Background
Family offices aim to ensure clients’ financial legacy lasts for generations by managing large amounts of wealth that have become too complex for an ultra-high-net-worth individual to handle alone. These private companies provide services such as asset management, succession planning, and more.
To manage these large fortunes, a coordinated team of professionals specializing in law, investing, insurance, and other skills works together for an integrated approach.
Combined, the more than 8,000 single-family offices around the globe manage $5.5T, making them a powerful force in the financial world.
Types
There are two main types of family offices: single-family offices set up to serve just one family, and multifamily offices that manage several families’ needs.
One-third of single-family offices work with families who have at least $1B in investable assets. The largest single-family offices by total assets manage the fortunes of the Walton family (who started Walmart), the Gates family, and the Bezos family (see the full ranking).
While single-family offices cost an average of $3.2M to run each year, multifamily offices usually charge a percentage of each family’s managed assets for their services (typically less than 1%). That means a family with $50M, for instance, might pay a multifamily office $200K to $350K a year (more on average operating costs).
As technology has advanced, a third type of family office has formed: virtual or outsourced family offices. These offices leverage a network of professionals who work at third-party employers such as law firms and banks to provide legal counsel and manage monetary assets. One person typically coordinates separate individuals’ work for the family.
With this newer type of family office, each family has less control over the professionals managing their money. But these offices may be more accessible to families with lower net worths: While it’s recommended that a family has at least $30M in assets to use a multifamily office, some argue that those with $10M in assets can benefit from an outsourced family office.
Purpose
A recent study found that, on average, less than a third of family wealth generally makes it to the second generation. Just 12% of family wealth reaches the third generation, and 3% makes it to the fourth.
Family offices work to prevent that kind of attrition and ensure that family fortunes are passed to the next generation by establishing succession plans, making sure the wealth at stake is tax-optimized via financial tools such as trusts, holding companies, and more. They also develop tailored investment strategies, typically investing in a broad range of both traditional and alternative assets.
Another main purpose of family offices is securing private information. For families with millions, if not billions, in assets, protecting confidential documents such as bank statements and health records is paramount for protecting the family members’ financial, if not physical, safety and well-being.
Family offices answer primarily to their clients, not shareholders or even most financial regulators—though the lack of oversight on them has been criticized.
These businesses also help families meet philanthropic goals and prevent family discord by handling succession plans, for instance (a UBS study found tax efficiency was a top challenge in planning wealth transfers).
Growing Impact
The amount of money that family offices manage globally is expected to nearly double by 2030. In recent years, family offices have often invested in private credit, venture capital, and real estate.
In the next 20 years, the largest intergenerational transfer of wealth is expected to happen, and experts are watching for a shift in family offices’ investing strategy. (Learn more in this video.)
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