So what is a family office?
The term “family office” sells easily because it appeals directly to its target clientele – wealthy families who need someone else to do the planning for them. As a business, it extends to the usual functions of day-to-day administration and management and includes the provision for tax compliance work, access to private trust services as well as private banking, bookkeeping services, family support services, bill paying, family governance and family member financial education. A more aggressive family office with plenty of capital may even venture out to private equity placement, real estate development and venture capital opportunities.
However, it is not to say that a family office MUST provide for all these services. The key here is that a family office would offer a range of services that might or might not include the functions noted above, depending on the needs of the family it is serving.
There are many types of family offices, single, multi, virtual etc. but they all have the same functions of the single family office. As the names imply, a single family office serves the needs of one family while the multi family serves the needs of multiple families, there is also a new virtual family office that is for smaller families or individuals seeking to get a good structure in place early for their assets and establishing a legacy.
For a single family office, the family office assets would be the wealth acquired by the family it is serving. The system was coined by the Rockefellers during the late 19th century, but it has swelled in popularity only from 2005. If you would recall, the Rockefellers have a very strong hold of their finances, often through marrying cousins to prevent their wealth from being distributed outside of the family. Therefore, it comes as no surprise that the purpose of a family office has always been to effectively transfer wealth across the family’s generations.
For a family office to function, it will have the same organization as any corporation. This means that it will have a president, a CIO, a support staff, and so on. The cost of running the office is almost always overridden by the profits or gains that are generated by the office.