Family office

What it means

A family office is an organisation that manages the wealth of one or more wealthy families: investments, tax, property, succession, philanthropy and administration. The family has one place where professionals look after its assets instead of many separate advisers.

There are single family offices serving one family and multi family offices that manage the wealth of several families and share costs. A dedicated family office usually only pays off for very large fortunes; smaller families use multi family offices or private banking.

Family offices often invest directly in companies as patient capital. Unlike private equity funds, they need not sell after a few years, which makes them attractive long-term partners for owners of family businesses.

How it works in practice

A common task is preparing succession, handing the family business and assets to the next generation. This covers the ownership structure, for example via a holding company, family constitution rules, choice of management and the tax consequences of transfers.

Philanthropy is often carried out through a foundation or non-investment fund managed by the family office. This separates charitable activities from business and sets clear rules on how donation decisions are made and reported.

When investing in startups or family firms, a family office acts much like a venture capital investor but with more flexibility. Founders should find out what the family office expects in terms of return, control and investment horizon.

What to watch out for

Concentrating wealth management in one structure brings conflict of interest risks, for example when the family office recommends products on which it earns commission. The family should have transparent remuneration and independent oversight.

International family office structures are subject to information exchange between tax authorities and anti-abuse rules. Tax planning without real substance may be challenged, so the structure needs a sound economic rationale too.