Family Office
A family office is a private organisation that manages the wealth and affairs of one very wealthy family, or of several. It handles investments, tax, estate planning, philanthropy and administration, and is controlled by the family it serves.
Also called: family offices · single-family office · multi-family office · SFO · MFO
A single-family office works for one family and is typically justified only above several hundred million dollars of assets. A multi-family office serves a number of families and spreads the cost. Either may employ its own investment staff or allocate to outside managers.
Because the money is the family's own, a family office has no outside investors to answer to each quarter. It can hold illiquid assets for decades, which is why family offices are prominent buyers of private companies, real estate, farmland and timberland. In the United States a single-family office that meets the conditions of the SEC's family office rule is excluded from registration as an investment adviser.
For banks and payment firms a family office is a demanding customer to onboard. The structures usually involve layers of holding companies, trusts and foundations in several jurisdictions. A provider must identify the ultimate beneficial owners, establish source of wealth as well as source of funds, and check for politically exposed persons among family members.
In practice
A family office that advises or manages money for people outside the family may need a licence. The exemption depends on who the clients are, not on what the firm calls itself.
See also
- TimberlandTimberland is forest land owned as an investment. Its return comes from the biological growth of the trees, movements in timber prices and the value of the land, and increasingly from carbon credits and conservation payments.
- Source of WealthSource of wealth is the evidenced account of how a customer accumulated their overall assets — the business they built, the inheritance, the years of earnings — as distinct from the origin of the particular money moving through one transaction.
- Ultimate Beneficial OwnerThe ultimate beneficial owner is the natural person who ultimately owns or controls a customer, identified by tracing ownership up through holding companies, trusts and nominees. Twenty-five percent is the common anchor in the United States, the United Kingdom and the European Union, but each states it differently and control is tested alongside it.
- Politically Exposed PersonA politically exposed person is someone entrusted with a prominent public function, together with their close family and known associates, who is treated as higher risk because such positions create opportunity for bribery and corruption. The label is a risk classification, not an accusation.
- Enhanced Due DiligenceEnhanced due diligence, or EDD, is the additional scrutiny applied where money laundering risk is higher. In the UK and the EU it is mandatory in prescribed cases — politically exposed persons, high-risk countries, correspondent banking — as well as wherever a firm’s own risk assessment says the baseline is not enough.