May 4, 2021
Successfully managing a family’s wealth and its enduring legacy can be a challenge without a family office. According to The Family Firm Institute, only about 30 percent of family businesses survive into the second generation, 12 percent are viable into the third generation, and only about 3 percent of all family businesses operate into the fourth generation or beyond. This statistics make a case for a family office more compelling. A properly functioning family office can provide the structure and focus that is needed to properly navigate the wealth management landscape largely due to its freedom from conflict of interest, as it pursues no commercial interests of its own. In this article, we examine the concept of family office, the different types of structures and their role in supporting family wealth preservation.
There is no globally accepted definition of a family office. One of the reasons is that family offices can be set up in different ways to pursue varying objectives. Notwithstanding, a family office can be described as an entity established or engaged by a single family or a group of families to manage their wealth. The focus of the family office is on managing, building and sustaining wealth for current and future generations. It also plays a major role in risk management by building a diversified portfolio and ensuring that this portfolio is properly managed.
The journey to setting up a family office that will meet the wealth preservation needs of a High Net Worth Individual or a wealthy family starts with a clear definition of the purpose and the role of the family office. Wealthy families often set up family offices to: