Family offices are rapidly emerging as foundational structures for wealthy families to manage their wealth, investments and long-term goals. Advisors often say, “If you’ve seen one family office, you’ve seen one family office.” This suggests that each one is so unique that it defies categorization. But we can, in fact, highlight some commonalities and insights to help a prosperous family understand how a family office might be useful.
A family office is typically understood as an organization created by a family to manage its investments and support its members. It might even be said that every family contains one. In the corner of my office sits a file drawer with my will, estate plan, investments, tax information and information about each asset I own. That is my family office.
But if a family has a family business or significant investments, their family office is far grander than a file drawer or financial record center. Family offices today help manage not only financial capital, but also human capital, family relationships, governance and legacy planning. Many families view their family offices as essential to their current and future wellbeing, both financially and as a connected family.
This column will examine a recent academic article summarizing wisdom from several decades of research about how family offices work and why families create them. The article, by Patrik Hayoz, Bingbing Ge and Alfredo De Massis of U.K.-based Lancaster University, is titled, “Research on family offices: What is the way forward? A systematic literature review” and was published last year in The Journal of Family Business Strategy.
The authors of the review suggest that family offices should be viewed not just as financial organizations but as structures that help families achieve long-term goals and continuity as they cross generations. Several functions and purposes make them more than just mini-banks for the family:
• Aligning with family needs and values
• Resolving family conflicts and differences
• Maintaining unity across generations
• Supporting entrepreneurship and legacy
• Preparing future leaders
• Managing wealth transitions
Such goals are not primarily financial, but involve the relationships and interconnection of an extended family that expands with each new generation. The family office becomes a central coordinating institution within the family’s broader ecosystem of organizations. Family offices are evolving from wealth management structures into central hubs for implementing cross-generational family strategy and coordination. To understand the attraction of family offices, we need to focus less on the organizations themselves and more on how they serve the families behind them — their goals, dynamics and long-term aspirations.
Why Families Create Family Offices
Estimates suggest that there are now roughly 17,000 family offices worldwide, with thousands created in the past 15 years.
Several trends drive their emergence, according to the Lancaster University researchers:
• The rise in ultra-wealthy families around the world
• Increasing complexity in managing investments and assets
• Greater attention to passing wealth across generations
• The need to coordinate financial, family and legacy goals
Why do families want a separate office rather than a room in their family business or a connection with a financial firm to invest their money? There are many reasons, but the primary one appears to be that they want more than just a financial office; they want a place to locate and sustain their family relationships and activities beyond investment, and outside their family business.
The researchers identified a broader set of motivations that have become just as important to the family as financial management:
• Manage investments and complex financial assets
• Coordinate tax, legal and accounting matters
• Support philanthropy and social initiatives
• Preserve family legacy and values
• Prepare younger generations for leadership
• Maintain family cohesion and communication
• Plan the transfer of wealth across generations
The earliest studies suggested a simple reason for the rise of family offices: wealthy families needed a way to separate personal affairs from business interests while maintaining control over their wealth and influence. This is especially true when the family diversifies or sells their legacy family business. Others start one within their family business and begin to discover that their family concerns are different from those of their business. Younger and older generations must get to know each other and learn to work together. So, they look for a separate place, as the family office becomes both the emotional and financial center for shared family activities. You can’t do this in a financial office.
According to the Lancaster University article, the biggest reason for the existence of so many standalone private family offices is their ability to combine financial activities with non-financial family activities by:
• Supporting family governance
• Managing family dynamics
• Educating NextGens
• Facilitating communication
• Organizing philanthropy
• Preparing succession plans
The Lancaster University research suggests that these activities are critical to sustaining family connection and long-term success, especially when wealth is transferred between generations. Many families struggle to maintain wealth and cohesion as it passes from founders to later generations, and family offices are often seen as key institutions for supporting that transition. Issues that arise because of diverging interests, values and wealth levels among family members can be resolved through a family office. Family offices offer a place for the family to gather and work with dedicated advisors toward transfer of ownership, power and authority across generations. This is not a one-time transaction, but a series of phased activities.
A family might wonder whether such a costly venture is little more than a status symbol and whether it provides tangible value. It’s helpful to view family offices as existing on a continuum that ranges from an office that utilizes staff time within a family business to a multi-family financial services firm to a dedicated private family office. The cost rises with each level.
What’s best for your family enterprise depends on what you need and want from the office. Single-family offices offer greater privacy, tailored services, a place for family activity, mementos and art, and personal connection and strong alignment with family goals. But they can be expensive and harder to staff and organize. Correspondingly, multi-family offices can serve a handful or many families, and offer cost efficiency, access to broader expertise and advanced infrastructure. However, they may feel less customized and sometimes drift away from individual family needs.
Some families shift from one model to another over time as their circumstances change. They start as single-family offices, serving the founder, and then may evolve to become MFOs, or shift their operations from being an SFO to merge into an MFO. Family offices are evolving and each generation may take a different path.
Needs also differ among families. Some are newly wealthy; others have multigenerational wealth; some remain deeply involved in operating businesses while others have taken a more hands-off approach as shareholders or have sold the business altogether. Family size, communities, cultural traditions, values and investment priorities also vary. This diversity determines the constellation of needs that they incorporate into the family office.
In the first generation, the family is small and under the direct control of the wealth creator. But the next generation grows exponentially, and by the third generation, the family is more like a small community. Its unity may be shattered as different interest groups and family branches take different paths. All the while, they have shared leadership and must rethink their goals and core purpose.
Family offices also operate differently across regions, reflecting cultural norms around authority, family structure and investment behavior. For example, studies suggest that in some parts of Asia, family offices often have stronger alignment with the authority of the family patriarch compared with Western contexts.
Role of Family Involvement
Research consistently shows that the level of family involvement strongly influences how a family office operates. Families that stay engaged tend to foster better alignment and control over long-term strategy, prioritize non-financial goals such as legacy and values and can use the single-family office as a platform for coordinating and connecting family members.
At the same time, family involvement can create tensions. Questions often arise about:
• Who should make decisions
• How much authority professionals should have
• How different generations should participate
Despite these difficult issues, families seek the benefits of staying together as they grow.
A related intention of the private family office is the desire to foster entrepreneurship. Following the founder, families see continued entrepreneurial activity as essential for preserving wealth and purpose across generations. Yet studies suggest that entrepreneurial drive often declines in later generations, creating a challenge for family offices trying to balance risk-taking with preservation of wealth. The founder wants the family office to encourage and support such entrepreneurial activity in new generations. Educating and preparing younger family members has therefore become an increasingly important responsibility of family offices.
Studies show that investments remain the core activity for most family offices. Investment strategies vary widely across regions and families and include startups, private capital, impact and ESG-focused companies, and philanthropic, arts and cultural investments.
Family offices differ from traditional investors in their priorities. In many cases, they focus more on long-term profitability and stability rather than on rapid growth. The family has greater tolerance for long-term success, and this makes them attractive investors to growing businesses. Family offices have begun to create investment networks and groups that emphasize long-term commitment and patient capital.
Most studies focus on the operations of family offices themselves, rather than deeply examining the families they serve. They primarily focus on what family offices do rather than what families actually need. This research tends to look at the effectiveness of the factors that make up family offices rather than the degree to which the family needs them.
ROLE OF PROFESSIONALS
Family offices rely heavily on professionals — both internal staff and external advisors. These may include investment specialists, legal experts, accountants and family governance advisors. The professional staff initially work for the wealth creators and, after their passing, may continue to work for their heirs and the growing family. Advisors are joined by the presence of rising generation family members and may collaborate or compete for key roles and the support of the wealth creator. These two groups can see each other as rivals, but an effective family office will see advisors and younger family members working together, sharing knowledge and finding ways to share authority and rewards.
The Lancaster University research highlights several challenges in this area:
• Recruiting and retaining high-quality talent
• Aligning professionals with family culture and values
• Managing relationships between professionals and family members
• Adapting when leadership transitions to younger generations
There are also structural issues. Employees in single-family offices may feel more accountable to founders than the broader family. Advisors sometimes propose standardized solutions that do not fully reflect the family’s unique needs.
Another emerging topic in single-family offices is gender, according to the Lancaster University research. Women currently make up a minority of senior roles in family offices, although their participation is growing. A family can begin early to promote gender equality by including everyone in family educational and bonding activities. Advisors can meet and work with these family members to help them develop their capabilities and demonstrate their diverse skills.
These considerations should influence the choice for a family to create a single-family office. Consider the functions needed, their cost and the future needs of the family and its business. The degree to which the family wants privacy and wants to depart from purely financial function to create a family center can justify the added costs and work that are needed. But it is not a one-time or either/or choice. Many families start with a small embedded or virtual office and then expand as new conditions arise and the family grows.