Key takeaways
- A family office is a company that manages the financial life of an ultrahigh-net-worth family.
- These entities centralize every aspect of a family’s financial life and ensure its wealth is managed according to the family’s vision.
- Operating a family office can cost between $2.1 million and $20.8 million per year, according to Deloitte.
As a family’s wealth grows, managing that wealth—and all its accoutrements, including investment portfolios, real estate, yachts and charitable endeavors—can become incredibly complex.
For some ultrahigh-net-worth families, establishing a family office (or joining a multi-family office) is an important step in ensuring the longevity of their fortunes. It enables them to better manage their wealth now and for generations to come.
What is a family office?
A family office is a private company formed by a family to help them manage their wealth. Beyond this basic definition, there’s a lot of variety in how a family office can operate and what its focus is.
“We work with a lot of family offices and they all look different,” says Isidora Lagos, director of family office solutions at William Blair.
Deloitte estimates there are over 8,000 family offices worldwide, with around 3,200 of those located in North America, according to its 2024 “Defining the Family Office Landscape” report. Many of the world’s wealthiest dynastic families have their own family offices, including the Kennedy family’s Joseph P. Kennedy Enterprises or Walton Enterprises, the family office that manages the wealth of the Waltons, who own Walmart.
It isn’t just about finding the best financial advisor. Establishing a family office centralizes all aspects of a family’s financial life, including asset management, estate and legacy planning, tax planning, risk management, financial reporting and philanthropic strategies. Often, the aim is to preserve an ultrahigh-net-worth family’s wealth across generations and manage that wealth according to a set purpose.
“I do think for people that form family offices, the wealth sustains the generations more successfully because the family office has a mission, a purpose and a vision,” says Craig Savage, a partner and wealth advisor at William Blair.
A family office might also provide lifestyle management for the family members, such as handling travel needs, managing domestic staff and paying bills.
How does a family office work?
Every family office is different, but typically they have some sort of governance structure. Many have boards of directors, which can include family members or outside professionals. Family offices can also be led by one or two family heads (such as a patriarch or matriarch) or have an advisory council.
The average family office has 15 staff members, according to Deloitte. These are often financial services and accounting professionals, but it can also include experts with more specialized skills, depending on the needs of the family. Key hires might include a chief executive officer, chief investment officer, a portfolio manager, accountants and administrative support staff, but it varies.
Not every family office employs a large staff—some families prefer to outsource the services they need.
Single-family vs. multi-family offices
A single-family office serves one family. Its structure and services are customized to meet the family’s needs and preserve their wealth. This customization, however, comes at a cost, which means that many families who might benefit from family office services don’t have enough assets for it to make sense.
In these cases, establishing or joining a multi-family office could be a better alternative. A multi-family office manages the wealth of multiple ultrahigh-net-worth families under one family office entity. This allows them to pool their resources to gain access to these services, but at the expense of the personalization that comes with a single-family office.
“It’s not quite as specialized and customized as it would be as a single-family office,” says Molly Rothove, a partner and wealth manager at Creative Planning.
Wealthy families interested in being part of a multi-family office can coordinate with one or more families to establish their own office or join an existing one. Michael Marquez, president of multi-family office Bessemer Trust, says that a multi-family office can serve just a handful of families or many families. Bessemer Trust, he says, serves 3,000 families.
What services does a family office provide?
Some common services that a family office can provide include:
- Investment and asset management: Investing goals, strategies and portfolio allocation are all customized to the needs of the family—typically with access to a wider range of investments compared to individual investors. “Once you form a family office, you institutionalize your wealth,” Savage says. “By doing so, you’re going to get access to another level of investment products that are only available at the institutional level.”
- Accounting and financial administration services: A family office can handle a family’s financial reporting responsibilities, ensure that all of its bills are paid and manage cash flow. Professionals serving the family office can also provide tax planning and filing.
- Estate planning: Establishing a family office helps ensure the longevity of a family’s wealth, and having a robust estate plan that outlines how that wealth should be passed to the next generation is a vital part of that.
- Charitable planning: Philanthropy is often an important part of wealth management for ultrahigh-net-worth families. Advisors working for a family office can oversee the family’s charitable giving strategy and ensure they’re giving in a tax-efficient manner.
- Education for the next generation: A common focus area for family offices is preparing the next generation to manage the family’s wealth.
- Concierge services: In addition to their financial functions, some family offices also provide lifestyle support services. This can come in many different forms, such as arranging travel for family members, managing the family’s fleet of cars, planes and boats, overseeing household staff or advising on the family’s art collection.
How much does a family office cost?
Savage says the initial fees associated with establishing a family office can run between $100,000 and $250,000 alone. The ongoing costs are much higher, especially for family offices that employ a large staff of in-house professionals compared to those that run smaller operations and outsource many services.
Deloitte estimates that smaller family offices (defined as those with assets under management (AUM) between $250 million and $500 million) cost around $2.1 million a year to run, while large family offices (over $5 billion in AUM) cost $20.8 million a year.
Because the costs are so high, a family needs to have sufficient wealth and complexity for establishing a family office to be worth it. However, there’s no single threshold for when an ultrahigh-net-worth family should consider setting one up.
“I think the question is, what are the needs of the family, how complex are the needs and do they have the size and scale to warrant the establishment of a family office?” Marquez says.
If a single-family office doesn’t make financial sense, setting up or joining an existing multi-family office could be a better fit.
It’s also possible to get family office-style services from a wealth management firm, Rothove says. Rothove’s firm, Creative Planning, offers this type of service to clients who want the centralized approach to wealth management “without the burden of the family office,” she says.
FAQ
Who typically needs a family office?
A family office is typically a good fit for ultrahigh-net-worth families with complex wealth management needs. They’re expensive to establish and operate, so you need to have enough wealth for it to be worth it. Additionally, not every ultrahigh-net-worth family needs a family office if their needs aren’t complex enough to warrant it.
How much wealth is required to start a family office?
There’s not a single threshold for the net worth needed to start a family office, but Lagos says it likely doesn’t make sense to establish one until your wealth exceeds $300 million.
How is a family office different from a wealth manager?
A family office is a company that centralizes all aspects of a family’s financial management within a single entity. The term wealth manager typically refers to a financial professional who manages clients’ investment portfolios. An individual might start their financial journey choosing a financial advisor or wealth manager to oversee their investments, but as their wealth and complexity grows, they might decide that it makes sense to establish a family office (which could, in turn, hire one or more wealth managers to oversee the client’s investment strategy).
Are family offices regulated?
Family offices aren’t regulated the same way registered investment advisers are, but they’re still subject to applicable securities regulations and tax laws, which is why it’s important for those who have a family office or are considering establishing one to work closely with experienced attorneys and tax professionals to ensure they’re in compliance with the law.