In 2013, the number of family offices in Australia was 800.

By 2023, this number had ballooned to around 2000.[1]

A 150% rise over 10 years, the growth reflects the increasing number of high net worth individuals (HNWIs) and ultra-high net worth individuals (UHNWIs) in Australia.

Key definitions:

  • HNWIs are people with liquid assets of at least $1 million USD.
  • UHNWIs are people with liquid assets of at least $30 million USD.

While the growth rate of HNWIs and UHNWIs has been modest over recent years, this won’t remain so for long. Australia’s wealthy population is set to accelerate over the next five years. According to forecasting from Frank Knight, by 2027:

  • HNWI populations are expected to rise by 71.1%
  • UHNWI populations are expected to rise by 40.9%[2]

As our wealthy population grows, expect to see more wealthy multi-generational families setting up a family office

Understanding family office structures

A family office is set up by a wealthy individual to manage their family’s wealth. Major life events like marriage, divorce, death, and selling a business often lead to creating one. In the past, family offices managed private wealth from a founder’s success. Now, they help multi-generational families grow businesses and support each member’s success.

Family offices offer a wide range of services. Some common family office services include:

  • Investment management: Creating and overseeing plans to grow and protect the family's private wealth.
  • Tax planning: Developing strategies to reduce taxes and follow tax laws.
  • Estate planning: Planning how to pass on wealth, including wills, trusts, and estate management.
  • Philanthropy: Managing charitable donations and helping the family meet their giving goals.
  • Financial reporting and accounting: Providing detailed financial reports and handling accounting needs.
  • Legal services: Handling legal matters, including family rules, contracts, and compliance.
  • Succession planning: Ensuring a smooth transfer of wealth and leadership to the next generation, especially for family businesses.
  • Risk management: Identifying and managing financial and personal risks, including insurance.
  • Lifestyle management: Handling personal services like travel, household staff, and property management.
  • Education and training: Teaching family members about managing money and preparing the next generation.
  • Health and wellness: Coordinating healthcare services, wellness programs, and medical needs.
  • Personal security: Ensuring the family's security and privacy, including physical and cyber security.

Family offices are generally set up by high net worth families and ultra-high net worth families to manage and preserve their wealth over generations. They cater to those with a substantial net worth who seek tailored, highly personalised services that address all their financial and lifestyle needs.

Types of Family Offices

Single-family offices (traditional family offices)

Single-family offices (SFOs) serve only one family. They handle wealth management, estate planning, household staff, and travel. SFOs offer great privacy and control but are expensive to run.

Multi-family offices (MFOs)

Multi-family offices (MFOs) serve several families. They share resources and save costs. MFOs offer similar services to SFOs but at a lower cost because families share expenses. This is good for families who want high-level service without high costs.

Outsourced family offices

Outsourced family offices use outside providers for services. This gives families access to expert help as needed, saving money and offering flexibility. This option is good for families who don’t want the complexity of running an SFO or MFO.

Implementing investment strategies

Family offices create custom investment plans that match the family's long-term goals and risk tolerance. This means diversifying investments in various assets:

  • Stocks: Investing in public companies for growth and income.
  • Bonds: Providing steady income and reducing risk.
  • Real estate: Investing in properties for income and appreciation.
  • Alternative investments: Including hedge funds and private equity for higher returns.

By tailoring these plans to the family's needs, family offices can balance risk and return.

Investment strategies are about preserving wealth and also finding growth opportunities. This includes:

  • Investing directly in startups: Supporting new businesses with high growth potential.
  • Family businesses: Ensuring continued success and growth.
  • Venture capital: Funding innovative projects and companies.
  • Impact investing: Combining financial returns with positive social or environmental impact.

Family offices often have a team of experts. These include financial analysts, portfolio managers, and investment advisors. They monitor market trends and adjust strategies as needed. This proactive approach ensures the family's wealth is always optimised and protected against market changes.

Navigating tax and legal considerations

Managing taxes and legal matters is crucial for family offices. Tax laws can be complex, and the stakes are high. Good tax planning helps reduce liabilities and ensures compliance with laws. Family offices work with tax experts to create strategies that improve tax efficiency. This includes using tax-deferred investments, giving to charity, and planning estates.

Legal matters in family offices go beyond tax planning. Estate planning is key to passing wealth smoothly to future generations. This includes creating wills, trusts, and other legal tools to protect assets and fulfil the family's wishes. Proper estate planning prevents disputes and clarifies how assets will be shared.

Family offices also handle legal issues related to family governance. They set up clear rules and structures for making decisions, resolving conflicts, and involving family members in managing wealth. These rules help keep harmony and ensure everyone shares the same vision and goals.

In addition, family offices manage compliance with local and international laws. They ensure that all legal requirements are met, avoiding potential legal problems. This comprehensive approach helps maintain the family's legacy and financial health.

Ensuring long-term succession planning

Succession planning is crucial for keeping family wealth intact across generations. Family offices create detailed plans for passing on leadership and ownership. They make sure the next generation is ready to take over by finding and training future leaders. This includes giving them the education and experience they need and involving them in decisions early.

Good succession planning also means making a clear plan for business continuity, especially for families with big business interests. Family offices help set up clear succession policies, family councils, and family constitutions. These documents outline the family's values, vision, and rules for succession. This organised approach helps prevent conflicts and ensures a smooth handover of responsibilities.

Family offices also educate the next generation about managing wealth, financial literacy, and the family's legacy. This training is vital for preparing future leaders to maintain the family's values and make smart decisions for the long term.

Enhancing financial oversight

Good financial oversight is crucial for family offices. This includes checking financial reports, tracking performance, and managing risks. These steps help handle the family's money wisely and clearly. By showing a complete view of the family's finances, family offices help make smart long-term decisions.

Family offices use advanced systems to track investments, spending, and overall financial health. These systems create detailed reports, helping families understand their financial position and make informed decisions. Regular audits ensure everything is accurate and follows the rules.

Risk management is also important. Family offices identify possible risks like market changes and economic downturns. They create plans to reduce these risks, like diversifying investments, keeping enough cash, and having backup plans to protect the family's wealth.

Family offices also handle all financial activities. They work closely with advisors like accountants, lawyers, and investment managers. This teamwork ensures all parts of the family's finances are aligned and managed well.

In summary

A family office manages the wealth of wealthy and ultra wealthy families. They offer a range of services like investment management, tax planning, and estate planning. They also handle legal issues, risk management, and family governance. Family offices make sure the family's wealth grows and stays safe for future generations. They educate the next generation to take over and make smart decisions.

For families with these setups, expert guidance is essential. Ulton offers financial planning and wealth management services tailored to family offices' unique needs. Our advisors help wealthy families manage their wealth, ensuring it grows and serves future generations.

 

Related Articles

Wealth Superannuation
17 min read

Inside or Outside Super? Strategies for High Net Worth Investors

In life, change is the constant. Our personal circumstances change, unexpected surprises crop up and our priorities shif...

Wealth Wealth Management
14 min read

Life events and financial planning: Adapting strategies to changing circumstances

Financial planning is innately future-focused. It’s in the name—planning—which means to make arrangements in advance.

Wealth
13 min read

The Ultimate Guide to Private Wealth Management in Brisbane

In recent years, Brisbane’s growth story has captured the nation’s attention. Since March 2020, the value of residential...