Are family offices only for the wealthy?

Experts

A traditional family office provides value-adding services and advice which cater to a family’s own unique needs.
multi generational family walking at the beach
Image source: Getty Images

A Family Office, or a Private Office as it’s sometimes referred to, is a family-owned and controlled structure that manages private wealth and other relevant family matters. It can take many forms, however, at its core, a traditional family office provides value-adding services and advice which cater to a family’s own unique needs. But these are just for the wealthy, right?

The Vanderbilts and the Rothschilds

In today’s society, conversations surrounding these two families will, more often than not, include their financial downfall. Google the names, and you’ll be met with pages on how they rose and fell from wealth, with explorations of such conspiracy theories as ‘the hidden families that run the world’.

However, despite their losses, these families did something exceptional. They built enormous wealth from virtual poverty. As the story goes, Cornelius Vanderbilt founded his empire from a $100 loan from his mother, and Mayer Rothschild, from money lending and trading.

But, it isn’t the beginnings of these families that interest us. Fast forward a generation or two, and it is the structures these families used to, not only, continue to grow their wealth, but more importantly, to protect it, that hold our attention. The families’ ability to mentor the younger generations into the family business effectively built a fortress around their family fortune, introducing the structure that is, today, recognised as the traditional family office.

The family office origins

From the time that The Rothschilds came into fortune, they all became a part of the family business, spreading themselves from Frankfurt, outward towards the corners of Europe. As one of the largest media moguls, the family as an entity worked within the family business, sharing the common goal of seeking investment for financial growth. Today, this is represented as a ‘Family Office’. Traditionally, the amount required to start a Family Office ranges from $50 million to $100 million, plus, today, it is more about the strategies put in place to grow and protect your family’s wealth than the amount at hand.

The benefits of a family office

 Family Office structures encourage a mentality, family-wide, to effectively and productively utilise and grow money. When one of the Rothschilds’ wanted to generate an income through a business idea, they wouldn’t, simply, be handed money from the family to go forth and prosper. Instead, they were required to understand, develop and present a business plan and strategy in the interest of obtaining a loan from the family bank. That money would eventually be returned in the form of repayments, thus, teaching them the value of money.

Today, we see these structures in the form of self-managed super funds, where adult children and parents are all members of their family retirement funds. This larger pool of funds can allow for greater growth, create highly valuable discussions around investing and growing money together, and, with a combined effort, work towards an ultimate end goal, most commonly financial autonomy.

So, how is that relevant to the everyday family here in Australia? Well, if your family is anything like mine, their careers and interests span across a diverse array of sectors as opposed to one family business, each with their own views on how money should be run. But that doesn’t mean your combined wealth cannot be pooled.

Pooling not only financial resources, but knowledge, experience and time can be invaluable in the growth of your family’s wealth and infrastructure. From the protection of personal and family assets, the distribution of an even income across family members to maintain and mitigate tax liabilities, to the use of the family’s finances to aid in a business venture, there are an abundance of reasons a family trust, or family office, is of benefit.

So, why do more families not use this structure?

The modern day family office

Though it can be an expensive exercise, there is a definite misconception that a family trust is only for the wealthy. While many tax benefits have been reduced, there remains the ability to distribute income to mitigate wearing the full tax bill at a large marginal rate, and this can also be stretched across several financial years.

Why consider a family trust?
  • Distribution of wealth
  • Asset protection
  • Tax strategies
  • Protection against a tumultuous financial event

Today, the Rothschilds family worth is estimated to be approximately US$500 billion, and the Vanderbilt’s beneficiary estimated at around US$50 million, the fact is that the wealth still remains. In one facet or another, the family structure afforded the future generations an opportunity to continue to grow an empire in one form or another.

There is no minimum amount required to establish a family office, just a shared common goal among family members and understanding of the set up costs. It can help future generations to learn proper financial strategies and protect what wealth you have built.


Brendan Gow, is a corporate authorised representative (no. 1295850) of Samuel Allgate Investments Pty Ltd (SAI) AFSL420170 (the “Aussie Advisor”).

This article has been prepared without taking into consideration any investor’s financial situations, objectives or needs. Accordingly, before acting on the advice in this article, you should consider its appropriateness to your financial situation, objectives and needs. Every reasonable effort has been made to ensure the information provided is correct, but we cannot make any representation nor warranty as to the accuracy, completeness or currency of that information. To the extent permissible by law, no responsibility for any errors or misstatements is taken, negligent or otherwise. SAI or its authorised representatives may also receive fees or brokerage from dealing in financial products, see the Financial Services Guide for information about the services offered available at http://www.ywm.com.au/.