Family Office

Article byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Family Office?

Family Office is an advisory entity that holistically manages wealth, investment and other finance-related aspects of ultra high-net-worth (UHNW) families. It takes care of everything from controlling family finances to charitable spendings.

Family Office

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Family office services involve dealing with the services of an investment bank that individuals take to help manage their capital and to make it grow. UHNW families handle multi-million funds which require expert services like that of a family office which ensures professional management and thorough confidentiality.

Key Takeaways

  • A family office is a dedicated entity or group of companies established to manage ultra-high-net-worth families’ substantial investments and financial affairs.
  • Ultra-high-net-worth individuals (UHNWIs) are individuals with net assets valued at $30 million or more.
  • Family offices provide comprehensive financial services to UHNW families, including investment management, wealth management, accounting, financial advisory, tax planning, legal compliance, and travel arrangements. Experts from various fields are hired to ensure expert management across these domains.
  • There are two types of family offices: single-family offices, which serve a single family, and multi-family offices, which cater to the financial needs of multiple families.

Family Office Explained

A family office manages all of the UHNW family’s finance-related needs. Some services provided by the office are investment-centric, wealth management, accounting, financial advising, tax accountingTax AccountingTax accounting is the framework that considers the tax returns instead of public financial statements disclosure while recording and presenting the business transactions in the books of accounts. It complies with the rules and policies of the company's Internal Revenue more, legal compliance, travel arrangements, educational services, staff salary distributions, bill payments, background check, and charity work.

In addition, it makes sure the young generation of the family is financially literate. The professionals financially educate the family members so that they understand the reasons behind managing the finances.

The only requirement for a family office is that one should have a net worth of over $250 million. The underlying goal is to preserve and grow the family’s wealth for the current and future generations. In a sense, these professionals are the preservers of the wealthy family’s legacy.


The legendary Rockefeller family and the Mellon family are believed to have brought family offices to life in the 19th century. The Rockefeller family established an office to look after its wealth by hiring professionals from various domains. Professionals in these offices generally belong to investment, tax, legal, welfare, etc.

Drawing professionals from different streams ensure expert advice and handling of the matter. For example, the tax experts ensure that all the tax obligations are met including those on real estate, liquid assetsLiquid AssetsLiquid Assets are the business assets that can be converted into cash within a short period, such as cash, marketable securities, and money market instruments. They are recorded on the asset side of the company's balance more, financial securities, gold investments, properties, hotels, etc. They ensure that their clients park their money intelligently so that there are multi-dollar tax savings as well.

Another vital role of them is to provide financial advice to each family member to preserve and grow their wealth with time.


Let us have a look at the functions to understand the family office definition even better: Traditionally, a family office served only one family at a time and it was called a single-family office. It gradually grew into a business of its own. A 2016 EY report has estimated that there were over 10,000 such offices in existence around the globe. These offices started handling more than one client, leading to a diversification of the structure and the rise of multi-family offices.

They have a broad scope of investment which works well for single and multi-family services. Studies have been conducted time and again to understand the investment pattern of these offices. The family office investors usually invest in bondsBondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain more, equities, real estate, hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging more, and venture capitalVenture CapitalVenture capital (VC) refers to a type of long-term finance extended to startups with high-growth potential to help them succeed exponentially. read more, etc.

As per a UBS 2020 Study, over 69% of family offices consider private equityPrivate EquityPrivate equity (PE) refers to a financing approach where companies acquire funds from firms or accredited investors instead of stock marketsread more a prime driver of returns. Moreover, the portfolios showcased the dual play of “growth-sensitive assets and wealth-preservation assets.” The diversification in the portfoliosDiversification In The PortfoliosPortfolio diversification refers to the practice of investing in a different assets in order to maximize returns while minimizing risk. This way, the risk is kept to a minimal while the investor accumulates many assets. Investment diversification leads to a healthy more was such that 35% belonged to alternative investments. Private equity was at 16% and real estate at 16% respectively.

Besides, they focus on expanding their existing business in terms of demographics, product and service line as a way to grow their wealth. For example, indulging in acquisitions and mergersAcquisitions And MergersMergers and acquisitions (M&A) are collaborations between two or more firms. In a merger, two or more companies functioning at the same level combine to create a new business entity. In an acquisition, a larger organization buys a smaller business entity for more is a way to multiply their wealth and reach. So, when Walmart took over the Indian e-commerce company of Flipkart, it was a straight-cut move to enhance its reach in the e-commerce domain in a country that serves a massive potential for growth.


There are four broad categories into which the family office is divided:

#1. Single-Family Office

It is dedicated to the financial management of a single family. Its main aim is to centralize business management. There is direct control of staff, making it easy to manage any conflict. Also, the team can concentrate on the affairs of one family. Members need to agree to devote their time collectively.


The advantages of having a single-family office are as follows:

#1 – Tailor-Made Services

The services they offer are unique to you, which is a plus for your business. Thus, no other person has the same ideas as you and thus contributes positively to your business.

#2 – There is no competition from other groups of families

Since there is no competition, no one can steal the unique ideas of the professionals.

#3 – Wealth management from a centralized place

There is a dedicated office to plan and conduct everyday activities with a team. There is also easy staff control. Running a single office is costly as talents need to be grown and managed regularly. If a professional quits, it jeopardizes the whole process till a replacement is found and trained.

#4 – Confidentiality

Firms hold family information with utmost care. Leakage of ideas is well managed and thus enhanced family growth. Secrecy agreements are usually a part of the deal.

#2. Multi-Family Office

Such an office manages the wealth of more than one family. Since it involves several families, the overhead costsOverhead CostsOverhead cost are those cost that is not related directly on the production activity and are therefore considered as indirect costs that have to be paid even if there is no production. Examples include rent payable, utilities payable, insurance payable, salaries payable to office staff, office supplies, more are shared, making it more cost-effective for the management. Besides, having multiple experts and professionals provide a regular stream of expert advice.


Having a multi-family office has the following advantages:

#1 – Varieties of experts

Legal and financial experts meet together, giving a view from different experts before making a move. This, therefore, helps them make better investment decisions.

#2 – Overhead cost-sharing

Having a different category of people in the same investment category allows the spread of costs. Hence it minimizes the overall business operatingBusiness OperatingBusiness operations refer to all those activities that the employees undertake within an organizational setup daily to produce goods and services for accomplishing the company's goals like profit more cost.

#3 – Easy management

It becomes easier to manage all under one roof units than different units in separate places. Hiring a property manager at this level becomes essential, which makes these offices more sensible.


Let us consider the following examples to understand the concept better:

Example 1

Stella, a businessperson classified under the HNWI category, found it difficult to manage her investments and prepare the family budget for every month. Though she knew she had enough money to take care of the financial requirements of her four kids, she witnessed how carelessly the money was being spent on unnecessary items.

Hence, she decided to have a family office to ensure the family finances are controlled without any compromise with the lifestyle, and also make sure her kids are financially literate to understand the real utilization of the monetary resources they have.

Example 2

Walton Enterprises LLC, the company behind Walmart, is one of the most relevant examples to be cited here. It holds a stake of 50% in Walmart valued at $160 Billion. This family office is a prime example of the growth of such offices. It operates most large hypermarkets in the USA. What started as a family dynasty has grown to serve several clients in the USA.

Family Office Vs Hedge Fund

Family office and hedge fund are terms that are widely used in the financial sector. When it comes to managing finances for investments, one must understand the differences between these two terms:

CategoryFamily OfficeHedge Fund
TypeOffers personalized services to ultra-high-net-worth familiesServes and is chosen based on the niche it specializes in
ServicesThey offer everything related to a family’s financial planning from budgeting to investment to wealth management to financial education.Invests in assets that are undervalued but have high potential
ChargesPaid per their fee that covers the cost of the services they offer.Based on the performance of the assets in the market

Frequently Asked Questions (FAQs)

1. How does a family office handle succession planning?

Family offices handle succession planning by creating strategies and structures to ensure the smooth transfer of wealth, leadership, and values to future generations. This may involve developing estate plans, establishing trusts, educating heirs, and implementing governance frameworks that facilitate the transition process.

2. What are the challenges or considerations when setting up a family office?

Considerations when setting up a family office include determining the scope of services to be provided, assessing the costs and resources required, addressing confidentiality and security concerns, establishing investment policies, and defining the roles and responsibilities of family members and professionals involved.

3. Are there any regulatory requirements or oversight for family offices?

Family offices may be subject to regulatory requirements and oversight depending on the jurisdiction and the services they provide. Some countries have specific regulations governing family offices, while others may apply existing financial regulations or require registration with relevant authorities. Compliance with tax laws, anti-money laundering regulations, and investment regulations are also important considerations for family offices.

This has been a guide to What is Family Office. Here we explain its structure, vs hedge fund, examples, benefits, functions, and types. You may also have a look at the following articles to learn more –