What Is a Family Office?

In broad terms, a family office is an entity established to manage the financial and administrative affairs of high-net-worth individuals and their families.

Depending on the family and its needs, this typically involves coordinating the activities of, as well as data and reports from, professionals including accounting, tax, investment, legal, and administrative professionals. These services, and how they interact within a given family office, can be highly customized and guarded by confidentiality.

A family office can be created in a variety of formats, and for varying reasons to serve the specific needs of the families setting them up. If a family’s assets are shared by more than one generation, for example, a formal family office structure can increase reporting transparency and enable a smoother transition to a younger generation.

Family offices often have one or more primarily focuses on how they serve their families and principals:

These broad focuses are often combined to align with a family’s specific needs and preferences. Some family offices are led by a strong principal and others are overseen by a formal board or a less-formal family council.

Similarly, some offices are dedicated to serving a single family, while multi-family offices provide shared services to a small group of families.

While thresholds vary, many families with assets between $10 million and $250 million will be served most effectively with virtual family offices that use a variety of professionals. Families with assets in excess of $750 million will likely benefit from a dedicated family office with in-house professionals and specialized expertise on retainer. Families between those ranges typically have a blend of resources.

Some of the most common family office services include outsourced accounting and bill pay. These services are well-suited for outsourcing because they require professional expertise to perform, and because most busy family office principals would prefer not to take care of the intricate details of financial reporting themselves.

Instead, outsourcing accounting and bill pay allows family members to focus on their business, community, recreation, or other activities while feeling assured someone’s monitoring their accounts and paying their bills on time.

In addition to peace of mind, outsourced accounting and bill pay provides more effective reporting and a deeper understanding of the family’s assets and investment performance. By combining data from different accounts onto a single report or dashboard, busy family members can understand their financial data at a glance.

Outsourcing bill pay also offers stronger financial controls, such as requiring approval for major purchases or two signatures on checks for amounts above a pre-determined threshold.

Another benefit family offices provide is access to sophisticated financial software to help the family optimize its reporting, forecasting, and budgeting. Many families start tracking their finances with checkbook registers, account statements, and spreadsheets, but find the complexity of managing different accounts and asset classes challenging.

Dedicated financial tools such as Sage Intacct help family offices consolidate financial and performance data across multiple accounts, integrate investment management reporting with bill pay, expense management, and payroll, and reduce fraud and manual error risk.

If you would like assistance reviewing your situation and implementing a roadmap to meet your family office’s goals, contact us.