Family Offices

Family Offices operate alongside traditional private banking services and are generally only available to those HNWI's and families with assets in excess of $50MM USD. There are a multitude of reasons why a family might form a single-family office, or join a multi-family office already in operation.

Reasons for Creating a Family Office

One of the most common reasons is a recent or anticipated liquidity event. Often vast sums of wealth are tied up in the operation of a family-owned company. The sale of the company or other familial asset (like a large plot of land that has been in the family for generations) is sold, resulting in the new 'problem' of having lots of liquid assets in the hands of family members not accustomed to having access to such liquidity.

Another common reason for forming an office or joining a multi-family office is simply that the family's resources have organically grown to the point where full time professional management becomes necessary and/or desirable.

In some cases, the time required by existing family members to manage the sizeable assets is distracting them from the ability to effectively manage what was the source of those assets -- often times an existing family business. In other cases, the desire for financial privacy makes the separation of familial assets from those of a business a desirable goal.

Another common reason for migrating assets to a family office is that the family itself has grown multi-generational and the growing number of family members and needs require increasingly complicated and diversified products and services. In many cases, this is also accompanied by the unavailability of the older family member who carried out these duties in the past to continue to do so.

The Birth of the Family Office

The family office came into vogue many years ago as a way for the truly wealthy families to coordinate financial services and manage all of their financial affairs in one place. The primary difference between the family office and traditional wealth management and financial services is the idea of one trusted fiduciary acting on your behalf to manage many different professionals providing their services to the family; for example, trust management, legal advice, tax planning, estate planning, and investment management.

Private Banking and the Family Office

While private banking doesn't compete directly with most family offices, a larger 'multi-family office' does compete at some level for a private bank's client base. While private banks often argue that a multi-family office cannot offer the same breadth of services, many multi-family office proponents feel they are getting more unbiased financial advice, and the perception of receiving a higher level of service.

Future of the Family Office

While the trend in recent years in private banking has been towards consolidation and ever larger organizations, able to offer a more and more diversified product offering to their clientele, some clients have realized, especially in the wake of the recent turmoil at UBS, Switzerland's largest bank by assets, that big is not always better. The future of the family office is expected to be towards the formation of more multi-family offices that can offer a breadth of service only available before through the private banking institutions, while maintaining the perception that they are able to provide truly unbiased research and advice with a greater level of personal attention.