A family office is a type of wealth management service that is aimed at high-net-worth and ultra-high-net-worth individuals and families. The PDF attachment gives an overview of wealth management services in general.

Family offices can be single-family or multi-family offices, dealing with either one ultra-high-net-worth family or several at once. Family offices provide a more comprehensive service than wealth management service providers, dealing with every aspect of the family wealth. This can include services for tax, budgeting, wealth transfer, charitable giving, insurance and family-owned businesses, all in one place.

Because of the comprehensive range of services offered by a family office, there will be several professional advisers involved, each specialising in a different area of finance and financial law. Dr Edgar Paltzer is an attorney-at-law who offers second opinion legal advice to family offices from his practice in Switzerland.

Increases in Family Office Operations

The popularity of the family office has increased in recent years, in part due to an influx of new ultra-high-net-worth individuals and families. According to a report issued by the Economist, ultra-high-net-worth individuals today hold approximately US$9 trillion privately.

In the past decade or so, the total number of ultra-high net worth individuals and families has grown tremendously. While not all of these will choose to open a family office, large numbers do see the advantages of having a team of professionals dedicated solely to the management of their own family wealth.

This explosion in ultra-high net worth individuals has seen a parallel explosion in the number of family offices in operation, which has increased tenfold in just over a decade; in 2008 there were approximately 1,000 family offices in operation, while today that number is closer to 10,000.

The short video attachment looks at the definition of ultra-high-net-worth.

Impact Investing

The costs of establishing and running a private family office are relatively high. Due to these high operating costs, general estimates show that the family offices that are in operation will command a minimum of £30 million in value of investible assets. However, the benefits of establishing a family office are many and often outweigh the cost in the long-term.

Multi-family offices allow individuals and families to access the same types of service but share some of the operational costs. One key benefit is that the ultra-high-net-worth individual retains complete control over what happens with their money and investments, working with a hand-picked team of professionals who have no conflict of interest and are paid to follow the wishes of their employer.

The increased popularity of impact investing may therefore also have played a role in the increase in family offices over the past decade, as more investors look to create a lasting legacy as well as protect and increase their own wealth.

Wealth Transfer

One of the most significant reasons ultra-high-net-worth families may choose to bring their wealth management in-house is to facilitate the smooth transfer of wealth from one generation to the next. Conflicts can easily be created when large amounts of money are changing hands, but having a dedicated in-house team that fully understands the ins and outs of the business, assets and investments – as well as the family dynamic – can help overcome any challenges that the transition of wealth may impose.

As the number of ultra-high-net-worth individuals around the globe continues to rise, the power of the family office rises also. Financial firms, investment banks and other financial institutions are therefore learning how to deal with family offices appropriately going forward.

The infographic attachment shows the regional distribution of ultra-high net worth individuals as of 2019.