06 December 2018

Keeping it in the family: The vital role played by family offices

The Lancashire proverb "clogs to clogs in three generations" is, it seems, a universal one – "shirtsleeves to shirtsleeves" in America, "rice paddies to rice paddies" in Japan, "wealth never survives three generations" in China and in Scotland "The father buys, the son builds, the grandchild sells and his son begs".

The conundrum for today's wealthy families is, then, how to avoid this happening to them? In an ever-changing and increasingly volatile world with a constantly evolving regulatory landscape, there are increasing challenges for managing and preserving family wealth. 

One commonly used solution is the family office. Family offices have been around for decades, if not centuries. The New York Times reports that the Rockefellers first pioneered family offices in the late 19th century – the family office that they founded is still in existence, managing billions of dollars in assets for a range of families, individuals and global institutions.  Family offices gained in popularity in the 1980s, and since 2005, as the number of ultra-high net worth families has grown, the number of family offices has grown proportionately. 

There are essentially two species of family office, each of which sub-divides into a number of sub-species – the single family office and the multi-family office.

The single family office is a private structure which manages the wealth of a single, usually very wealthy, family – most family office insiders suggest that a family will need at least US$100 million to make it worth their while having their own family office, as the costs are typically around 1% of the overall wealth. That aside, however, all single family offices are different – some will provide little more than a personal assistant, looking after the domestic and travel arrangements of the family members, some may be responsible only for investment and wealth management, whereas others will provide a concierge-type service as well, property management and accounting or legal services, tax reporting, family governance, philanthropic activities, and succession and wealth transition planning.

Some single family offices will employ their own staff including legal and investment advisers, accountants and reputation managers. Others will employ a small staff of key employees and out-source specialist tasks to third party advisors. 

Single family offices in Jersey can be stand-alone organisations with an independent footprint on the island – perhaps more commonly, however, they are housed within and administered by a regulated trust company business. Jersey is particularly well-placed in this regard with a significant number of trust company businesses offering this service, providing office space, trustees, directors, company secretarial support, administration and accounting and shareholder and nominee services.

Single family offices housed within a regulated service provider can generally operate in Jersey without being required to register under the Financial Services (Jersey) Law 1998 – because the service provider is regulated but also because the single family office (by definition) provides services to a single family and does not solicit business from the public. 

They will often involve the establishment of a private trust company or a Jersey foundation, with the members of the board or the council being made up of family members and their trusted family advisers, and officers of the trust company business.

A family who is considering a single family office may wish to consider joining with other like-minded families to establish a multi-family office instead – costs are shared and for that reason it will be more cost-effective to bring the required specialists in-house. Alternatively – as apparently happened with the Rockefeller family office – a single family office can evolve into a multi-family office over time.

Multi-family offices are a very common offering of Jersey trust company businesses. The business may provide a dedicated team servicing the needs of an individual family, or the provision of family office services may simply mean that the business will provide some of the services that a single family office might otherwise provide, such as trust administration, philanthropic advice, and an investment arm – often outsourced, with a mandate varying from fully discretionary to execution-only.

What benefits does the family office provide, which can help a wealthy family to avoid the classic 'clogs to clogs' scenario?

Modern life is complicated. Typically, the wealthier a family becomes, the more complicated their lives get. Within such complexity, it is easy for the wealthy family to lose focus on the objectives and ideals that first drove its financial success. With the right professionals on board, the family office is the administrative arm of the family as a whole. Their main roles tend to be:

Constitutional guardians

Families who have enough wealth to have a family office should also have a written constitution or charter which sets out the family's governing philosophy and its values about wealth creation, management and perhaps most importantly, distribution. To paraphrase Warren Buffet, family members should have enough to be able to do anything – but not enough to be able to do nothing. The family office can help to ensure that those values are observed and encouraged. 


A common cause of wealth loss is a lack of planning to help with the transition of wealth across the generations. A family office involving the use of a foundation or a private trust company to act as the trustee of family trusts, can enable those individual family members who wish to be involved in the management of the family's wealth (if not the day to day administration) to be members of the foundation's council, or on the board of the PTC. This will enable succession to pass seamlessly to the younger generation. Furthermore, many wealthy families are very involved in philanthropic activities – within a family office, this provides the ideal training ground for the younger generation to become involved in the use of the family's wealth for good. Or the family office can operate a family 'bank' to support and encourage entrepreneurial ideas.

Relationship counsellors   

Disputes are expensive and a loss of trust between family members can be difficult to reverse. It is often the lack of information which breeds mistrust and the family office can work hard on the family's behalf to encourage constructive dialogue and consensus. The family office can arrange forums to ensure family members are kept informed about asset values, investment decisions and key future initiatives with the broader objective of encouraging family harmony. There can often be tension between successful parents who have created the family's wealth wanting what they consider to be the best for their children, and the younger generation's need to live by their own ideals, rather than being constrained to abide by the values of their parents' generation – the family office can bring the two sides together.

Human shields

An experienced family office can do all of the family's 'heavy-lifting' in relation to legal, accounting and regulatory matters, keeping the relevant members of the family informed as required. This allows the family peace of mind to concentrate on other things, be it running the family business, formulating the next investment strategy, or just living life unimpeded by the huge administrative burden which often accompanies significant wealth.

A family office is a useful weapon in the armoury of any wealthy family looking to preserve and enhance its wealth across the generations, and avoid the classic 'clogs to clogs' scenario. Jersey is ideally placed as a location for such families to establish their family office, whether single or multi-family, as the island has a long history of running such structures, an experienced, specialist workforce, robust regulation and a highly respected court system.


An original version of this article was first published by eprivateclient, December 2018.

© Carey Olsen 2018.

Find a Lawyer