Establishing a Family Office

Many families who have experienced a significant liquidity event will consider setting up a family office.7 However, the overwhelming majority of family offices are really convenience offices consisting of a very small number of individuals who typically have little influence over the family's important policy decisions. Instead, this staff handles routine chores such as bookkeeping, bill paying, and gatekeeping. The purpose of this section is to discuss more serious family offices: the reasons families consider establishing such an office, the typical duties of such offices, and a basic framework for designing and setting up a successful family office.

Why a Family Office?

There are thousands of family offices in the United States and many thousands more in Europe, Asia, and Latin America; powerful testimony to the attractiveness of the concept. The specific reasons families establish offices are as numerous as the families, but the most fundamental reason has to do with the challenge of stewardship: No one will take your issues as seriously as you will take them yourself.

For most of American history all but the wealthiest families8 entrusted their assets to banks and trust companies, and the results tended to be dismal at best. Moreover, outside institutions were either indifferent to or completely ignorant of families' needs for advice on issues beyond asset management: philanthropy and intergenerational issues, for example. As a result, many families ...

Get The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website now with the O’Reilly learning platform.

O’Reilly members experience live online training, plus books, videos, and digital content from nearly 200 publishers.