Structuring your family office: A purpose-driven approach
Family offices are growing in number and rapidly evolving to meet a wide range of needs. As founders think about how to create the office that will work for them, articulating the purpose of the family office can help them determine the optimal organizational structure and leadership approach to meet their goals.
By Daniel Aghdami and Renee Neri
Once viewed as service organizations, family offices—that is, private businesses that manage the financial needs of an individual family—are increasingly perceived as investment and wealth managers. They help families preserve and grow generational wealth, steward assets, oversee estate and tax planning, support philanthropic efforts, and more.
The number of stand-alone family offices is increasing, from 6,000 in 2019 to more than 8,000 today. There may be nearly 11,000 by 2030, according to some projections.1 Assets under management are projected to increase by 73% over the next five years.2
With an estimated $84 trillion in wealth expected to transfer between generations3 over the next 20 years, family offices will play a critical role in ensuring alignment of benefactor and next-generation values; on the other hand, beneficiaries may look to create or restructure family offices to align with their own purpose, values, goals, and principles. Principals responsible for a family office need the executives they hire to possess organizational leadership and financial, legal, and investing acumen. These executives can help principals establish succession plans for their operating businesses, as well as offload the challenges and stress of simultaneously managing a family business—all while effectively stewarding their personal and family wealth via the establishment and oversight of the family office.
Given the wide range of objectives and benefits, principals and families looking to establish or restructure a family office will, in our experience, benefit from being clear about their specific purpose for doing so. This insight will serve as a blueprint for how the entity should be structured and the capabilities its professional staff will need.
Identifying the purpose
Questions to ask that will help bring purpose into focus include:
- What is the primary goal for the office? Is it continued wealth creation, wealth preservation, or a structure to support ongoing and successive generations? Are definition and delivery of family legacy important?
- If investment management is a priority, what values will guide investments? Have these values evolved? Are the interests of those making investments aligned with the values of the family?
- Is the next generation ready? Are younger generations equipped with the financial understanding and acumen necessary to manage familial wealth and legacy? Do they want to be involved in the day-to-day management and stewardship of a family enterprise? Are multiple family offices needed to serve the needs of an expanding family and future generations?
- How does the principal want to engage with the office? How involved—or removed—do they want to be in management oversight, governance, reporting, etc.?
- Is philanthropy involved? Does the family wish to establish, fund, and sustain a charitable foundation or other altruistic pursuits?
Potential family-office leadership roles
There are several leadership roles that those building family offices need to consider. The following are the most common, though it is important to note that not every office will include every role.
- Head of family office or president of family enterprise: This is usually the most senior position, responsible for the overall direction of the family office. This individual oversees management of the family office and staff and serves as the primary liaison with the family.
- Chief investment officer: This individual is the steward of the family’s investment strategy and implementation. This can include buying and selling securities, overseeing direct investment commitments, and allocating capital by hiring external investment managers. They help to determine strategies for growth and facilitate dialogue around risk levels assumed in the investment portfolio(s). This individual typically reports to the CEO or president, or a family principal or board.
- Chief financial officer: This top financial role defines policy and plans. The CFO provides oversight of the tax, insurance, budget, credit, and treasury functions, and ensures financial transactions, policies, and procedures meet long- and short-term objectives. This individual typically reports to the head of family office or may be the most senior person reporting to the family board.
- Chief operating officer: This individual coordinates and administers all aspects of the family’s operations in accordance with established policies. They are responsible for the development of policies on the functioning of the office. They may also have oversight of legal, technical, and human resources matters. This individual typically reports to the head of the family office.
- General counsel: General counsel advises on or manages routine legal matters, reviews investment and management structures, and oversees outside counsel on tax, estate planning, insurance, and other needs. This individual typically reports to the head of the family office.
- Chief of staff: This individual manages the family’s affairs, often in lieu of a CEO in a nascent family office. The chief of staff oversees the family’s finances, banking relationships, concierge services, and household staff needs.
Structuring the office: Sample organizational structures
Consider a couple of family office structures and the roles that might best align with each.
The first example is what we might call a classic structure, serving the investment needs of the family. It primarily acts as an investment office, using permanent capital to invest in private equity, venture capital, public equities, credit, and real estate transactions. Additionally, the organization functions as a family office, assisting with the principal’s financial administration and the acquisitions of residential properties, as well as modern and contemporary artworks.
The family is active in philanthropic giving and has a separate foundation led by an executive director supported by a small program team. The president of the family office and the executive director of the foundation work closely together to support the principal’s vision.
The chief operating officer is responsible for the operations of the family office, including human resources, information technology, office management, and travel management. The principal is no longer involved in their operating company.
The second example is a family office with a more complex structure—one that encompasses family business ownership and oversees broader family interests.
In this example, the family enterprise serves as the principal’s holding company, comprising accounting, legal, IT, and operating companies with exposure across various industries, including sports and media, insurance, financial services, and real estate.
Additionally, the family enterprise oversees the principal’s social impact arm. The president of the family enterprise was the first hire tasked with formalizing the structure of all family enterprise operations. This individual initially worked with the principal as chief of staff within the affiliated operating company. Their remit spans accounting, information technology, legal, and human resources. They also advise the principal on all facets of their holdings—including investment management functions, philanthropic endeavors, and charitable enterprises—and serve on the executive committees of the principal’s operating businesses.
References
1 Mia Pei, “Global family office wealth to jump 73% to US $9.5 trillion by 2030: Deloitte,” The Business Times, September 4, 2024, businesstimes.com.sg.
2 Deloitte, The Family Office Insights Series – Global Edition, 2024, deloitte.com.
3 Cerulli Associates, “Cerulli Anticipates $84 Trillion in Wealth Transfers Through 2045,” January 20, 2022, cerulli.com.