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09 May 2023 09h35
Source: Banco Carregosa

Family offices: what are they and how do they work?

Family offices: what are they and how do they work?



Managing wealth effectively is challenging. Family offices can be the answer. Find out what they are and how they work. 


Family offices exist for a single purpose: to preserve wealth for the next generation. The numbers speak for themselves: almost 70% of families lose their wealth by the second generation, and a staggering 90% by the third generation. The key to wealth preservation is financial literacy – something that not all parents in a position to pass on to their heirs.


Effective wealth management is a huge challenge, with ever-changing laws, family dynamics and economic conditions. To manage all these variables, Family offices provide professional management to preserve and grow your wealth over decades and across generations. Find out what they are and how they work.


What are Family offices?


Family offices are a structure that centralises various aspects of wealth management. The main purpose of this service is to manage, protect and grow family wealth in a consistent and secure manner and to pass it on to future generations. 


Managing a large family fortune is a huge challenge. It typically involves managing a wide variety of assets, such as real estate, stocks, bonds, funds, businesses and other investments. It also involves ensuring that the wealth is transferred efficiently and appropriately from one generation to the next, which requires a strict mastery of complex legal structures and other legal mechanisms. On the other hand, changes in the economic environment and the adequacy of the family portfolio also require a watchful eye and the ability to prevent risks and adjust investment strategies.


These are just some of the complications faced by high net worth families. This is why it is necessary to rely on a team of experts to manage all the variables correctly and effectively. 



What do family offices include?


The services offered by family offices vary according to the needs and objectives of each family, but generally include:


• Investment management – helping families manage their financial and wealth assets, including investing in equities, bonds, real estate or alternatives.


• Wealth planning – helping to develop plans and strategies to manage the transition of wealth between generations, including the structuring of trusts, the preparation of wills and the drafting of prenuptial agreements.


• Liquidity management – helping to manage the family's liquidity, including management of available capital, debt management and financial commitments. 


• Risk management – help families to manage their financial and asset risks correctly, using diversification strategies appropriate to their risk profile. 


• Trust services – can act as trustees and assist in the administration of trusts, foundations and other legal entities, including companies.


• Property management services – can assist with property management, including acquisitions/disposals, development and property management.


• Philanthropy services – can help develop philanthropic strategies, including grant management and the establishment of foundations.



What are the advantages of family offices?


1. Personalised management – offering personalised financial management tailored to the specific needs and objectives of each family, taking into account their values, objectives, risks and liquidity needs.


2. Increased privacy and confidentiality


They provide a high level of privacy and confidentiality for high net worth families, ensuring that their financial and asset information remains confidential.


3. Access to experts


They provide access to a range of financial experts, including investment managers, tax advisers, lawyers and other professionals who offer specialist advice in many different areas. 


4. Multi-generational wealth protection


They play a vital role in the preservation and continuity of family wealth, helping with succession management and long-term planning. These teams counteract the statistics which show a sharp decline in wealth from the third generation onwards.


Having the right experience and understanding all the financial issues involves is crucial to ensuring an efficient succession. 


5. Risk prevention and management


They can help high net worth families to better manage and control their financial risks by developing tailored investment strategies and diversifying assets across asset classes.


Where do family offices originate from?


The origin of family offices can be traced back to the European aristocracy of the 18th and 19th centuries, when they began to accumulate large estates that required more professional management. At that time, family offices were generally run by the family members themselves or by trusted financial advisors.


Over time, the concept of family office has evolved and expanded beyond aristocratic families to include families of successful entrepreneurs and investors around the world. According to a Deloitte study, the number of family offices in the US and Europe increased significantly in the 1970s and 1980s, driven by the growth of private equity.


Today, family offices are widely used around the world by wealthy families seeking professional, personalised management of their financial and wealth assets. 


Banco Carregosa 


Advising and guiding high net worth families requires a well-coordinated and collaborative effort by a team of professionals from different areas from a global wealth management perspective.


With Banco Carregosa, you can benefit from personalised and experienced assistance, designed to preserve, capitalise and pass on your assets safely and effectively. Contact us