What is a family office, and who is it for?
The term comes up more and more, and no longer only around the very largest fortunes.
A family office is not a bank, not an asset manager and not a tax adviser, but the party that organises a family's wealth as a whole: from administration and investments to structure, agreements and the next generation.
What that means in practice, how a single and a multi family office differ, what it costs and when it becomes worthwhile for a family, is set out below.
What a family office does
A family office organises a family's wealth as a whole: the administration and reporting, the investing and the choice of managers, the structure and the agreements within the family, and the transfer to the next generation. It does not replace the banks and specialists, but brings their work together into one plan.
A family with substantial wealth rarely deals with just one party. There are one or more banks, perhaps an asset manager, a notary, a tax adviser, an accountant, and alongside them assets that never appear on a bank statement: a business or a participation, property, sometimes something abroad. Each of those parties does its own work well. None of them has been asked to look after the whole. That is the role of a family office, and in practice it consists of four kinds of work.
Administration and reporting of the whole of the wealth, on one basis and as at one date. The investing, with the choice of managers and the oversight of them. The structure and the agreements within the family, set down in a family charter or investment charter. And the family itself: from a family council to the next generation and philanthropy. How we fill in those four, and how such a process runs from the first picture to the ongoing follow-up, is on our Family Office page.
A family office is therefore not an extra layer on top of the existing parties, but the place where the work of all those parties is brought together. The family has one point of contact, with behind it the team that does the investing, structuring, reporting and administration.
Who is a family office for?
A family office makes sense from the moment the wealth demands more work and more coherence than the family, alongside everything else it does, can still give it. That moment has recognisable features.
More than one bank
The wealth sits with several banks or managers, and nobody sees the total at a glance any more.
Wealth outside the bank
A business, a participation, private equity, property or something abroad: holdings no bank keeps track of for you.
An event
The sale of a business, an inheritance or a move across a border sets everything in motion at once.
The next generation
Children come into view and the family wants to make arrangements before they are needed, not after.
A family office of one's own, with its own people and systems, only becomes realistic for wealth that can carry such an organisation. A multi family office, in which several families share the organisation, comes into view considerably earlier. Our own family office services are generally aimed at wealth from around €20 million; below that, the work is usually better organised with a good asset manager and a fixed point of contact. Whether it is worthwhile for a family is in the end a conversation, not a calculation, and we are glad to have it openly: including when the outcome is that a family does not need it yet.
Single or multi family office
A single family office works exclusively for one family, with its own people and systems. A multi family office does the same work for several families, which share the organisation but each keep their own wealth, structure and confidentiality.
Originally a family office was literally one family's own office: a small team working exclusively for that family. Such a single family office still exists, but it is only feasible and sensible for families whose wealth can carry an organisation of its own, with its own people, systems and licences.
Because several families in a multi family office share the organisation, the people and the knowledge, the way a family office works comes within reach of families that do not have the size, or the wish, to set one up themselves. For most entrepreneurial families, that is the form that matters in practice.
Andreas Capital is a multi family office, founded in 2009 by entrepreneurial families.
Family office or asset manager: the difference
An asset manager manages an investment portfolio within an agreed mandate; a family office organises the total wealth, of which that portfolio is one part. The terms are often used interchangeably, but they describe two different roles. The asset manager selects the investments within its mandate and accounts for them. That is an important part of the whole, but it is one part.
A family office starts one step earlier and looks wider. It is about how the total wealth is built up, what structure lies underneath, which parties manage which part and whether all of that fits what the family wants. An asset manager can be part of that whole; the family office keeps watch over the whole itself.
In practice both roles often sit with one party. That can work, but it does raise the question of who keeps watch over the overview when the same party also supplies the products. We therefore keep the roles separate. In the family office role, the parties where your wealth is currently held simply stay in place: we follow how they perform, set them side by side, and the family decides. Should you also want part of the wealth managed by us, that is a separate choice, with its own research and its own considerations, and never a condition.
What does a family office cost?
A family office works on the basis of a fee that is agreed in advance and set down in writing, so that the family knows what it pays and what for. That fee is related to the size of the wealth and to the work it requires: a family with four banks, two participations and property in two countries requires more than a family with a single portfolio.
What a family office costs has to be set against what the current situation costs, and the latter is often invisible. Costs embedded in returns at various banks and managers, overlap between portfolios that nobody notices, structures that were never tidied up, and decisions left lying because nobody oversees the whole. One of the first things a family office does is make those costs visible, so the comparison becomes a fair one. What that means for a specific family is something we discuss in the first conversation.
Why families choose a family office in Luxembourg
Luxembourg is one of the countries where the family office profession is regulated by law: anyone offering these services needs a licence and is subject to supervision. That supervision rests with the CSSF, which grants licences and tests them on an ongoing basis. Client assets are legally separated from the assets of the institution that holds them. For a family that mainly means something practical: there is a regulator you can turn to, and the wealth remains yours, even if something goes wrong at an institution.
Add to that the country's position at the heart of Europe, inside the European Union and the eurozone, and its long habit of dealing with families and wealth that cross borders. It is neutral ground for a family with members in the Netherlands, Belgium and beyond, multilingual by nature and within easy reach from the Benelux.
Andreas Capital works with a licence and under the supervision of the CSSF, from Luxembourg, for European families whose members, businesses or wealth are often spread across more than one country. For them, Luxembourg offers a stable, strictly supervised financial centre, and a team that is used to families whose lives cross borders.
Is it right for your family?
Whether a family office suits a family becomes clear faster in a conversation than in an article. How we do the work in practice is on the Family Office page. If you would like to go calmly through how your wealth is arranged today and what a family office would mean for it, we are glad to think along with you, without obligation and without anything having to be decided straight away.