challenges for multinational families.

When starting a family office, the natural tendency is to locate it where the family business was and/or where the matriarch and/or patriarch live. Over time, however, as family members relocate, it may be necessary to move the office or add satellite offices in other jurisdictions. The cost of running one or more offices must be weighed against the benefit of serving clients in their local jurisdiction and time zone, as well as gaining access to legal and investment opportunities unique to specific areas. Outside the U.S. and Canada, private investment companies (PICs) are a common structure for family offices. These PICs are typically owned by a trust, often a family trust that could also be managed by the family’s private trust company.

When selecting a location, it’s important to consider whether the jurisdiction:

• Enjoys political stability and adheres to the rule of law

• Has specific privacy regulations that may impact you

• Has access to quality staff and professional advisors

• Provides access to desired legal structures (such as an LLC, FLP, PTC, purpose trust, non-charitable foundation, etc.) 

Models for Investment Oversight

In order of popularity, the three most common models for investment oversight are the institutional model, the family office chief investment officer (FO CIO) model and the distributed management model.

The institutional model adopts the same checks-and-balances approach used by large endowments and foundations. In this model, the family office outsources investment oversight to:

• An advisor , to establish asset allocation policy and conduct manager due diligence. The advisor is responsible for overall investment strategy. The advisor’s mandate may be discretionary or non-discretionary (also referred to as an “Outsourced CIO”). The difference between discretionary and non-discretionary mandates determines the level of accountability an advisor has for performance and investment manager selection.

• Investment managers , to buy and sell stocks, bonds, etc., based on their fit within the asset allocation policy. Investment managers are responsible for managing assets within established risk metrics and for achieving performance results that are in line with appropriate benchmarks.

• A master custodian , to protect the family’s assets. The custodian holds all marketable securities and cash, settles manager-directed trades into custody accounts and provides an independent, consolidated accounting report for all of the family’s assets.

The FO CIO model is similar to the institutional model, except the advisor is replaced by staff at the family office. In this model, the family office staff sets asset allocation policy and evaluates investment managers. The other checks and balances of the institutional model remain in place.

When using the Outsourced CIO model, some family offices choose to split their assets across multiple outsourced providers. In this distributed model, the family office monitors and reports on the results of each advisor and collects and consolidates the advisor reports. While this approach seeks to improve investment results through competition, it also creates an environment that delegates away significant control of the assets and may result in higher fees and investment risks through redundant investments across advisors.

Many other models exist, particularly if part of the office’s mission is to leverage the family’s unique advantages in certain markets, such as becoming direct investors in the real estate, energy or private equity sectors. 

Best Practices for Family Office Management

A successful family office requires more than just a good plan. It also requires effective management that is flexible enough to adapt to changes in the family’s needs. Best practices for family office management typically include:

• A mission statement in the family’s own voice that captures the business goals, family goals and important family values that will guide decision-making for current and future family members. The mission statement should also include a clear set of priorities, one of which should be an annual measure of the performance of the office with respect to its execution of the mission statement. (Note: This is different than measuring investment performance.)

• A governance process that clearly outlines ownership vs. management responsibilities, defines the boards and committees to be created and how they will function, details policy and procedures for each major function of the family office in writing and discusses how family members are to be supported by and possibly included in the decision-making process. Successful families typically have processes to involve future family leaders in graduated levels of decision-making, such as being junior board members or serving on a committee. Clear bylaws, shareholder agreements, family meetings and succession plans are important parts of any governance process.

• Ongoing education for rising generations and activities promoting understanding among and between generations. Mission statements and formal processes are important but are no substitute for paying attention to family dynamics. Family office personnel and/or external coaches facilitate communications exercises and intergenerational activities that provide the foundation for the collaborative spirit that binds the family and supports having a family office.

• A detailed outline of the services offered (by whom and for whom) and an operating budget. The service offerings are often a mix of outsourced solutions and services provided in-house. The office should have clear due diligence requirements for every solution and regularly validate that current operating models are cost-effective and delivering quality service.

• Policies that define the roles and responsibilities of each staff person , along with compensation and benefit considerations. Family offices are small businesses that are empowered with tremendous authority and control over the family’s assets. Hiring and retaining intelligent and trustworthy staff is critical to success. Every office should also have a written code of conduct, perform ongoing background checks and provide regular performance reviews. Policies also need to be clear about whether family members can be employees of the office.

• A technology road map, as technology can become a significant expense for the family over time. Proper due diligence needs to be conducted around accounting and portfolio management solutions purchased by the office. The office’s hardware and operating systems must be secure, email solutions need to be updated with the best available protection, and data backup and disaster recovery policies must be in place and regularly tested.

Exiting the Family Office

As generations grow, offering the freedom for family members to leave is critical to the long-term viability of the family office. For some families, this means creating a formal process that helps facilitate a graceful and prudent exit.

Provisions for exiting can be housed within a family constitution or in a separate document. Details may include specific provisions for valuing the shares of a departing member if family office assets are held in a structure such as a family limited partnership, as well as a staged exit process whereby an outgoing family office client receives payouts over multiple years. This is particularly important for members of the family who may not have been given the choice to work with the family office, such as beneficiaries of trusts.

Over time, some families may find that the family office structure no longer serves their needs. Family members in the third and fourth generations may no longer have a shared sense of identity, family ties to a major investment may have weakened or the scale of wealth may no longer justify a family office.

By collectively acknowledging the desire to collapse the structure, family members can unwind relationships with advisors, vendors and staff in an orderly and timely manner and find substitute solutions that better match their individual needs.

BNY Mellon Global Family Office Can Help

For more than two centuries, we have helped families build, manage and preserve their wealth. We understand the unique and evolving challenges that families face, starting with the first liquidity event and creation of the family office and continuing through the transition of the office to future generations. Backed by the resources of BNY Mellon, our dedicated Global Family Office group is focused on delivering specialized advice and access to tailored solutions to help family offices and their advisors manage the complexities that exceptional wealth presents.

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Growing a business, estate tax strategies for business owners, private banking, utilizing private banking in family offices, cybersecurity, cybersecurity best practices for family offices.

This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However,this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available.The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.

The Bank of New York Mellon, DIFC Branch (the “Authorized Firm”) is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorized Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 240 Greenwich Street, New York, NY, 10286, USA. In the U.K. a number of the services associated with BNY Mellon Wealth Management’s Family Office Services– International are provided through The Bank of New York Mellon, London Branch, One Canada Square, London, E14 5AL. The London Branch is registered in England and Wales with FC No. 005522 and BR000818. Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, One Canada Square, London E14 5AL, which is registered in England No. 1118580 and is authorised and regulated by the Financial Conduct Authority.Offshore trust and administration services are through BNY Mellon Trust Company (Cayman) Ltd. This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors. This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services orto participate in any particular strategy mentioned and should not be construed as such.BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland.

The information in this paper is as of June 2023 and is based on sources believed to be reliable but content accuracy is not guaranteed. Trademarks and logos belong to their respective owners. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation.

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6 best practices for single family offices.

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There are many different approaches to consider when setting up a single family office. Having a ... [+] clear direction and following best practice can help families of wealth and their external management.

Over the past decade, an increase in private wealth, along with a lack of advisors with the ability to provide for the needs of ultra-high net worth families, has fostered the creation of more single-family offices than ever before.

As the growth in family offices continues, there is a definite necessity for those involved in family offices, whether directly or as service providers, to consider both the financial and non-financials sides of the business equally.

For banks, strategic planning on both fronts may identify new opportunities that necessitate the inception of independent advisories equipped to assist clients with the set-up of entire operations. A service that is becoming a necessity as exits occur or the next-generation cashes out on family businesses and seeks to set up new family offices, often approaching their family’s bank by virtue of the fact that they are a trusted advisor.

This week, Morgan Stanley Family Office Resources announced the launch of their new  Single Family Office Best Practices report . The report was a collaborative effort between Morgan Stanley’s Single Family Office Advisory team along with the company’s wealth management professionals and single-family office executives as well as the Family Office Resources team and the network of preferred providers in the Morgan Stanley Signature Access program.

The report offers insight into the considerations and best practices for single-family offices based on six core issues Morgan Stanley clients raise most often as they seek the best ways to drive mission and impact. Here is a summary of best practices for those involved in family offices to consider.

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1. Mission and purpose

Mission statements have  been around since the 1940s . While every organization seems to be creating one, very few seem to have any notable significance and may occasionally even prove counter-productive.

This, however, does not have to be the case. When family office purpose, mission and vision statements  are customized and crafted according to the single-family office service needs and act as the foundation for strategic decision making, linked to measurable results, they can be highly beneficial.

The Morgan Stanley report begins with an exploration of the family’s mission statement and encourages families to engage in meaningful discussions to define their mission so that they can answer one critical question – is a family office necessary?

The report’s authors believe that such discussions allow families to discover whether conducting their affairs through a single entity best serves them. If the answer to this is yes and a shared purpose unites the family, every aspect of the family office can flow and be evaluated against the family’s mission. Samples and guidelines on how to formulate documentation surround this are also included in the report’s appendices.

2. Set-up and Operations

When establishing and operating a family office, several vital factors need to be carefully considered. The second chapter of the report is devoted to these, encompassing everything from selecting a legal entity and the various implications of each form, to procuring talent and organizing leadership, competitive compensation, selecting third-party vendors and even cybersecurity concerns.

Equipped with information in each of these areas, those new to family offices and even those looking for ways to improve existing ones, can understand and make meaningful contributions.

3. Asset Management

Part three of the report covers asset management and steps involved in formulating an investment policy statement. This is vital for any family office as it will help to clearly define the family’s objectives, which may include both financial and non-financial aspects when it comes to investing. Knowing and making investment decisions based on these is vital to long-term success. It helps the family and their advisors identify relevant deals and ensures time is not wasted evaluating those that do not align with these objectives.

Other topics covered in this section include philanthropy, intergenerational wealth transfer, reporting resources and practices, consolidated reporting and even a discussion on art as an asset class. With the latter increasingly considered  part of an overall wealth management strategy  by a growing number of wealth managers, it serves families to be well-informed on the subject.

4. Financial administration

Successful families are adopting a more business-minded approach to wealth management. This, of course, necessitates implementing comprehensive accounting, reporting and cash management systems to record all financial transactions and data. The report discusses various aspects of these and how they can serve to safeguard the family’s wealth, preventing risk mismanagement and fraud.

5. Wealth Advisory

Many ultra-high net worth families face wealth management issues far beyond investment strategies. The implications of every decision must be weighed carefully and all family members, including the next generation, need to be timeously educated to these facts. How wealth is organized and shared can have considerable tax implications, while other aspects of the affluent lifestyle have the potential to cause loss and liability.

The success of the family’s long-term legacy can be significantly influenced by ensuring that adequate insured coverage is in place, appointing the most appropriate trustees, and structuring philanthropic activities to ensure cost-efficiency and reduce tax liabilities. All of which are discussed in chapter five.

6. Lifestyle Advisory and Concierge

A significant benefit of single-family offices is their potential to serve the family by facilitating lifestyle advisory and concierge services. Everything from procuring the best health care to ensuring personal safety and travel can all be planned, organized, and executed under one umbrella. This removes the challenges often presented by hiring staff for these functions privately.

The report offers guidance in this regard with practical consideration on how to identify, train and manage staffing requirements for such functions on a day-to-day basis.

According to Head of Signature Access and Single Family Office Advisory, Morgan Stanley Family Office Resources, Valerie Wong Fountain, "There is no simple formula to follow when creating or maintaining a single family office. In fact, some family offices are formed explicitly because the existing service models don’t sufficiently address the family’s unique needs."

By starting with a clear family office purpose statementLearning from these best practices, addressing the questions that may arise as a result, identifying areas that require specific services and implementing these along with tangible measurements and benchmarks to assess performance in each area are all building blocks to greater long-term success.

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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Investopedia / Madelyn Goodnight

A family office is a private wealth management advisory firm that serves ultra- high-net-worth individuals (HNWI) .

Family offices are different from traditional wealth management shops in that they offer a total solution to managing the financial and investment needs of an affluent individual or family.

For example, in addition to financial planning and investment management, many family offices offer budgeting, insurance , charitable giving, wealth transfer planning, tax services, and more.

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 can provide various kinds of planning, charitable giving advice, concierge services, and other comprehensive services.
• An important responsibility a family office has is to educate next generations in the handling and management of their wealth.
• Single-family offices serve one individual and their family, while multi-family offices serve more than one family, and are less expensive due to economies of scale.
• The need for a family office can be determined by the extent of a family's wealth and the complexity of its life due to that wealth.

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 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 defined as either single-family offices or multi-family offices (MFOs). Single-family offices serve just one ultra-affluent family. MFOs are more closely related to traditional private wealth management practices. They seek to build their business by serving many clients.

MFOs are more prevalent due to economies of scale that allow for cost-sharing among the clientele.

Importantly, what a family office does can differ widely. While one client may need a family office for high-caliber advice from a range of experts, another may need a family office to organize their lifestyle needs. 

The Responsibilities 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 can be confronted with several obstacles when trying to maximize their legacy . These obstacles can include 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 management or transfer of business interests, the disposition of the estate, management of family trusts, support for philanthropic desires, and family governance.

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 also serve as a concierge for families, handling their personal affairs and seeing to their lifestyle needs.

This service 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 the streamlining of business affairs.

Investment Management

For a single family, a family office may be responsible for investment portfolio management, commercial real estate purchase, sale, and property management, private equity deals, hedge fund investments, and venture capital investments.

Family Wealth Education

A family office is responsible for educating younger members of the family in the proper handling of wealth and how it can or should be used, based on the family's values. The family office can help instill in next generations an appreciation for their wealth and its demands. With the right education, a family office can help maintain family unity and prevent discord over money issues between the generations.

John D. Rockefeller is thought to have established the first full-service, single family office in the U.S. in 1882. In 1937, when he died, he was worth $1.4 billion. That's equivalent to approximately $255 billion as of 2019. The Rockefeller family office exists to this day.

Types of Family Offices

Traditional family office.

A traditional family office is an entity established by a wealthy individual to manage the family's wealth. It usually has a staff of experts who protect and grow the wealth. The staff might include a financial advisor, tax specialist, estate planner, accountant, and more. All are employed by the family, so there aren't the conflicts of interest with products and services that might be found if they worked for other financial institutions. The overarching objective is to serve the family's demanding financial interests.

Multi-Family Office

A multi-family office is a firm that manages the wealth of more than one family. It offers the same types of services that a traditional family office offers. Its variety of experts tailor wealth-related solutions for each family's financial and household needs.

Beyond investment management, these might involve bill-paying, transfer of wealth plans, philanthropic advice, wealth education, and more. Multi-family offices usually charge a percentage of investment portfolio assets under management for their services.

They can be less expensive than traditional family offices because they work for more than one family. However, a family has less control over these providers, as a result.

Outsourced Family Office

An outsourced family office is a network of appropriate service providers—financial advisor, lawyer, accountant, etc.—who collaborate on behalf of a client. Typically, one of the professionals is appointed to coordinate all communication and efforts.

The fact that they're authorized to consult with each other about one family's financial business is what separates them from other professionals who provide the same services.

An outsourced family office can handle many of the same matters that traditional and multi-family offices handle. These might include philanthropic planning and family wealth education. This type of family office is usually less expensive than a traditional family office. However, the family also has far less control over the professionals.

Whether or not someone needs a family office depends on the extent and complexity of their wealth, as well as the demands that wealth puts on their family. Certain situations may require a variety, or teams, of specialists with access to high-value resources that can address a long list of important issues.

Broadly speaking, those with a net worth of $200 million might consider establishing a traditional family office.

What's a Family Office?

A family office is a private wealth management firm established by an ultra-high-net-worth family that provides that family with a selection of personalized services that include 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 can offer some of the services that a family office offers, such as portfolio management and investment management. However, wealth advisory firms typically have many different clients while a family office focuses on one (or several if it's a multi-family office). What's more, family offices offer a much larger range of services to address the complete list of wealth-related needs an ultra-high-net-worth family has.

A family office is established by ultra-high-net-worth individuals for a variety of reasons. First and foremost, a family office needs to manage and grow wealth. It also has to provide a wide variety of other services that can help a family manage the complexities and demands associated with that wealth.

While a family office may be appropriate for some extremely wealthy individuals and families, most highly affluent people should be well served by the professionals at a wealth advisory firm.

CitiBank. " A Guide to Establishing a Family Office ." Page 4.

Deloitte. " Modern History of Family Offices ." Page 1.

CitiBank. " A Guide to Establishing a Family Office ." Page 19.

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Is Your Family Office Built for the Future?

• Rob Lachenauer

Five critical decisions to set it up for long-term success.

Family offices can provide a number of benefits, including privacy, customization, and having your own team to handle a wide range of services, such as guiding family philanthropy, managing shared properties, or even managing household help. Successful principals in hedge funds, private equity, real estate, and tech entrepreneurs, and even family businesses owners selling their firms, have recently created an explosion in the number of family offices. While most single-family offices are set up with good intentions of continuing to keep the family (and its wealth) close, they face some unique built-in tensions that family businesses don’t have that leave them vulnerable in the long-term. This article addresses five key decisions that family offices need to make if they want to set themselves up for long-term success.

Two years after their father died, Paul and Hank knew the time had come when they should break-up their family office. At their father’s insistence, the family’s substantial financial assets had been invested together. As their father’s business was the source of the family wealth, the brothers felt an obligation to build a single-family office together. But investing decisions soon became a source of conflict. Decision-making authority was murky; each brother lacked transparency into what the other brother was investing in and why. How aggressive to be on tax strategies became a matter of great disharmony.

• JB Josh Baron is a co-founder and partner of BanyanGlobal Family Business Advisors and a Visiting Lecturer in Executive Education at Harvard Business School. He is a co-author of The Harvard Business Review Family Business Handbook (Harvard Business Review Press, 2021).
• Rob Lachenauer is a founding partner of BanyanGlobal Family Business Advisors and co-author of The Harvard Business Review Family Business Handbook (Harvard Business Review Press, 2021).

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• Complete Guide to Starting a Family Office

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Financial advisory firms have become popular among affluent individuals and families. Whilst there are a number of options available for wealthy families, many choose a family office as their financial adviser.

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This guide will examine what family offices are all about and the services they provide . We’ll also look at the value proposition of a family office and the risks involved in setting up such a business .

WHAT IS A FAMILY OFFICE?

You might be surprised to hear that family offices have their roots in the sixth century. At that time, the steward of the king had to take over the responsibility of managing the royal wealth. The concept has since developed, with the Rockefellers setting up a famous family office in 1882.

Family offices are essentially private companies, which have been set up to look after the finances of wealthier families and individuals. A family office is therefore a private wealth management advisory firm dealing with high net-worth individuals and families. Family offices are currently among the fastest-growing businesses in the world.

Family offices differ from other traditional wealth management firms regarding the services they provide for affluent individuals or families. These offices will be able to provide management of financial and investment issues for the families, but they also provide other services that are not necessarily connected to the family’s finances.

There are essentially two types of family offices: single family offices (SFOs) and multi-family offices (MFOs). SFOs focus on catering for the needs of a single family. Therefore, SFOs often look after other non-financial issues aside from the financial management. SFOs manage for example aspects such as private schooling and household arrangements as well.

On the other hand, MFOs are traditionally mainly focused on operating as a wealth management firm on a commercial basis. MFOs look after a number of clients at the same time and often sell services to interested families. In some occasions, MFOs provide services exclusively for certain families and are not willing to accept other customers.

In many cases, family offices start off as SFO but will eventually become a MFO, if they are successful. This is due to other families wanting to gain access to the services, which have helped the family to succeed.

There are different ways to classify family offices, depending on the type of services they offer. Scott D. Gardner outlined the three-model classification of family offices in the following manner:

• Class A family office : Offers comprehensive financial and non-financial services for a wealthy family. The family office can look after the finances of the family, together with providing estate management. The office is always run as a third party company with oversight from a family trustee or administrator. The family office will oversee all liquid and often illiquid assets of the family. The firm must provide advice, which is free of conflict of interests . The fee structure is often a monthly or annual flat fee. This is the most common type of family office.
• Class B family office : Class B family office offers typically just financial services. This includes many other financial management firms, such as law firms, private banks and accountants. Class B family offices don’t necessarily provide information, which is free from conflict of interests.
• Class C family office : The final family office classification deals with the provision of basic estate services. These offices are typically private companies directly run and managed by the family themselves. It can include any in-house staff from personal assistants to family trustees.

This guide will mainly focus on the Class A family office, but it is helpful to know about the other classifications and their role.

Typical services offered by family offices

While management of the family finances is at the heart of family offices’ services, the offices can provide a range of other services as well. The following are a collection of the typical services family offices should consider providing to their clients:

Financial management

Taking care of the finances of the wealthy family is the key function of family offices. The different aspects of financial planning include:

• Investment management services – Often at the heart of family office work and mainly aims at preserving and increasing the family’s wealth. Includes different aspects of investing, from determining investment goals and allocating assets to actual execution and goal tracking.
• Reporting and record keeping – Family office reports and consolidates all family assets and their performance. The offices typically also provide tax preparations and reporting.
• Managing wealth transfers – Family office can help manage wealth transfers within a family, for example from parents to children.
• Life management and budgeting – Family offices can also take care of membership payments, budget servicing and budget objectives.

Strategic planning

Besides the administrative management of finances, family offices typically offer strategic services as well. These could include things such as:

• Business and finance advice – Provide assistance in strategic planning of finances such as debt management and structured financing. Furthermore, family offices offer guidance on business management including issues such as buyouts or business development.
• Strategic estate planning – If the wealthy family or individual has a number of properties, family offices can provide assistance on the best use of the estate. For example, information on when to sell or strategic tax planning.
• Succession planning – Family offices can provide advice on succession planning and help with the administrative part of ensuring a smooth transition.
• Educational planning – Family offices can also help educate the next generation on wealth management.

Administrative support

Family offices tend to also provide a range of administrative support for wealthy families and individuals. Administrative planning services include:

• Philanthropic management – Philanthropic management involves guiding the family regarding donations and administering charitable work.
• Other administrative work – Family offices can help with other administrative tasks, such as dealing with public relations firms, banks, lawyers and so forth.

Advisory role

Finally, family offices have an advisory role. The aim is to provide wealthy families and individuals impartial and unbiased advice on finances and in other areas that are important for the family. The advisory roles typically deals with:

• Tax and legal advice – The family office can help construct a tax plan and ensure the family is operating tax compliant.
• Compliance and regulatory advice – There can be situations where the family requires further compliance and regulatory advice. These can deal with corporate governance, staff management and board role, for example.
• Risk management – Since investments come with a risk, family offices aim to provide risk assessments to their clients, together with continuous monitoring of risks. The risk management assistance includes insurance advice as well.

The above is a comprehensive list of the core services family offices provide. However, the nature of the services can vary depending on the firm and certain families might only be interested in specific services, even if the family office offers more services than they might need.

WHY WOULD ANYBODY WANT TO USE A FAMILY OFFICE?

Preserving and increasing wealth as well as a smooth management are often the main reasons why wealthy families seek the help of family offices. Managing a large pool of wealth can be time-consuming and difficult and therefore, an outside firm can ease the process.

Furthermore, just as with many other wealth management firms, family offices provide experienced, legal and responsible wealth management. They are designed to help the family to make the most of their assets and preserve their wealth.

While the above are certainly issues other wealth management firms can help wealthy families with as well, family offices have some advantages. Perhaps the most important is the personal relationship that families can forge with a family office. The working atmosphere is much closer. Financial advisory firms or banks might have staff change frequently and the advisor might not stay the same for longer periods. In family offices, this kind of change happens less frequently.

Furthermore, there is less conflict of interest with a family office. As they are only focused on wealth management of the family, they aren’t interested in selling particular products or services to the family. Banks, for example, are more likely to try to sign the family with the bank’s services, even if they aren’t the best available deal. A family office, on the other hand, will enable you to choose from a wide variety of products.

The level of trust is especially important for families running large-scale businesses. An independent advisor, who works closely with the family, will be able to develop a trustful relationship and provide better financial and strategic assistance. Trust is crucial, as advisors often gain deep insight into the family’s business and finances.

A family office is typically more reliant on the family, especially in the case of SFOs. This means that the firm is concerned about their reputation and will do everything to preserve it. Therefore, the level of service is better and remains consistent. Even in the case of MFOs, the typical client-base is limited to a few families, meaning the family can enjoy much more focused and personalized services.

Since family offices only focus on a few clients, the advisors also have more time to focus on the family’s needs. On the contrary, when dealing with law firms or banks, a single advisor might have to take care of a number of clients. The family office advisors have less pressure and can focus on delivering high-quality services.

Since the family office relies solely on the wealthy families for income, the incentive to build a good relationship that benefits both parties is higher. Many financial advisory firms provide advisors a stable salary and a commission, which can mean the interest to serve isn’t quite at the same level

Watch the below video of Will Bonner, founder of Bonner & Partners, explaining why his family set up a family office:

THE POSSIBLE DOWNSIDES TO SETTING UP A FAMILY OFFICE

Whilst setting up a family office can be a beneficial business adventure, the establishment of one is a big undertaking. Not all family offices become successful and you need to carefully consider the concerns surrounding the setting up of a family office.

Cost can be high

Due to the nature of a family office, with the regulatory and compliance reporting, costs of setting up a family office are high. Finding families, wealthy enough to meet these costs, can be difficult.

You should also note that the costs of running a family office have been increasing in the past few years. The Global Family Office Report 2015 found that costs have increased by seven basis points from the previous year, driven by family offices’ increased willingness to restructure and to attract the top talent.

Especially the location of the family office can affect costs significantly. The tax framework of different countries can increase or decrease the running costs of a family office.

The biggest expense of a family office are the staff costs. Research by Family Office Exchange found that over 60% of the total costs of family offices tends to be allocated to staff compensation and benefits. Family offices need to offer attractive remuneration packages, especially as they wish to attract the right type of talent for their family office.

The operating costs are another major costs factor. This includes anything from the rent of the office property, legal fees, travel expenses and so on.

Finally, you also need to consider the following costs:

• Planning fees
• Insurance premiums
• External investment fees
• Internal costs
• Trustee fees
• Other external costs

There are different ways family offices can bring down costs. Some decide to outsource certain services, especially if the family office doesn’t have the skills to full-fill the specific task. For example, outsourcing educational training can be a cost effective option.

Legal and tax infrastructure is complicated

There are also other things to consider besides pure costs. Setting up a family office is surrounded by a relatively complex legal and tax infrastructure. Finding the right structure for the company can therefore be difficult.

Although the legal structure of a family office is relatively flexible, you must consider a broad range of issues beforehand. The key issues you should consider before setting up a family office include:

• Selecting the right entity type – the legal entity of the family office can be a company, partnership or a trust, with a combination of entity types available as well.
• Choosing the right funding structure – the family office can fund itself either through a fee structure , which can change from individual memberships to a collective fee.
• Considering the employment arrangements – you must decide on the type of employment contracts you offer and answer questions such as: what happens when employees want to move on?
• Solving the obvious tax issues – tax legislation varies from country to country. You need to be aware of the infrastructure in order to make the best decisions, not just in terms of financial gains, but also to reduce administrative work.
• Further regulatory issues – different countries have different legislative requirements for family offices, either as a direct result of the firm’s structure or because of tax implications. Depending on where the family office is set up, these regulatory issues might play a role in the legal and tax infrastructure of the family office.

Tough competition by other wealth managers

Finally, since the family’s wealth has to be at a certain level in order to be viable for a family office, the competition between different firms is tough. As a family office relies on reputation, it can be difficult to attract interest from clients at the start. Furthermore, you need to be able to compete with other advisory firms such as banks and insurance companies, which might have more resources available.

THE BOTTOM LINE

If you are considering whether to set up a family office or not, the above should hopefully have provided you enough information about the structure and the process. Essentially, there are three questions to help determine your possible success in setting up a family office:

• Do I have enough expertise to satisfy my clients? As the services lists shows you, wealthy families are looking for a comprehensive manager and advisor. In order to attract interest to your family office, you need to be able to highlight your expertise in a range of things. Furthermore, you need to offer something different to the countless other wealth management firms in order to attract clients and convince them to work with you.
• Do I have enough connections to get started? As mentioned above, competition for clients in the industry is tough. Since you are essentially asking a wealthy family to trust you with their money, you need a strong network of people who already trust you and know about your capabilities.
• Do I have enough money? Setting up a family business requires quite a bit of funding. You also need to be able to comply with the legal requirements in order to start your business.

Depending on your answers on the above questions, setting up a family office might be a viable business alternative to keep in mind. If you don’t feel you meet the requirements, working in an advisory firm might be a suitable way to gain experience and build up a strong network of potential clients for the future.

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Family Offices: One size does not fit all

John West started his farming business in the 1960s at the same time that he began growing his family. The business grew as his children grew, and many of the business’ employees felt like family to the Wests. 

As the second generation (G2) entered adulthood, they naturally turned to the business’s CFO to help them with important financial matters including buying their first homes, making investments outside of the business and their tax compliance. John’s longtime assistant helped plan the family’s vacations, and the HR department started playing a more active role in securing appropriate insurance for the family. The West family did not realize it at the time, but they were slowly creating an embedded family office (FO) within the operating business.

An embedded family office leverages the skills, expertise and capacity of staff in the core operating business and can range from a single senior staff member providing advice, to more than 20 employees actively supporting the family owners. For some families, an embedded family office is ideal, supporting the family’s wealth and endeavors in a cost-effective way while leveraging the infrastructure of the business. Often, families such as the Wests, find that eventually the family outgrows this model.

By 2020, the third generation (G3) began to rely on the embedded family office, in addition to the G2 members. The family turned to employees for more support than ever before, causing the employees to be distracted from their official roles within the business. The G2 and G3 family members did not realize the additional pressure that these non-business related tasks placed on employees, including having to prioritize requests from family members relative to their day to day responsibilities. The embedded FO employees seemed to have only a part-time focus on their actual roles within the business, causing capacity issues and resentment from fellow staff members. 

With G2 and G3 having grown to more than 10 adults, the investment portfolio had grown too large and too complex for the operating company’s CFO to oversee in addition to their full-time responsibilities. Additionally, the family had a desire to pursue investment opportunities that were outside of the CFO’s expertise. The list of tasks that the embedded FO supported continued to grow, including processing payroll for employees of G2’s outside business ventures, hiring and payroll for household staff, family vacation planning and other concierge services. With such a heavy task load, attention to detail dwindled, leaving the family vulnerable to errors and security risks. Additionally, G2 wanted to consider selling the family business in the near future, bringing new demands on a limited number of people, raising considerations related to how the existence of this structure would be perceived by potential buyers, and also raising concerns about how the family’s needs would be met post a potential transaction.

If this narrative sounds familiar, it may be time to consider some alternative options for meeting the growing needs of your family. Below are some highlights of the various options available to you:

Outsource to a Multi-Family Office (MFO) . A multi-family office is great for families that are low on the spectrum of complexity and can be a cost effective model. With this structure, however, the family loses the personal touch of having a full-time staff to support their wealth and personal needs. MFOs also typically rely on managing investments for the family and deriving management fees to subsidize the additional services which some families may or may not be interested in.

Create a Single Family Office (SFO) . As a family and its business grow, the time may come when a single family office that is dedicated to the family full time becomes the best solution. This model allows the family to fully separate its personal dealings from the business, and can make it easier to eventually sell or go public with their legacy operating entity. An SFO can also provide a high degree of privacy and confidentiality and can handle more customized tasks and requests, but is often the least cost-effective option.

Employ a Virtual Family Office (VFO) . As family office technologies become more sophisticated and secure, virtual family offices are becoming more prevalent and attractive. At a time where much of the world is working remotely, the virtual family office has proven to be a viable option for administration, accounting and reporting and analysis as well as document management and communication, especially for globally diverse teams and families. Virtual family offices allow families to outsource all or part of their family office and provide wealth owners real-time reporting, analysis and support. This method can be extremely cost-effective for families, because the virtual family office can take the place of multiple family office employees, while maintaining control for family owners. 

Choose a hybrid model . For some families, none of the options listed above fully meets their needs. These families may prefer a hybrid model where they can outsource aspects of their family office while still maintaining an embedded family office for select functions. This model can be the best of both worlds for families — they can maintain the relationships and status quo of their embedded FO, while lightening the load of the embedded FO by outsourcing services such as bill pay, bookkeeping and reporting or complex and specialized investment functions.

After learning of the potential options, the West family knew that they had to evolve their family office in order to best support the family, but G2 wanted to keep the personal support provided by the loyal employees within the family business. The family found their solution with a hybrid model — the embedded family office shrunk to a single dedicated employee, and the bookkeeping, bill pay and reporting have been outsourced to a managed services provider. Technology-enabled virtual family offices are typically easier to implement as they leverage digital technology and automation tools. Although the new outsourced aspect of the family office was virtual, the family has a dedicated team to openly communicate with and turn to with any issues or questions. 

Each family office is as unique as the family it supports. By carefully considering the needs of the family and the business goals and needs, the family can determine if the embedded family office model can continue to provide support or if an alternative model would better serve both the family and the business.

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