By Phoebe Venable
Have you ever come across the term “family office” in the business or finance section of newspaper or magazine? Were you pretty sure it wasn’t referring to the room in your house with the desk and computer?
The term “family office” once was known only to uber-affluent families, but today the term is popping up across the landscape of wealth management. A family office is a private company that manages investments, trusts and more for a single family (or multiple families, in some cases) that possesses great wealth.
The history of family offices goes back to the sixth century, when a king’s steward was responsible for managing the royal family’s wealth. Over time, the aristocracy began to call upon this service from stewards, which lead to the concept of stewardship that still exists today.
In 1938, the family of J.P. Morgan, the famed financier, banker, philanthropist and art collector, established the House of Morgan to manage the Morgan family’s extensive assets. In 1882, the Rockefellers founded their own family office, which still today provides services to the current generations of Rockefellers as well as other families.
The definition of family office varies greatly depending on whom you ask, because each family office is as unique as the family or families it serves.
Generally, a family office is designed to help family members collectively manage, sustain and grow their wealth across multiple generations. Family offices can offer a wide array of services including investment management, tax advice, fiduciary duties, risk management, estate planning, charitable giving, financial education of family members, wealth-transfer planning and family conflict resolution.
In the case of a “single-family office,” the family is the owner of the business and uses its services exclusively. Because the cost of running a family office and providing all of these services is very high, families often decide to offer their services to other families. When a family opens up its services to other families, it becomes a “multifamily office.”
According to Wealth-X, a global ultra-high-net-worth intelligence provider, there are about 50,000 families worldwide with at least $100 million in financial assets, excluding collectibles and primary residences. The Family Office Association estimates there are 3,000 single-family offices around the world today, at least half of which were created in the past 15 years. They are arguably the fastest-growing investment vehicles in the world today as more and more wealth is being created globally and as families with substantial wealth increasingly see the virtue of setting one up.
Most of us will never have to experience this rarified kind of headache, but great wealth comes with great complexities. Almost all of us, on the other hand, are all too familiar with families and their special complexities and headaches. Put the two together and you might just need a family office.
Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.
