Family Office

The why, who, what and how of starting a family office

More and more families with multigenerational wealth are starting family offices to help them manage, sustain and grow their financial and nonfinancial assets. Family offices can offer a personalized array of meaningful benefits based on each family’s specific needs and wealth stewardship goals—from customized, holistic financial asset management to centralized professional and administrative services, to governance strategies and building an enduring legacy.

Determining if a family office makes sense for your family—and the right approach for your needs—starts by considering these four key decision points:

1. Why are you considering a family office?

There are many catalysts that may prompt a family to consider establishing a family office, such as a liquidity event, growing complexity of family assets and/or expansion of the family itself. While it can be tempting to jump straight to the types of services you might want the family office to provide, it can be even more powerful to first take a step back and view these in context of the family’s overall vision and values. Doing so can help frame the intended purpose of the family office from a more strategic perspective to help position it for long-term success.

Family values

Legacy

Success

Time

Purpose

2. Who will be the key stakeholders?

Next, develop a clear understanding of who will be served by the family office, how they are related and how they will engage with one another. It can also be useful at this point to take an inventory of family capital (e.g., core operating business(es), other operating companies/entities, financial investments and dividend/distribution payouts) and spending commitments (e.g., lifestyle, philanthropy, taxes).

Who will be served by the family office?

Are there specific family considerations?

How will the family approach ownership, management and governance?

Our recent 2024 Global Family Office Report found that about one-quarter (24%) of family offices support only one household, around half (52%) serve two to five households, and about one-quarter (24%) work with six or more. More than half (56%) support only one or two generations.

3. What types of services and structures make sense?

Services: Most family offices are initially created to manage the family’s financial wealth.

However, the scope of services that might be provided is virtually unlimited. Once the range of services is determined, the family can start to scope out potential resource and cost considerations, and whether specific services are better managed in-house, outsourced or through a hybrid approach.

Range of services and associated questions to consider

Source: Is it Time to Start a Family Office, J.P. Morgan Private Bank, 2024.

Structures: Family offices can take a variety of forms and serve one or multiple families. However, the majority fall into one of three archetypes:

Virtual family office (VFO)

Embedded family office (EFO)

Single family office (SFO)

Standalone family offices also may take several legal forms, each with different tax attributes, including the potential deductibility of expenses. It is important to be aware of potential regulatory requirements, and to seek sophisticated legal and tax counsel at this stage.

Legal structures

Compensation models

Tax attributes

Regulatory considerations

4. How to start building a business plan

Once you are ready to start moving into action, it is time to begin creating a business plan around how you can implement your strategic vision into actual design.

Start by crafting your mission statement, setting forth the anticipated legal structure, and setting clear guidelines for decision making and governance on investments and other key decisions.
Outline specific cost considerations, bearing in mind staffing (in-house versus outsourced), operations, technology and cybersecurity, taxes, accounting and other advisory services.
Determine the expected economics model and how costs are to be paid.
Scope out how much time you expect to commit to the endeavor.
Define who will lead the office and if other family members are willing and able to participate.

It also can be important to begin determining if there is universal family buy-in around these issues. This is where you start focusing on the details. And remember, you don’t have to go it alone.

We can help

Your J.P. Morgan team can help you navigate the opportunities and complexities of deciding whether a family office may make sense for your family. Contact us today to discuss your options and for additional resources regarding family offices.

Thinking of starting a family office? Four key decision points to consider.

Elisa Shevlin Rizzo Managing Director, Head of Family Advisory

Anita Sarafa

Midwest Wealth Advisor Team Lead

Published May 10, 2024

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