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How to Start a Family Office


Family offices can help financial advisors differentiate themselves in a competitive market as a one-stop solution for diverse client needs. This type of firm sets itself apart from other firms by providing highly personalized and holistic wealth management services for wealthy families. Here are four general steps to set up a family office.

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What Is a Family Office?

A family office is a private wealth management advisory firm that serves ultra-high-net-worth clients and their families. By specializing in the specific needs of affluent families, financial advisors can better guide them in selecting a long-term approach to manage their wealth effectively. Family offices offer a more comprehensive suite of services, such as investment management, estate planning, tax strategy, philanthropic planning and administrative support.

Family Office vs. Traditional Financial Advisory Firm

A traditional financial advisory firm typically offers investment advice and financial planning services to a broad range of clients. So while a traditional financial advisor business will focus primarily on managing investments and providing general financial guidance, a family office often addresses every aspect of a family’s financial life. This includes coordinating with legal and tax advisors, estate planning, and even managing household staff and planning family meetings and education sessions.

Family Office vs. Private Banking

Private banking services, typically offered by large financial institutions, also cater to high-net-worth individuals, but differ from family offices in scope and personalization. Private banks provide tailored financial services, such as investment management and estate planning, but often within the confines of the bank’s products and services. Family offices operate independently, and can provide a wider range of financial products and services, providing truly customized solutions.

Single-Family Office vs. Multi-Family Office

There are two main types of family offices: single-family offices and multi-family offices. A single-family office serves one affluent family, providing highly personalized and exclusive services. This allows for complete customization based on the specific needs and preferences of that family. A multi-family office serves several families, pooling resources to offer comprehensive services at a lower cost per family. While multi-family offices may not provide the same level of individual attention as single-family offices, they offer significant cost savings and access to a broader range of expertise.

How to Set Up a Family Office

Advisors discussing their plan for setting up a family office.

#1: Define Office Structure and Processes

The first step in setting up a family office involves defining your office structure and processes. Part of this is deciding whether you want to have a single-family office, serving one family, or a multi-family office, serving multiple families. Each structure has its own benefits and drawbacks.

You’ll also need to set up governance policies, compliance measures and operational workflows. Your processes should cover investment management, estate planning, tax strategies and philanthropic activities, so that you can ensure all aspects of the family’s financial needs are addressed.

#2: Finalize the Framework

You’ll then finalize the framework for your family office. This involves selecting and integrating the right technology platforms for financial planning and reporting, portfolio management and communication. You’ll also want to recruit key personnel such as accountants, investment managers, legal advisors and administrative staff. Creating a detailed operational manual that outlines all procedures and policies can also help you maintain consistency and efficiency.

#3: Test Systems and Processes

It’s important to test all systems and processes before you launch your family office to ensure everything runs smoothly. This involves conducting trial runs of financial transactions, reporting systems and communication protocols. Advisors should seek feedback from the family and other stakeholders to identify any issues and make any necessary adjustments. This can help you iron out any operational kinks and prepare the family office for seamless day-to-day functioning.

#4: Launch Your Family Office

Your final step is the official launch. This includes formally introducing the family office to all stakeholders and ensuring that all systems are fully operational. You should schedule regular reviews and updates to ensure the office continues to meet the family’s evolving needs.

When working with a high-net-worth family, be sure you fully understand the family’s financial situation, understand the scope of their assets and identify their specific goals. It’s important to create a detailed vision that outlines the family’s financial objectives, legacy aspirations and core values.

Frequently Asked Questions About Family Offices

What Are Some Common Mistakes in Setting Up a Family Office?

One common mistake is underestimating the complexity and cost involved. Financial advisors should have a realistic budget and timeline, accounting for both the initial setup and ongoing operational expenses. Not planning ahead can lead to financial strain and operational inefficiencies.

Failing to account for potential friction among family members can be another common mistake. Family members can disagree over goals, investment strategies and governance, which can undermine the efforts of the family office. Advisors should facilitate regular, transparent communication and involve all key stakeholders in decision-making processes. This can foster harmony and help members come to a consensus on important decisions.

Why Is Having a Clear Governance Structure Important?

A lack of clear governance structures poses significant risks. Without well-defined roles, responsibilities, and protocols, a family office can struggle with decision-making and accountability. Establishing robust governance frameworks and detailed operational manuals from the outset is essential to avoid these potential issues.

What Role Do Experienced Professionals Play in the Success of a Family Office?

Neglecting to hire or consult with experienced professionals can result in suboptimal management and missed opportunities. Advisors should ensure they have access to a network of experts in areas such as tax planning, legal affairs and investment management. This professional expertise is crucial for navigating the complexities of wealth management and maximizing the family’s financial outcomes.

Bottom Line

A financial advisor works with a high-net-worth family after setting up a family office.

Running a family office requires careful planning and the collaboration of various financial experts. In doing so, financial advisors can deliver comprehensive and personalized services that address the specific needs of affluent families, such as estate planning and tax strategy, all while solidifying their role as trusted advisors in the process.

Financial Advisor Tips

  • If you don’t have a lot of time to actively spend on marketing, you might consider using an online marketing service that brings leads to you. SmartAsset AMP (Advisor Marketing Platform) is our holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
  • Another way to grow your client base is by expanding the radius of where you’re looking for clients. Potential clients are increasingly willing to work with financial advisors remotely. Consider broadening your search and working with high-net-worth investors who are comfortable connecting online, rather than in person.

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