Family Offices: What They Are and Why You Might Need One

By Erik Berge | Senior Wealth Strategist, Citizens Private Wealth

For many, the term family office conjures up images of several generations of a single family working together to operate a small business. However, it carries a much broader connotation in financial services.

So, what is a family office? The original family offices managed the financial affairs of a single, wealthy family such as the Rockefellers, Vanderbilts or du Ponts. Though these single-family offices still exist, multi-family and outsourced family offices can provide ultra-high-net-worth (UHNW) individuals and their families with comprehensive solutions to managing financial and investment needs.

What is a family office?

A family office is generally a private wealth management firm that offers a range of personalized services that go beyond investment management or financial planning. It differs from a typical financial advisory relationship in its breadth as it often provides a range of concierge services that greatly eclipse any single stand-alone service required by UHNW families.

Family offices provide a wide range of services, including financial planning, bespoke or direct investment opportunities, investment management, consolidated reporting on both managed and outside investments, budgeting, insurance, philanthropy and charitable giving, estate planning, tax services, bill paying and cashiering and engagement with the next generation.

There are two types of family offices:

• Traditional family office: A traditional family office has a staff of experts dedicated to the financial planning and other needs of one UHNW family. The staff are employees of the family.
• Multi-family office: A multi-family office serves the needs of more than one family. Families are clients of the firm, which offers selected services, including financial advisory, accountancy, legal and others. This structure may be more suitable for families that require fewer resources, are not interested in establishing a business to manage their finances or prefer to share the costs of these services with other wealthy families.

What does a family office do?

The responsibilities of a family office can encompass a variety of family needs, including:

• Lifestyle management: This can include coordinating business and leisure travel, handling the family's doctor appointments and other health care needs and managing the family's residential and commercial real estate.
• Investment portfolio management and asset management: Financial advisors can monitor the family's existing market investments while looking for new opportunities. Asset managers can oversee real estate or business holdings.
• Tax guidance: Accountants and lawyers can help manage and limit a family's tax obligations.
• Estate and wealth transfer planning: Estate attorneys often coordinate with outside counsel to prepare documents and implement structures to efficiently manage wealth that will be passed to future generations.
• Family governance and engagement with next generation: Family office experts can teach younger family members to understand and responsibly manage their wealth.
• Philanthropy management: Advisors can help the family navigate philanthropic goals and interests in a tax-efficient manner.
• Legal matters: Lawyers can help the family navigate legal matters related to real estate, trusts, investments, and other potential issues.

The benefits of a family office

For UHNW families, establishing a family office offers numerous benefits:

• A team dedicated to managing a family's wealth and investments: Coordinating the efforts of investment, tax and legal professionals can help ensure a harmonious approach to preserving and growing a family's wealth aligned to their beliefs and wishes.
• Protecting a family's wealth and legacy: A family office takes a long-term approach to wealth preservation, mitigating risks and protecting assets across generations.
• Services at scale: Combining experts to provide comprehensive services can be less expensive than managing a disparate group of personal and financial advisors. Choosing a multi-family or outsourced family office may provide additional benefits that single family offices might not perform at scale.
• Customized solutions: A family office team can take the time to understand your vision, values, and goals to build customized solutions — from personal banking for the family to financial products for your firm.

Is your advisor really a family office?

Although many wealth advisory firms provide some family office services, it’s important to truly understand the services offered and how those align to your family’s needs, as there is a great deal of subjectivity regarding a family's needs and the service offering.

At a minimum, a family office denotes an in-depth, holistic approach that provides clients with services that address numerous aspects of their daily financial life — from sophisticated financial planning and complex wealth transfer strategies to more mundane services such as bill-paying, staff payroll and concierge services. Many advisors, outside of family offices, may not be able to satisfy the complicated needs of an UHNW family.

Do you need a family office?

Having a family office can provide tremendous peace of mind while managing a myriad of administrative tasks. It can be especially helpful to family leaders who personally handle most aspects of a complicated and time-consuming financial structure. The services can also be beneficial for retired C-suite executives who no longer have a personal assistant at their disposal. And for those who travel often, whether for business or pleasure, or if you suffer a health event, a family office assures that the family's financial life continues to run smoothly — bills are paid, staff is supervised, investment portfolios are managed, and taxes are filed.

Family offices can also provide access to a wider range of asset classes. They are growing more popular, and rising in importance in the investment community, according to a PricewaterhouseCoopers (PwC) analysis*. About 50% of existing family offices were established since 2006, and 80% draw their wealth from existing active businesses. Many family offices are moving away from investing in property and funds to seek out opportunities in areas including direct investments in start-up companies and impact investments.

Ultimately, a family office provides enormous value for UHNW families with complex financial and family needs. A family office provides an integrated model with ease of access. The oversight a family office provides significantly reduces the possibility of omissions created by individual financial silos.

Family office services at Citizens

Is a family office right for you? Reach out to a Citizens Relationship Manager, to discuss how our family office solutions can meet your needs. Our offering holistically supports your banking and investment management needs through a dedicated team of bank and investment professionals. We offer customizable online banking portals, relationship-priced access to credit, and sophisticated wealth management solutions including alternative investments. Our specialized resources, including estate planning experts, professional trustee services, and comprehensive insurance solutions, ensure that every aspect of your financial well-being is meticulously managed. With Citizens Private Bank and Private Wealth, you can trust that your unique needs are met with unparalleled expertise and personalized care. Follow the link to schedule a call or reach out to your relationship manager with any questions.

*PwC. PwC’s Global Family Office Deals Study 2024