A family office is a private wealth management firm usually set up by a wealthy family to manage their finances. But can an ordinary family take advantage of one as well?

Typically, a family office can provide investment banking, financial planning, and other services to the family. The structure and operation of family offices vary depending on the size and needs of the family. For example, some families use a single-family office, while others use a multi-family office or outsourced family office.

But can a regular person take advantage of the benefits of a family office, or are they reserved solely for ultra-high-net-worth families? 

Fortunately, while most people associate family offices with the ultra-wealthy, there are many ways that regular families can benefit from these services if they are willing to put in the effort — and the benefits of doing so can be well worth it. Continue reading to learn more.

What Is a Traditional Family Office?

In a traditional sense, a family office is an all-in-one wealth management firm for a high-net-worth family.

It provides various financial services and can support multiple generations with complex tasks such as tax planning, administering trusts and trusts funds, real estate management, and financial advisory services. In addition, family offices typically offer family members assistance with charitable giving activities and can even help establish and maintain a private giving foundation for the family. 

While a family office can be similar to a wealth management firm, the key difference is that a family office will handle all of the family’s financial affairs. In contrast, a typical wealth management firm will advise on investments and potentially explore tax strategies but will often refer to a CPA for advanced tax planning and preparation and a lawyer for estate planning purposes. So while a wealth management firm may have a limited scope, there’s often no limit to the financial services offered by a family office.

Overall, a family office provides detailed guidance and strategies to affluent families so they can protect their assets while maximizing the value they get from their wealth.

If you feel intimated by the fact that the traditional family office includes attorneys, wealth planners and the likes, that should not deter you from thinking about creating one. You could make one at a limited scope to help propel your family to prosperity and protect your assets as well. Before we get into that however, let’s discuss how the family office came about.

The History of Family Offices and Why They Were Once Only Available to the Wealthiest People in the World

Historically, family offices have only been available to the ultra-wealthy.

They have an extensive history of safeguarding wealthy families' assets and managing their finances, going back to the 19th century. Historically, wealthy families like the Rothschilds and Rockefellers would hire staff to manage their finances and ensure that their wealth would be protected for generations to come. 

Over time, the use of family offices has grown significantly as wealthy families have become increasingly sophisticated in managing their money. Not only do wealthy individuals now engage in diverse investment management techniques through the use of a family office, but many family offices also take on areas such as philanthropic giving and succession planning for ultra-high-net-worth clients. 

As the world's wealth expands, wealthy individuals continue to utilize family offices to protect their assets effectively. 

Individuals like Elon Musk, Jeff Bezos, Warren Buffett, and Bill Gates have used family offices to diversify into different asset classes and manage the tax implications of their billionaire status. You may have seen politicians who have a significant amount of wealth and wondered how they have it as well; it’s through a family office. By having expertise on hand, such as tax advisors and estate planners, these wealthy individuals are ensuring that their legacies will last for generations. 

With access to investments in private equity investments, hedge funds, and real estate portfolios, family offices represent an essential tool for wealthy individuals looking to sustain their fortunes.

The Immeasurable Benefits of a Family Office

There are considerable benefits to having a family office, particularly when preserving wealth, or what one earns through their employment, businesses or investments throughout their lifetime. These include making meaningful investments and developing tax strategies that make the most of family resources.

At a high level, there are four core benefits of working with a family office: 

• Access to sophisticated investment strategies. This can include traditional investments like stocks and bonds and alternative assets like private equity, commercial real estate, commodities, cryptocurrency, etc.

• Holistic financial planning. This involves a detailed and comprehensive review of your total financial picture, including tax, investments, and legal. In addition, these services can extend to your entire family, creating a legacy of financial health and stewardship for generations to come.

• Customized service. Services are often fully customizable to the family's needs and can include establishing and administering trusts, tax planning and preparation, investment management, charitable giving strategies, and more.

• Convenience. Lastly, family offices provide ultimate convenience for their clients by offering a one-stop shop for all the family’s financial needs. Within the family office, there are typically several different advisors that will handle a family’s financial affairs — including financial advisors, CPAs, and lawyers. But, because these advisors are all working together within the family office, there’s no need for the family to coordinate between the advisors. Instead, the advisors can communicate and work together seamlessly to provide all of the financial services the family needs.

When it comes to sophistication, comprehensive planning, customizable service, and convenience, it’s tough to beat a family office.

Understanding the Three Different Types of Family Offices

When understanding the role and benefits of a family office, it’s important to understand the three different types: traditional, multi-family, and outsourced. 

Traditional Family Office

A traditional family office or “single-family office” is the original type of family office where one office supports one family. 

It can be an invaluable asset for wealthy individuals and their families, but it’s inaccessible for most families because of the high investment minimums. Because the traditional family office only has a single client family, they need to be able to cover the cost of all their staff and services from the family. Asset minimums vary by firm, but most traditional family offices have investment minimums starting around $50 million, though some range as high as $250 million. 

This makes them out of reach for most American families.

Within a traditional family office, families can expect an in-house expert team that provides tailored services to preserve and increase the family's wealth. The staff members are employed directly by the family, ensuring a clear focus on the family’s interests without the distractions that might arise when working with multiple clients.

Multi-Family Office

Next, multi-family offices are an excellent option for families looking for customized wealth solutions that may not meet the asset minimums of a traditional family office. A multi-family office will service multiple families rather than focusing on a single client family.

Generally, this makes their services more affordable because they are earning fees from more than one family, but this also has the potential to reduce the level of customization and service you can expect. Investment minimums vary by office, but many multi-family offices offer their services to families with less than $50 million, though some may have minimums above $50 million. 

Like a traditional family office, a multi-family office provides portfolio management, bill-paying, transfer of wealth plans, philanthropic advice, and wealth education. However, consider that providing services to more than one family means they may have less flexible and customizable services compared to conventional firms as they need to standardize their offering to scale it across multiple families.

Outsourced Family Office

Lastly, an outsourced family office is ideal for families looking for professional assistance with their financial matters who may not meet the high investment minimums of a traditional or multi-family office. 

Instead of a one-stop shop like a traditional or multi-family office, an outsourced family office is a network of financial experts, such as financial advisors, accountants, and lawyers, who collaborate to provide tailored services according to the client's requirements.

The main benefit of an outsourced family office is that it can offer a comparable level of service as a traditional or multi-family office at a significantly lower cost. Investment minimums vary, but generally, families can find a financial advisor no matter their asset levels, and additional experts like a CPA or Lawyer will often work on an annual retainer basis. 

But, to make this work, families have to be much more involved in the coordination, communication, and sharing of information between their experts and advisor. 

Generally, families appoint an advisor to take the lead in coordinating all communication and efforts to create a streamlined service that offers personalized solutions and advice. Often this is a trusted financial advisor who oversees the whole financial plan at the highest level. Then, that advisor is usually responsible for assigning and coordinating tasks and scheduling meetings with the other experts and the family. 

How Everyday Americans Can Take Advantage of a Family Office

An outsourced family office can provide everyday Americans with various valuable financial services customized according to individual needs. 

Lawyers, accountants, and specialized advisors provide expertise on tax compliance and other complex matters and can help families make important decisions that build toward their long-term financial success. Outsourcing these activities may require more effort from the family in communication and coordination, but it offers significant potential for cost savings if managed effectively.

A financial advisor, CPA, and lawyer are essential for the everyday individual looking to take advantage of family office benefits. While it may sound intimidating to bring on such a team, most financial advisors work on a fee only basis off of a percentage of the money that they manage for you. That means, in many instances, you may not come out of pocket. There are other instances where if you may not meet the minimum money management requirements for a particular financial advisor that they may provide you with services provided at a specific retainer or flat fee, which gives an average American an opportunity to work with an advisor. In regards to attorneys, while their billable hours could add up to considerable costs, if you are only contacting them for essential matters, your fees may cost significantly less than one would imagine them to be. A CPA tends to be essential, and could be the lowest cost to someone who is looking to set up an outsourced family office for their own family. 

A financial advisor can provide guidance and direction regarding investments, insurance, asset management, and more, while a CPA is specifically trained to handle tax strategy and tax preparation. Furthermore, having a lawyer to draft and review documents is invaluable to ensure that all the estate information is handled correctly and legally. 

Additionally, there are many financial advisors that prefer to help coordinate the other professionals in your life on your behalf. In fact, some financial advisors and their teams offer ‘family office’ lite services, which may be more appropriate for your specific needs. It's a great time to search, compare, and analyze what professionals are out there who are equipped to help you solidify your financial future by using our free search tool to get detailed background information on financial advisors in your area.

Finally, setting up a reliable outsourced family office with financial experts can put individuals in a better position to work out effective financial strategies now and in the future as their wealth grows.

If you feel intimidated by how a family office is traditionally setup, do understand that there are ways to do get these elements incorporated into your own family’s life at a fraction of what the wealthy would spend.

“I have worked with an attorney, financial advisor and a CPA since 2016,” says Leonard Kim of AdvisorCheck. “If I were to add up the fees from my attorney, financial advisor and CPA, the most I have ever spent in a given year to all parties would be $10,000. While there are key periods in one’s life where more services are required than others, by stagnating the process throughout your relationship, or by getting everything done in one said instance, you are able to dramatically reduce the cost that you could expect to work with all parties involved.”

How a Family Office Can Benefit You

Going at it alone when it comes to investing and taking care of your family on your own can be rough.

Earlier, we talked about the key benefits of a family office being:

• Access to sophisticated investment strategies 
• Holistic financial planning 
• Customized service 
• Convenience

No matter what one earns, having access to sophisticated investment strategies will allow for anyone to take advantage of methods that one may not consider when they are planning on how to achieve their own financial goals or retain a sizeable portfolio throughout retirement and to pass down to their children to continue down the family legacy and build generational wealth. In some instances, just a simple investment strategy that comes with a huge tax benefit could take years off of the time you may have expected to retire, or to purchase your first or second home.

A holistic plan would not only set your own future up in the right direction, but could also help transfer property to your children after your passing without facing detrimental tax consequences, set up a college plan to prevent your children from going into immense debt after receiving their degree, and even set them up to have a million dollars by the time that they retire, to alleviate much of the pressure that our economic landscape has already put on ourselves, for their future.

With customized service and convenience, these plans could be custom tailored to you and your entire family, no matter what one’s current financial situation is, providing a vastly greater potential outcome than one could arrange on their own. 

Creating an outsourced family office where your financial advisor, CPA and attorney were in tandem with each other can only create a much more positive outlook on one’s entire financial trajectory. 

The Future of Family Offices

The future of family offices looks accessible, with advances in technology providing plenty of options for families to keep track of their assets and manage a team of experts at a fraction of the cost. 

In addition, digital investment solutions allow families to open and manage accounts more quickly and efficiently than ever before. These accessible tools pave the way for sophisticated investment models, allowing families more control over the success of their portfolios while also giving them the confidence they need when making decisions. 

As a result, family offices may become more accessible as many of the tedious administrative burdens of managing a family’s finances can be automated and streamlined.

Is a Family Office Right for You?

Family offices are a powerful tool for managing and protecting your family's finances, no matter how large or small. 

From their early beginnings in the 19th century to the innovative services they offer today, family offices provide customizable and comprehensive ways to deploy capital, maximize investment returns, and protect one's legacy. 

Despite their benefits being available to only the most affluent families in the past, people of all financial backgrounds can now find ways to benefit from an outsourced family office without spending a fortune. As technology evolves and drives down costs, we look towards the future to see how family offices can support our investments while giving us peace of mind regarding our long-term goals. 

If you're looking to protect and preserve your wealth for generations to come, consider the many benefits of a family office. And if you’re looking for a financial advisor to be part of your outsourced family office, use our search tool to locate some of the best financial advisors in your area. We are glad to provide you with a informative introduction to what family offices are and how they can benefit you and your loved ones.

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Written by Anders Skagerberg, CFP

Fact checked by Billy Quirk

Reviewed by Leonard Kim

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The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

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