Family Office

Family Office: Discreet Wealth Manager and Strategic Investor

Family offices have evolved in recent years into significant players in wealth management and transactional activities. As professional service providers for affluent families, they not only manage and allocate substantial private wealth but increasingly act as direct investors in companies and projects.

Functions and Service Spectrum of Family Offices

At their core, family offices aim to preserve and grow their client families’ wealth over the long term. They pursue a holistic, multi-generational approach that goes far beyond pure investment advice:

• Wealth Management: Family offices develop tailored investment strategies aligned with the family’s individual goals, values, and risk preferences. They manage asset allocation across various asset classes, ranging from traditional securities portfolios to real estate and equity stakes in companies, as well as alternative investments such as art, classic cars, or commodities.

• Strategic Planning: Together with the family, the family office defines long-term objectives and guardrails for wealth preservation and growth. This also includes issues such as succession planning, family constitutions, and governance structures within the family.

• Reporting and Controlling: The family office ensures transparency regarding the wealth situation and investment performance. Through regular reporting and controlling, the family maintains oversight and can respond promptly to changes.

• Tax and Legal Advisory: Wealthy families often face complex tax and legal challenges, for example in business succession, asset transfers, or foundation law. Family offices provide expert advice and coordinate with external specialists in these areas.

• Administration and Concierge Services: Many family offices also handle administrative tasks for the family, from accounting and real estate management to organizing travel or managing art collections and philanthropic activities.

The specific range of services varies from one family office to another. While some act as generalists covering the entire spectrum, others specialize in particular areas such as real estate, venture capital, or impact investing.

Types and Organizational Forms of Family Offices

Family offices can be broadly categorized into two types:

• Single Family Offices (SFO): These entities exclusively manage the wealth of a single family. They often originate from the sale of a family business and are closely tailored to the needs and values of that family. SFOs typically have their own staff and independent infrastructure.

• Multi Family Offices (MFO): MFOs pool the wealth of multiple families, achieving economies of scale in personnel, systems, and expertise. They often evolved from wealth advisory firms or bank divisions and offer their services to multiple clients, with each family receiving individualized attention.

While SFOs offer maximum flexibility and discretion, MFOs benefit from cost advantages and a broader knowledge base. The line between SFOs and MFOs is fluid, as many original SFOs now also extend their expertise to external families.

Regardless of the specific type, a governance structure with clear rules and responsibilities is essential for family offices. This applies to internal decision-making processes as well as interfaces with the families served and external service providers. Only in this way can potential conflicts of interest be avoided and efficient, trust-based collaboration ensured.

Family Offices as Investors

In addition to their role as wealth managers, family offices are increasingly appearing as direct investors, especially in corporate transactions:

• Direct Equity Investments: Many family offices invest parts of their wealth directly in companies, whether through majority or minority stakes. They often pursue a long-term, entrepreneurial approach and contribute not only capital but also expertise and networks.

• Co-Investments: Family offices also participate in transactions alongside private equity or venture capital funds to benefit from their deal flow and industry knowledge. They can act more flexibly than the funds themselves, for example regarding holding periods or exit strategies.

• Club Deals: Larger transactions are often jointly undertaken by several family offices to diversify risks and leverage synergies. Such club deals require close coordination among participants but also offer the opportunity for attractive terms.

• Real Estate and Tangible Assets: Many family offices allocate a significant portion of their wealth to real estate, both directly and through funds and partnerships. Other tangible assets such as agricultural land, forestry, or infrastructure are also playing an increasing role.

• Impact and Sustainability: Family offices are increasingly aligning their investments with social and environmental criteria. Impact investing—targeted investments in companies and projects with positive societal impact—is becoming an integral part of many families’ wealth strategies.

As capital providers, family offices are particularly attractive to mid-sized companies: Unlike return-driven financial investors, they often have a long-term perspective and can handle more complex transactions or turnaround situations. Additionally, target companies benefit from the entrepreneurial expertise and networks of the underlying entrepreneurial families.

However, this also brings specific challenges to the transaction process: Family offices operate differently from traditional financial investors, with their own decision-making processes and investment criteria. Sensitivity and understanding of individual family dynamics are required here.

Trends and Perspectives

The importance of family offices for wealth management and transactional activities is expected to continue growing in the coming years:

• The ongoing generational transition in many entrepreneurial families demands professional solutions for succession and wealth management.

• The internationalization of wealth and increasing market complexity raise the need for tailored, holistic services.

• Low interest rates and volatile markets push family offices toward new, often illiquid asset classes such as private equity or venture capital.

• The growing importance of sustainability and impact is fundamentally changing the investment philosophy of many family offices.

To meet these challenges, family offices are increasingly focusing on specialization and cooperation. Industry networks, co-investment platforms, and the exchange of best practices are gaining importance. The digitization of processes and decision-making foundations is also advancing, for example through the use of AI in investment analysis or blockchain for secure transactions.

At the same time, competition is intensifying, both among family offices themselves and with other players such as banks, asset managers, or fintechs. Clear strategies, operational excellence, and the cultivation of trusting, long-term client relationships are becoming all the more crucial.

Overall, family offices today are much more than discreet managers of family wealth. As active investors, entrepreneurial sparring partners, and drivers of innovation and sustainability, they play a decisive role in shaping the economy of tomorrow. For entrepreneurs and investors seeking suitable partners for growth and transactions, there is no way around them.