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.

Complete Guide to Starting a Family Office

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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.


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.


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:


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.


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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