What Is A Family Office & Why It’s Smart To Have One

Family Offices : Why You Need One

The family office market is one of the fastest-growing segments in the wealth management services industry. However, despite the growth, the industry is often misunderstood, with many people believing it to be either a small niche business or a differentiating factor for the ultra-high-net-worth.

The idea of a family office is nothing new. Royal families have been establishing them for decades to manage the financial affairs of the royal household and their real estate holdings.

Meanwhile, billionaires have also been setting up family offices to handle the operation and management of their financial assets.

But more recently, affluent individuals, far from being billionaires, are also establishing them.

1. What Is A Family Office?

The definition of a family office varies, but Forbes says it’s “a private office that handles the financial and personal affairs of high-net-worth families.” Additionally, the family office tends to be private and insulated from public relations. It’s typically mission-based, highly confidential, and takes on personal tasks that ensure the wealthy family would not be exposed to public scrutiny.


2. What Are The Purposes Of A Family Office?

As the responsibilities of a family office vary from one to another, it’s safe to state that there is no standard set of duties. A family office typically takes care of:

– Ensures tax efficiency of the estate by planning distributions from inherited investment

– Consolidates and integrates financial activities of the family members

Rather than letting each family member manage their wealth, a family office can consolidate all the related activities and businesses. This includes investment management, accounting, tax planning, insurance, and philanthropy. Of course, the family office might still work with external advisers for some related activities, but the family office coordinates all the activities.


– Helps to insulate the family from inappropriate business and personal entanglements

The family office can be involved in all the financial and business transactions of the family. As a result, it can prevent unwanted deals by screening them beforehand.

– Provides professional management of family commercial and real estate holdings

A family office can oversee the management of dairy farms or vineyards. It can also be involved in the day-to-day operations of a luxury hotel. A family office can also manage non-family-owned companies (e.g. corporate startups) or even charities.

– Provides a central location for coordinating family information

Family members who delegate their business and personal affairs to a full-time family office will enjoy having a one-stop shop for their many requirements. This can include managing emails and maintaining confidentiality regarding their matters.

– Provides security and safety for the family

This includes providing safekeeping for valuables and precious documents, as well as monitoring the health of family members.

– Offers complete infrastructure and basic human needs for family members  

This includes providing health insurance, managing travel, arranging educational opportunities for children, and so forth.


3. Why Create a Family Office?

Family offices are excellent for managing wealth and holding it within a family circle.

They are not meant to serve the entire spectrum of personal, discretionary, and non-discretionary affairs.

Those who need comprehensive estate-planning services should look for a full-fledged office suite consisting of a lawyer, accountant, and broker-dealer.


4. Key Roles of a Family Office

  • Discretionary trusts are those wherein beneficiaries can petition the trust maker for funds—for any purpose.
  • However, non-discretionary trusts are set up so that the beneficiaries are only entitled to receive funds upon the trust maker’s death.
  • This is where a family office comes in handy.
  • Since families tend to be protective of their wealth, they can ensure that subjects don’t have access to the trust funds until they are proven worthy.
  • Family offices act as trustees of discretionary trusts for external stakeholders.

Investment Agent

  • Certain families feel brokers and financial advisers are not catering to their needs. 
  • Some want to invest in obscure funds or markets that are off-limits to the general public.
  • Others want to hold onto certain assets.
  • Family offices act as investment agents for the assets in question in these cases.

Directional Guidance

  • Even though heirs are legally entitled to receive the trust funds at the time of the trust maker’s death, discretion can be used in guiding them.
  • For example, the contingent-inheritance scheme may dismiss children from previous marriages.
  • Similarly, the family office may approve or reject future spouses (by Will).
  • This allows them to approve or reject future beneficiaries quasi-judicially.


Business Owner Shielding

  • Some high-net-worth families use family offices to shield their business assets from future entrepreneurs looking to claim them.
  • Children are not savvy enough to run a profitable business, so the family office assists in vetting.
  • This allows families to choose the entrepreneurs who will run the companies in question in the event of the trustee’s death.


Families come in all shapes and sizes, just like family offices.

As such, there can be no template for family office structures since they are tailored to the priorities and facts of each family.

The creation of a family office usually takes place when a considerable amount of wealth has been created.

The nature and function of the family office are generally set out by its founder with a specific purpose in mind.  The services of the family office can change over time, as the family grows in size or as the family’s needs change over generations.

The key function of the family office never changes – it is there to preserve the family’s wealth. 

The best family office is the one that achieves the family’s objectives and visions.

When protecting your family, it’s vital to get the right advice. If you’re not sure whether you need to appoint a fund management company or MFO or even to set up your own SFO, speak to us over video consultation via Lawyer AnywhereWe can discuss your needs and recommend the best solution for you.

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