What is a family office?

A family office is a tailored structure that could help to support your priorities, if you have complex financial, investment, and personal needs that need to be managed.

Simply put, a family office is a group of advisers that provide a high-net-worth family with a range of services, including legal, tax, accounting and concierge support.

Benefits of a family office

All families need a way of organising their family’s needs and planning for the future. At its simplest, this may be done by the parents themselves, with the ‘family office’ being a study in the family home where financial and legal documents are kept. However, when we talk about family offices, we’re usually referring to more formal arrangements designed to meet the requirements of high and ultra-high net worth families whose affairs are more complicated.

If you’re finding that the financial and personal needs of your family are no longer being met with your current arrangement, then you probably need a family office.

Family office services

With a family office, it’s best to have a balance of in-house professionals and external advisers. Which individuals you should have in-house will depend on your exact needs.

Having a personal assistant (PA) would be beneficial in-house to prepare and file relevant paperwork, and to work closely with the external team as a point of contact. A PA from the accounting or legal professions is preferable, as you’ll need someone who has the skills and expertise to ask the right questions and understand what the external advisers need to provide a smooth service.

Larger family offices may incorporate inhouse investment advisers, lawyers, tax advisers, bookkeepers, and a payroll team to assist on the financial aspects. In addition, they may require full-time staff who provide administrative/concierge services, particularly if the family travels a lot.

In establishing who should be hired in-house, the key to ask is, is there enough of this work to employ someone full-time, or would I be better served by external advisers?

External advisers

External advisers will always play an important role in the family office, even if you have individuals with the relevant expertise in-house. This is because it’s important to get the perspectives and experiences of those outside of the family office.

This will likely include a tax adviser to manage your tax compliance and to help file your personal annual tax returns, a lawyer, and an investment adviser. In addition, you may use the services of other advisers such as real estate agents and concierge service providers. Experts in cyber security and reputation management may also be useful for some families.

Ideally, your external advisers will integrate with your in-house team to fill any gaps, but also utilise their knowledge and skills of the family to achieve the same goal.

Setting up a family office

When starting out, a family office can be established with a more informal set-up and can later adapt as your circumstances change.

As those working for the family office and household staff will be employees, it’s often useful to have a company to employ those individuals, rather than them all being employed by the parents. This is particularly useful where the family office is providing services to a number of family members and therefore it would not make sense for them to be employed by one individual.

Similarly, the company can rent the office space for the family office to operate from, or engage service providers as a whole.

Family office locations

Where the family office is located will depend on who it employs and where the family are based. While much business can be done remotely, it’s useful to locate the family office in a location where the family can meet their advisers face-to-face.

If this is predominantly outside of the UK, our Saffery Trust colleagues can help to provide comprehensive international family office services.

Funding a family office

It’s important that the family office is funded correctly as this can otherwise have significant tax implications. Robert Langston covers the potential tax issues a family office may face in his article.

Family members expertise

There is often a lot of useful experience and expertise within a family which would be advantageous to the family office. If this is the case, then individual family members should absolutely be involved.

It’s important to ensure that any involvement is formalised if necessary; for example, if a family member is providing investment advice, or other ‘regulated’ services, this should be managed appropriately.

As family wealth passes down the generations, and the family gets larger, it can also be useful to create a family charter which discusses how and when family members should become involved in the running of the family office.

The challenges of setting up a family office

Getting the “right” people can be challenging. Finding professionals with the right skills, expertise, and industry experience is the easy part, but they need to understand how you work and what you’re trying to get out of having a family office in place. It’s also vital that it’s someone (or a team) that you get on with, as you’ll be spending a lot of time with them.

As always, the position of the second (and future) generations should also be considered, to ensure smooth succession.

How can we help?

Our family office team provide the essential accounting and tax advisory services. We can work with your in-house team on tax and accounting, payroll, VAT, and compliance services, as well as audit work as your family office grows.

Please get in touch with Alexandra Britton-Davis to discuss your wealth planning priorities and to explore the services you may require.

Also, join Mike Hodges, Leonora Stevens and Alexandra Britton-Davis in our podcast episode, where they discuss all things family office and what to do if you’re thinking of setting one up.