Family Office

A family office is a private company that manages the entire wealth of a very rich family. To do so, it employs its own specialists: lawyers, tax advisors, investment managers and sometimes even art experts or real estate specialists. The family is thus not dependent on external banks but has its own internal finance department. At what point this becomes worthwhile is a question of scale: experts usually cite a fortune of at least 100 million euros as the minimum threshold for a dedicated family office. Below that, the ongoing costs simply don’t pay off.

Why the super-rich don’t use an ordinary bank

A private bank advises many clients at the same time and earns commissions on the products it recommends. This can mean it doesn’t always recommend what’s best for the client, but rather what earns it the most money. A family office, by contrast, works exclusively for one family. Its employees have no interest in selling particular funds or insurance policies.

Then there is complexity. Very large fortunes rarely consist of just a stock portfolio. They include stakes in companies, real estate on several continents, art collections, foundations and trusts in various countries. Coordinating all of this, optimizing it for tax purposes, and preserving it across generations is a full-time job for an entire team — not for a single bank advisor.

Single, Multi, and the costs in between

There are two basic forms. A Single Family Office (SFO) serves exactly one family. It is the most exclusive variant, but also the most expensive: a professional team quickly costs several million euros a year. A Multi Family Office (MFO), by contrast, bundles several wealthy families under one roof. Costs are shared, exclusivity decreases — but in return, the model becomes economically viable starting at fortunes of around 10 to 30 million euros.

The MFO thus resembles a classic private bank more closely, with the difference that it does not sell its own financial products. In practice, the boundary between a large multi family office and an upscale wealth management firm is sometimes blurred. What matters is whether the advisors' interests fully align with those of the clients.

Besides investment management and tax planning, many family offices also take on so-called concierge tasks: they organize security services, coordinate private jets, or manage vacation homes. The scope depends on what the family needs and what it is willing to pay for.

Family offices in the financial world and in the news

Family offices are not a fringe phenomenon. According to an estimate by the consulting firm Deloitte, family offices worldwide managed assets of over 6 trillion US dollars in 2023. As a group, they are thus larger than many hedge fund industries. Because they are not subject to banking regulation and have no public accountability obligations, they operate largely out of sight.

The term frequently comes up in the news when well-known entrepreneurial families are in the public eye. The family office of the Quandt family, major shareholders of BMW, or that of the Walton family, owners of Walmart, are considered among the most influential in the world. The spectacular collapse of Archegos Capital in 2021 also thrust family offices into the spotlight: Archegos was structured as a family office and had to disclose hardly any information — until it collapsed with losses of over 10 billion dollars, dragging several major banks down with it.

In the context of AI and technology, family offices are increasingly relevant as early investors in start-ups. They can decide faster than large funds and are willing to take on higher risks — because they are accountable only to one family and don’t have to deliver quarterly results to external investors.