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A 'family office' is a private company that manages investments and trusts for a single wealthy family.^[1] The company's financial capital is the family's own wealth, often accumulated over many family generations. Traditional family offices provide personal services such as managing household staff and making travel arrangements.
Other services typically handled by the traditional family office include property management, day-to-day accounting and payroll activities, and management of legal affairs. A family office can cost over $1 million to operate, so the family's net worth usually exceeds $500 million. Recently, some family offices have accepted non-family members.^[2]
The first noteworthy family offices in the United States were formed during the late 19th and early 20th century as a result of the tremendous wealth created during the Industrial Revolution. Four of the most well known of these are the Robert Pitcairn, John D. Rockefeller, Henry Phipps and Andrew Carnegie families, who made their fortunes in railroads, glass, oil and steel, respectively.
More recently the term "family office" or multi family office is used to refer primarily to financial services for relatively wealthy families.^[3]

Contents

Traditional and modern usage

Notes and references

Traditional and modern usage

A traditional family office is a business run by and for a single family. Its sole function is to centralize the management of a significant family fortune. Typically, these organizations employ staff to manage investments, taxes, philanthropic giving, trusts, and legal matters. The purpose the family office is to effectively transfer established wealth across generations.
More recently, the family office is not a separate company. The family office invests the family's money, manages all of the family's assets, and disburses payments to family members as required. The office itself operates just like a corporation, with a president, CFO, CIO, etc. and a support staff. The officers are compensated as per an arrangement with the family, usually with overrides based on the profits or capital gains generated by the office. Often, family offices are built around direct real estate or equity investment, professionally managing a large portfolio of real estate or stocks, often both. In addition, a more aggressive and well-capitalized office may be engaged in private equity placement, venture capital opportunities, and real estate development.

Notes and references

1. Case highlights family office risk
2. How to Bank Like a Billionaire, , Robert, Frank, The Wall Street Journal,
3. Family Matters