THU 28TH MAY 2020


Bringing the family business community together

The New Family Office

10th February 2016 Alison Paul, Turcan Connell

Good insight into the emergence of the modern version of a traditional way of managing family wealth and the role of family offices.

For years it was the jewel in the wealth management industry’s crown, a service as exclusive as an invitation to dinner with the Rockefellers – and if you had to ask about the cost... well, it really wasn’t for you!

It is the family office, a team of advisers privately employed to manage a family’s affairs.  The name might still be largely unknown outside the world of wealth management, but that is changing fast.  Having been cloaked in secrecy for the best part of a century, this symbol of the super-rich exclusivity is moving into the spotlight.  At the same time it is going downmarket: these days some clients don’t even own a yacht!

Origin of species

The concept of a family office is not new. In Europe, it can be traced back hundreds of years to when wealthy landed families first employed their own lawyers and bankers to run their businesses.

The basic idea might be old, but the origins of the modern family office are firmly rooted in American capitalism and date from the late 19th century when the country’s leading industrial and commercial families were building their business empires.  Having diverse business and philanthropic interests, the heads of these families wanted to protect their wealth for future generations.  They needed an overall succession plan and their children needed help managing their own finances.  As with their European predecessors, they realised that the best solution was to have an in-house team of professional advisers.

Unlike the Europeans, the American industrialists were primarily motivated by a desire for control and security.  America might have broken away from the class and social confines of the Old World, but capitalism’s founding fathers were well aware of how the circumstances that allowed them to amass a fortune could just as easily take it away.  Old Europe’s rigid social conventions may not have fostered an entrepreneurial culture, but they served a practical purpose: class boundaries and inheritance laws favouring the eldest son were an effective means of preserving family wealth through the generations.  Modern day America had no such equivalent and they saw family offices as a means of control.

For the few who could afford them, family offices were an essential service, but the cost of employing a private team of professional advisers consigned them to a remote corner of the wealth management arena.


After the Second World War, Europe underwent huge social upheaval and its subsequent recovery brought about a dramatic reallocation of wealth.  On both sides of the Atlantic, consumerism and the growth of the manufacturing economy had created new wealth.  The emerging group of affluent families needed the wealth management offered by family offices, but at a more affordable price.

In Europe, several banks, led primarily by the Swiss banks, started to develop their own family offices, and in America many original family offices developed into multi-family offices by acting for small groups of ‘similarly minded’ families.

The banks’ version of the family office tended to focus on what they did best: administration and transaction services.  They also offered succession planning and asset protection services, but the financial products on often were often restricted to those available from the banks’ own range.

This perceived lack of independence, arising from an inability to source from the open market, meant that the service offered by many private banks never reached its full potential. 

Similarly, across the Atlantic, the growth of multi-family offices was restricted by the need to find compatible groups of families.

European and American versions of the service provided a cost-effective wealth management tool for entrepreneurial families, but in both cases it was felt that untapped demand still remained and that a more competitive service was needed.


In Europe, we are now seeing this need being met by a new type of family office.  Wealth managers, many of them with a private banking background, have been setting up their own boutique operations.  They have the contacts, the experience – and now they have the independence to find the best financial products on the market.

This type of service has many characteristics that appeal to the owners of small and medium sized businesses.  Wealth management boutiques operate and deliver their service in a similar way to the accountants and corporate lawyers that business owners usually deal with.  Like these other professionals, private client advisers provide a service based on independent advice, mutual trust and a commitment to the long-term relationship.

They might have finally shaken off their Ivy League image, but that is not enough to explain the dramatic increase in the number of family offices appearing in recent years.

The answer to this question lies in understanding who uses them.  Of course, the wealthy dynasties still have their own in-house teams, and many of the new elite energy and technology billionaires also seek the prestige and security of having a private team of advisers.  But these families are still in the minority.  The vast majority of the new demand is for people joining multi-family offices and private client boutiques.

These people do not feature on any published Rich Lists, and instead of owning vast conglomerates, they are more likely to own a thriving family business and a portfolio of investments.  They do not want an exclusive service or private security; they want a cost-efficient way to manage all their assets and preserve their wealth for future generations.

The long view

The heads of many family enterprises are aware of the maxim that it takes just three generations for a family to make and then lose its fortune.  Succession planning has always been one of the most difficult issues for family businesses – family members often hold a diverse group of investments and other assets, but seldom have an overarching plan to manage them for the long term.  When running the business seems to demand every minute of their day, the head of the family needs to know that someone is still looking after the domestic affairs. 

In recent years, that concern has become heightened.  Children are less likely to become involved in the business, but they still want their share in its wealth.  In such circumstances, a trust can be an effective way of separating ownership from control.  A family office can allow the head of the family to set the overall direction, but it can also be established in a way that lets younger family members manage their assets as well.

This ability to provide joined-up thinking and overarching control lies at the heart of family offices’ appeal.  They consolidate the management and reporting of investments, insurances, property and the income derived from them.  They do this by bringing together experts on investment management, financial planning, trust and estate planning, tax advice, and even cash management.  But they also help families with the wider aspects of asset protection and management.  Unsuitable marriages and litigation often pose a threat to family wealth, so services such as family law. Property law and litigation are often available if required.

For this reason some observers see family offices playing a central role in every wealth management plan.  They are about continuity and the peace of mind provided by having planned for future generations.  Many people want the reassurance that, in the event of an unexpected accident or ill-health, their financial affairs will still be managed by someone who understands their objectives and the family ethos.

Doing good

But succession planning is only part of the story.  Like the American industrialist of the last century, many of the people setting up today’s multi-family offices are interested in philanthropy.  It might be a far cry from the high profile philanthropy of Bill Gates and Warren Buffet, but setting up grant-giving trusts and foundations forms a significant part of the work done by today’s wealth managers.  Often this is on behalf of successful local entrepreneurs who, having made enough money to secure the future of their families, now wish to give something back.  Such people operate in a private way and often at a very local level, wanting to help the communities that made them what they are.

Considering the entrepreneurial nature of the new users of family offices, we can expect this to be an important, if seldom discussed, reason for setting them up.


About the author - Alison Paul is a Trust and Tax Partner at Turcan Connell.  For more information about their serivces please visit their website here






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