Despite the fact that family offices have been existed for a really long time, they have recently been discovered and gained importance. While it is possible to see the family offices even in Japan dynasties, they are still unknown to many people in today's world. These offices are not only structurally very comprehensive including many areas such as investment, donation, budget, insurance, taxation etc. but also they provide services in these areas. Family offices may be categorized in two classes:

-Single Family Office: These offices are for single persons and families. Single family offices are generally preferred in cases where the wealth is minimum $100 Million or more. Being an executive director of a single family office, John Grzymala summarizes these offices as; these offices are entities or persons who provide support and manage the process for the family members in their daily tasks they have to deal with, such as investment, insurance, legal affairs and tax treatments.

-Multi Family Office: These offices serve for at least two persons or families. Multi-family offices can provide services for 2 to 500 families.

If we are to compare single and multi family offices; the most basic distinction is that single family offices focus on the needs of one single family whereas multi-family offices provide services for at least two families. What is meant here is not that multi-family offices provide a worse service to the families. But since single family office focuses only on one family, and the other has to provide services for multi-families, the attention is divided more. On the other hand, one of the advantages of multi-family offices is the experience gained through serving many families. It is very likely that these offices will be more experienced on an instant case as a result of dealing with many different situations. Single family offices ensure more protection of privacy for highly visible and ultra-wealthy families. Therefore, single family office will be a better option for families requiring high-degree privacy.

These offices fundamentally provide the same service; indeed their purposes are parallel. However, in practice each family office is unique. That's why they all have different budgets and needs, and should be evaluated from this point of view. Louis Hanna who is the executive of a single family office states that following should be considered while deciding between the family office types; this decision vary from case to case. At this point, in addition to the amount of wealth, deciding on the type of family office in the light of answers to some questions such as 'What does the family expect from family office?' or 'What is their purpose?' would yield healthier results. Angelo Robles, CEO of the Family Office Association also takes the same approach on this matter. According to Robles, when starting a single family office one should focus on what the family wants, how it wants to manage its assets and its purposes, rather than focusing only on the stipulated minimum wealth limitations.

Since the aim of family offices is to manage the assets of a family, particularly one question may cross our minds: Why should we prefer family offices instead of all those consulting firms or asset management firms operating in the market? Answer is quite simple indeed, if we want our assets to be managed by experts who are masters of their field, family office will be the best decision. Managing an asset and receiving profitable returns from this are multi-directional tasks. For instance, controlling a family's properties is not sufficient anymore; there are many more points to be considered such as how these assets will be invested, how they will be insured or their taxation control. All these points require leaving the traditional methods and acting within the scope of professional formations that will provide this sophisticated service. Since the above-mentioned companies (asset management, finance, consulting) are not specialized in the areas requiring special expertise such as tax, insurance, investment subject to service, rendered services by these companies will not be equally healthy. Family offices on the other hand, render this service to the families via their specialized consultants.

Another distinction between the family office and asset management companies /consultancies is that management of family assets can only yield healthy outcomes only if performed by means of special services. As stated also by many experienced family office directors, providing a really good asset management, the working hours spent and efforts made for gaining profit are all of great importance. Here, what is expected from a family office is to read the family like a book and foresee their needs even if they are not aware of it; in other words, briefly the family office has to invest in this task greatly. It is in this context that family offices diverge from the asset management companies or finance experts. For, it is not possible to anticipate special services from these companies since, due to their functioning they cannot focus only on the family and its needs, which is the essential key point of successful asset management.

Another importance of the presence of family offices is role played by wealthy families in the economy. Wealthy families constitute a fundamental link in the chain of economy and have importance in the operation of system. That is why; it will become more important to protect the concerned asset by means of family offices.

We may categorize two types of people who prefer family offices:

  • Those who acquire their assets by inheritance, and
  • Those that create their assets afterwards.

When we analyse people who prefer family offices, it is seen that those who take their company public or sell their business are predominant in percentage. And as a result of this, since they gain money they had not managed before (or used to manage), family offices step in at this point and provide support on how this asset should be managed/protected.

Michael Jordan, Bill Gates, Oprah Winfrey may be given as examples who use family offices.

Services Rendered by Family Offices:

  • Portfolio and investment management (This service is the core aim of family office)
  • Tax consulting
  • Reporting and archiving
  • Charity/donation activities
  • Intergenerational Asset Management
  • Assisting in Regulatory Compliance
  • Budgeting, Life Management (Like Club memberships; as the competition has increased between family offices, these kind of supplementary services are provided in addition to routine ones)
  • Asset Management (Support of management or purchase of real estate, car, yacht, jets owned by family office)
  • Education (educating young family members regarding asset management and finance)

It is possible to divide the family office industry into three categories:

  • Outsourcing Model
  • Expert Model (in this model, family office is run by experts of the field in question)
  • Corporate Model

The team who will work at the family office must be chosen very carefully. These persons must be professionals who are expert in their fields. In this team, the most important role is played by the person dealing with portfolios and investments. Besides, in order to run a healthy family office this team needs people working in many other fields such as supervision, project management, budgeting and so on.

Management of family offices is also an important matter in itself. Each year, many clients applying to asset management companies or fund companies are exposed to wilful misconducts and their investments fall into wrong hands. This is where the management of family office becomes of vital importance; a good management plays a sort of internal observer role. An executive positioned within the office as an internal observer will not only provide transparency but also assist in realizing the transactions more healthily and more in accordance with the requests of the families. All these reasons are of great importance despite the management side of family offices is son much emphasized.

Another important point for a family office is the service providers. What is meant by service providers is the auditors, accountants, attorneys, risk experts and insurers who will work for the office. There is a vast organization lying behind all these service providers. Main advantage of working with service providers is that instant solutions can be found in case of troubles, and firmer steps can be taken when it comes to the needs of the family. With this sort of team to be established in the office, sudden problems will be solved before long, and family needs will be understood better.

[*] This paper is prepared in the light of information used in Richard C. Wilson's "The Family Office Book".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.