What is a
family office?
A family office organises a family’s entire wealth. What lies behind it, which tasks it takes on and how it differs from portfolio management.
A family office is a unit that organises a family’s wealth as a whole: accounts, securities accounts, property, business holdings and companies. It keeps track of the whole picture, coordinates banks and advisers, takes care of payments, receipts and reports and supports matters such as succession and emergency planning. The difference from traditional portfolio management: a portfolio manager looks after invested securities; a family office looks after the entire wealth. Many family offices also invest the assets themselves, while others engage banks and portfolio managers to do so.
Meaning of the term
The literal German translation of family office is Familienbüro. In Germany, the term is not defined by law, as BaFin, Germany’s financial supervisory authority, also points out. BaFin understands it to mean companies that look after large private fortunes independently of banks. No particular legal form is attached to it: a family office can be a separate company with employed specialists, a service provider looking after several families or a small unit within the family business.
What tasks does a family office take on?
Which services a family office provides depends on the family and on the office itself. Typical ones are:
- Overview and reporting: bringing together the entire wealth across all banks, companies and asset classes and reporting on it regularly.
- Administration: keeping payments, receipts, contracts, insurance policies and deadlines under control.
- Property and holdings: monitoring rents, loans, capital calls and key figures, often together with property managers and fund companies.
- Investing: setting the investment strategy and investing the money itself or engaging banks and portfolio managers, comparing their results and keeping an eye on costs.
- Coordinating tax and legal matters: preparing documents for advisers, auditors and lawyers. The advice itself is provided by these professionals.
- Succession and emergency planning: preparing and documenting powers of attorney, advance directives and gifts together with a lawyer, notary and adviser, so that the family can find all documents in an emergency.
Some family offices also look after foundations or the preparation of the next generation. Much of this is administrative work that also arises with smaller fortunes, just on a smaller scale.
What forms and alternatives are there?
Single family office
A dedicated team works for one family only. This offers the most control but is expensive. According to an estimate by Deloitte, there are around 8,000 single family offices worldwide, about 2,000 of them in Europe (as of 2024).
Multi-family office
A service provider looks after several families. The costs are shared, but an external team takes over the processes and works with your data.
Family office software you run yourself
You or your assistant take care of the organisation, supported by software that brings together accounts, receipts and the entire structure. What such software should be able to do and what it costs is described in the guide Family office software: features and costs.
Which form pays off from what level of wealth is explained in the guide When is a family office worth it?
Family office or traditional portfolio management?
The two terms are often confused, but they mean different things. A portfolio manager invests money: within an agreed strategy, they decide themselves which shares, bonds or fund units to buy and sell for you. German law calls this financial portfolio management (Finanzportfolioverwaltung), and as a rule it requires authorisation from BaFin. A family office takes a broader approach: it keeps the entire wealth in view, including property, businesses and liquidity. Depending on the office, it handles the investing itself, or it engages banks and portfolio managers and monitors them.
| Topic | Portfolio management | Family office |
|---|---|---|
| Task | looking after assets invested in financial instruments | organising and monitoring the entire wealth |
| Asset types | financial instruments such as shares, bonds and fund units | all: accounts, securities accounts, property, investments, companies |
| Perspective | its own mandate | all banks, companies and advisers together |
| Relationship to each other | is engaged, for example by the family or its family office | invests itself or engages and monitors portfolio managers |
| Authorisation from BaFin | required as a rule | depends on the services |
According to BaFin’s guidance notice (as of July 2018), whether a family office itself needs authorisation from BaFin depends on its services. Bookkeeping, controlling or monitoring portfolio managers generally requires no authorisation from BaFin, whereas financial portfolio management or investment advice for others generally does. Exceptions apply, for example, to employees who look after their employer’s assets, to transactions within one’s own group of companies and to the immediate family circle. Other laws set their own limits, such as the German Tax Advisory Act (Steuerberatungsgesetz) for bookkeeping for third parties.
In short: portfolio management covers the securities portfolio; the family office covers the entire wealth. The two often work together.
Who needs what a family office does?
Whether a dedicated family office pays off depends mainly on the size of the wealth. Whether you need what it does, on the other hand, depends on the structure: anyone who owns several companies, properties, securities accounts and investments and works with several banks and advisers needs an orderly overview and clear processes, even if a dedicated team does not pay off. When a spreadsheet is no longer enough for this is shown in the guide Excel or family office software?
Where Finaure fits
Finaure provides the tools of a family office as software you operate yourself: consolidated overview, payment approvals, controlling, reports and emergency planning. Finaure is not a portfolio manager, does not invest money, does not broker financial products and does not give investment recommendations. Your bank, your portfolio manager and your advisers remain responsible for that. You can find all features under Features.
Sources
- Deloitte Private: Defining the Family Office Landscape 2024
- BaFin: Notes on whether family offices require authorisation under the German Banking Act (KWG) and the German Investment Code (KAGB) (guidance notice, as of July 2018) (in German)
- § 2 German Securities Institutions Act (WpIG): financial portfolio management (in German)
- § 3 German Securities Institutions Act (WpIG): exemptions (in German)
- § 15 German Securities Institutions Act (WpIG): authorisation (in German)
More guides
- When is a family office worth it?
- Family offices and taxes in Germany
- Family office software: features and costs
- Excel or family office software?
- Holding company assets: structure and reporting
- Reading statements, receipts and contracts automatically
- Private equity: capital calls and open commitments
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