This has come up at the office recently and it’s not something a lot of people deal with, so we needed to write a blog about it: Family offices.

Family offices have been getting some attention lately but what are they, what do they do, who has them, do you need one?

It came up for us because a family office called us about placing some insurance for a family’s plan.

Today we are talking about Family Offices for Canadian Business Owners and their Families of course.

Family offices used to be something that would be very reserved to only the wealthiest families in the world, and still generally are.

But with the rise of mass affluent families, the term family office has been used a lot more lately, even in showing up in mainstream movies and on TV shows like Succession.

What is a Family Office?

When your wealth and assets are big enough that you need a full-time staff to manage everything, you can consider a family office. Your assets and complexity would have to be enough to make it worthwhile hiring some very expensive experts full-time to just work for you.

A family office can do a few things from private wealth advisory, planning, accounting, legal and even administrative for very high-net-worth individuals and their families.

Family offices are different from traditional wealth management shops in that they offer a total solution to managing the financial and investment needs of an affluent individual or family.

For example, in addition to financial planning and investment management, many family offices offer budgeting, insurance, charitable giving, wealth transfer planning, tax services, and more.

Family offices are typically defined as either single-family offices or multi-family offices. Single-family offices serve just one ultra-affluent family. Multi Family Offices are more closely related to traditional private wealth management practices. They seek to build their business by serving more than one client.

Multi-Family Offices are more prevalent due to economies of scale that allow for cost-sharing among the clientele.

Importantly, what a family office does can differ widely. While one client may need a family office for high-caliber advice from a range of experts, another may need a family office to organize their lifestyle needs.

What are the responsibilities of a Family Office?

A family office provides advice and services for wealthy families under a comprehensive wealth management plan far beyond any professional advisor’s capacity.

It requires a well-coordinated, collaborative effort by a team of professionals from the legal, insurance, investment, estate, business, and tax disciplines.

Often, a family office provides high-level financial planning through an integrative approach.

Combining asset management, cash management, risk management, financial planning, lifestyle management, and other services, family offices help clients navigate the complex world of wealth management.

They provide Legacy Planning and Management

After a lifetime of accumulating wealth, high-net-worth families can be confronted with several obstacles when trying to maximize their legacy.

These obstacles can include confiscatory estate taxes, estate laws, and family or business issues.

Given this complexity, a comprehensive wealth transfer plan must consider all aspects of the family’s wealth, including the management or transfer of business interests, the disposition of the estate, management of family trusts, support for philanthropic desires, and family governance.

To ensure the family’s wealth transfer plan is well-coordinated and optimized for its legacy, family offices work collaboratively with a team of advisors from each of the necessary disciplines.

They provide Lifestyle Management

Many family offices also serve as a concierge for families, handling their personal affairs and seeing to their lifestyle needs.

This service could include conducting background checks on personal and business staff, providing personal security for home and travel, aircraft and yacht management, travel planning and fulfillment, and the streamlining of business affairs. It could even include things like making sure the kids school fees are paid.

They provide Investment Management

For a single family, a family office may be responsible for investment portfolio management, commercial real estate purchase, sale, and property management, private equity deals, hedge fund investments, and venture capital investments.

They provide Family Wealth Education

A family office is responsible for educating younger members of the family in the proper handling of wealth and how it can or should be used, based on the family’s values. The family office can help instill in next generations an appreciation for their wealth and its demands. With the right education, a family office can help maintain family unity and prevent discord over money issues between the generations.

Who – is it good for / not good for

Whether or not you need a family office depends on the extent and complexity of your wealth, as well as the demands that wealth puts on you and your family.

Certain situations may require a variety, or teams, of specialists with access to high-value resources that can address a long list of important issues.

Those with at least a net worth of $100 million or more might consider establishing a traditional family office.

Essentially, you need to be in a position where it’s worth more to you to hire people full time to work for you then to have firms that work for you.

For example, you would bring a lawyer on staff versus have a lawyer at a firm that you keep on retainer.

How does it work and how would you put it together?

The first and most important step in creating a family office is to define the goals of individual or multiple family members and create an organizational structure.

Creating a family office is very similar to establishing any other business entity, in which developing an organizational structure is the first move.

You build your team of professionals that work just for you, you involve CPAs and attorneys in the process to provide input on how to structure the family office, as there are many legal and tax issues involved.

The next step is to determine whether you want to establish the family office in-house or have a third party create the structure, hire personnel and provide and maintain basic services.

This whole team could include investment advisors, financial planners, lawyers, accountants, property managers, and maybe you even have a CEO that operates your family.

Before deciding on what type and scope of family office to establish, a cost analysis must be conducted to determine the amount of income generated each year versus the overall operating costs.

There is no one-size-fits-all, and if you’re looking to start a family office, knowing the first steps and estimated costs will help you make an informed decision.

Final Notes

Family Offices are established by high-net-worth individuals for various reasons, with the primary goal of managing and growing their wealth.

Additionally, a family office provides a range of services to help navigate the complexities and demands that come with significant wealth.

We’ve worked with family offices before to set up life insurance for the families and it while it does have its complexities, it’s not much different from setting up insurance for any other family to us, we’ve been doing this for 13 years.  If you’re reading this and you work for a family, we’re happy to consult on the life insurance part of your plans for the family or families.

Contact and More Info

Content like this is very niche and is only relevant for a very few people but if you want to contact us for life insurance or financial advising, you can fill out your contact details below and someone from the team will get back to you in 24 hours during business hours to set up a meeting time.