Should I Form a Family Office?
December 31, 2025
When to Start a Family Office
Your family business has grown and prospered beyond your dreams, your wealth is growing, and friends are telling you it is time to start a family office. You are confused, recognizing that you aren’t the Rockefeller or Gates family, and wonder if a family office is really right for your needs.
How do you know whether you should start such an office?
Let’s detour briefly to define what a family office is. In simple terms, a family office is a private organization created to oversee and manage the financial needs of a specific family. They may be as small as one or two staff, supported by a network of outsourced advisors, or they may include 20 or more employees. The ideal family office is a mix of insourced and outsourced services, leveraging a network of expert advisors.
There are a series of factors that weigh into the decision. We constantly meet families who are wrestling with this question, and there rarely are easy or clear-cut answers. However, if factors suggesting a family office outweigh the ones suggesting not, then the family may decide to move forward.
Let’s discuss seven key factors to consider when making this decision:
- High wealth complexity. Is the burden of administering your wealth and holdings outweighing the benefits of that wealth? Families with multiple houses with maintenance, staffing, and potential renovations often find they want additional support. Other families have assets spread across various trusts and entities, with a long list of asset managers and custodians. Often, such families struggle with knowing their total worth, identifying all of their holdings, and tracking their spending.
- Multi-generations. There certainly are first generation wealth-owners without children who can justify a family office, but most often, family offices benefit families who are planning across three or more generations.
- Privacy. A family office can be a tool for protecting the family’s privacy about its wealth and activities.
- Legacy. What is the family’s desired legacy across the next 50 to 100 years? Is there a desire to build and maintain family unity across generations, held together by common values, history and perhaps a business or other holdings? Other families want to split the wealth at each generation, giving each person freedom and flexibility to go their own way.
- Control. Families often form a family office to give themselves greater control over investments, holdings and staff compared to using outsourced investment firms.
- Cost. Hiring staff, with facilities and equipment, can be expensive. Frequently, one can outsource services or use a multi-family office for a lower cost. When the importance of the other factors listed here out-weigh concerns about cost, then a family office is feasible.
- Wealth level. The typical question is, “at what level of wealth should I start a family office?” Are we discussing overall wealth, including the business, or just marketable wealth? The right answer, of starting a family office or not, depends on the above factors just as much as wealth. However, since we are pressed for an answer, here is a rough guideline:
Advice and assistance from external parties can be beneficial for families who are unsure of whether to establish a family office. Such observers may be able to pinpoint the family’s challenges, guiding them to the best decision for their family.
Why should I allow an outsider to review my family office? This is a key question we frequently encounter. One of the primary purposes of your family office is to maintain the privacy of the family. If you allow someone to spend time in your office, understanding the services, processes and procedures, then you are giving up elements of that privacy. Why would you do that? What could the family office gain? A better question might be, “what do you have to gain?” Could there be risks or gaps that you haven’t thought about? Are there holes in your control processes? Could you better serve the family by bringing some services in-house, or perhaps by outsourcing something you currently do in-house? What additional services might you consider providing for the family? Are there ways to deliver your services more efficiently or effectively, perhaps allowing your team to expand their offering? Do your reports to the family provide them the information they want and need? Are you effectively using technology? And, not to step too hard on your toes, but when you changed your bill pay and approval processes during the pandemic, did you look at your controls to ensure they are still relevant and effective? If fraud were to occur, where is it most likely to happen? What is a family office diagnostic? We have worked with a wide variety of family offices over nearly 20 years, and are often challenged to come up with creative ways to add controls (e.g., how do you segregate accounting duties in a one-person office?) or enhance an offering. A family office diagnostic shows how your office compares to other family offices, gives you a quantitative grade, and most importantly, provides a series of recommendations for how to improve the office – risk management, effectiveness and efficiency. Such a diagnostic can be a great prelude to creating strategic plans , as you prepare to service the family’s next generation or consider technology upgrades. As for the privacy issue that we opened with, we will zealously guard the family’s privacy; our continued business depends on our discretion. Please reach out and let’s discuss a family office diagnostic.
Over the years, I've really enjoyed working with the various people at Family Business Magazine, and am honored to have another article published in the current edition. I've had many questions over the last few years about how family businesses should make distributions to owners, and I finally wrote my thoughts on the topic. Being thoughtful on this topic, involving the various family owners in documenting philosophy and approach, can go a long way toward building family harmony. I hope you enjoy this article. Please reach out about creating a vision and strategic plan to support your legacy.
One of our family business clients recently asked for a benchmark or assistance in setting an amount for charitable giving from the business. What a great question! The challenge is that family businesses have such different goals, values and approaches; it is difficult to compare them to each other. Most family businesses are at least doing nominal charitable giving, such as sponsoring youth sports and local schools or perhaps in-kind donations of whatever product or service they provide. Many family businesses do this without tracking them or even much thought. When it comes to larger donations, businesses have to think about why they are making them. Some businesses make donations as public relations, perhaps instead of advertising and marketing. These businesses may have larger donation budgets than others, as it combines marketing with charitable desires. Some businesses make very few donations, explaining that they distribute money to owners and encourage them to donate personally. A few family businesses we know have used the Biblical-tithe as a rule, giving a tenth of their net income, either donating in-year or perhaps setting up a foundation or donor-advised fund. Some businesses set a fixed amount annually, based perhaps on what they did in the past or a number that “feels” right. Other businesses choose to make donations in particularly good years, or perhaps when they sell a line of business or a particular property. One conversation we’ve held many times is about how important it is to ensure that donations from the business match the family’s shared values while ensuring they support (or at least do not detract from) the business’ goals. In other words, if a donation could lead to bad social media or alienate groups of customers, or if perhaps the recipient organization only matches the values of a subset of owners, then the business should not make the donation. Focus on where the family and its values are in alignment, and ignore the areas where they disagree. None of this musing answers our client’s question about how much they should budget for charity each year. We would love to hear from you on benchmarking charitable giving – how has your family business set amounts for such donations? Please reach out about creating a vision and strategic plan to support your legacy.
In working with families, family businesses and family offices on their vision and strategic plans, we’ve long discussed how the vision and values should identify where to focus your efforts and attention. Many times, we’ve looked at business opportunities and evaluated whether they aligned with the family’s values, as well as their vision. We’ve targeted investments, new businesses, philanthropic initiatives, succession plans, training programs, and much more based on their desired future-legacy. This has been a clear benefit of knowing who you are, where you want to go, and what is important to you. You can choose to change your vision, but don’t operate outside of it. As I created the vision and values for Big Canyon Advisors, I was reminded of another benefit to having a clear vision and purpose: providing boundaries about what not to do. I am focused on inspiring families to achieve their legacy for the next 100 years; spending time on activities that don’t support that vision is a distraction, limiting my success. Recently, several people have approached us about referral opportunities with good, solid companies. However, while such arrangements could be profitable for the business, since they are not within the vision (and are potential conflicts of interest), we have declined these opportunities. Our vision statement has helped us understand not just where we are going, but also where we should not go in order to stay on track. Having a clear vision and strategy for the family and business keeps us moving toward our goals, while also providing boundaries to help us say “no” to things that could distract or waylay us on the path toward success. This is just as true of the families, businesses and family offices with which we are working. Please reach out about creating a vision and strategic plan to support your legacy.
Welcome to Big Canyon Advisors! After more than 30 years of working for large companies, and nearly 20 years focused on family businesses and family offices, I took the leap to start my own consulting firm. I have been inspired by the entrepreneurial spirit of many of the clients I’ve advised over the years. We will use this blog site to share insights into some of the common challenges we find across our clients, and hope to hear back from you, with your own insights and experiences. Our intent is to have a fresh post at least monthly, so please check back. Thank you for visiting. Charlie
