Rising complexity and wealth transfer driving more families to consider family office model

Hymans Robertson Personal Wealth has identified several trends that are driving more families and individuals to consider adopting the family office model for managing their wealth.

It highlighted entrepreneurial exits, growing investment portfolios, the increasing complexity of tax and estate planning requirements, and wealth transfer as reasons for growing demand for family offices.

“As the K-shaped economy continues to evolve, more family business owners and individuals find themselves needing to consider ways to manage their wealth,” said Hymans Robertson Personal Wealth head of wealth & private office services, Jeff Simpson.

“Traditionally, the family office model has been the preserve of ultra high net worth families, but several factors are driving additional groups to look at this option.

“These trends mean many more families and individuals need to coordinate advisers and dedicate more time to managing risk.”

Families should consider five 'key points' before setting up a family office to ensure it truly meets their needs, Hymans Robertson Personal Wealth argued.

It noted that the family office model was not about wealth level, but wealth complexity, and establishing a family office without understanding what is needed could lead to several issues, such as governance challenges, unnecessary complexity, and avoidable costs.

To ensure the decision to set up a family office was made with insight, Hymans Robertson Personal Wealth urged families to consider the complexity of their financial affairs, as family offices were most valuable where wealth spanned multiple assets, businesses, properties, trusts, and advisers.

Families were also encouraged to define their desired level of control, because the model can take on significant responsibility and families should decide how involved they want to be in investment and strategic decisions.

Planning for future generations was recommended, as the firm noted that succession planning, wealth transfer, and family governance can all be affected by the structural requirements of the model.

It also called on families to consider value for money, stating that the costs and benefits of establishing and operating a family office should be weighed up thoroughly.

Finally, families were urged to identify the real challenge to ensure setting up a family office solved a genuine problem, such as adviser coordination, reporting, or governance.

“A family office is a dedicated structure that helps families manage complex wealth in a more coordinated way,” Simpson stated.

“It can bring together several streams, from investment, tax and estate planning to asset protection and governance. For some families, it may help prepare wealth for future generations or facilitate philanthropy, including through a donor-advised fund.

“However, choosing the model should be driven by need, not wealth level alone. It works best where there is genuine complexity to manage, such as multiple businesses, properties, trusts, investments or decision-making requirements. Families should be very clear on whether their strategic needs justify the cost and governance required.

“By considering the five points, particularly the problem they believe a family office will solve, families can build a clearer view of how complex their wealth really is and whether or not they should go ahead.”

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