How to Start a Family Office, step 1 of 12

Decide Why Your Family Needs an Office

In short. This step is about deciding whether your family needs dedicated coordination across its assets and advisors, and help setting priorities. Identify where fragmented advice, management demands, or missed opportunities are costing time or creating risk. Then consider whether a single family office, a lean virtual office, or support from existing advisors best fits your needs.

By Richard C. Wilson, from chapter 1 of How to Start a Family Office

A family office makes sense when managing your wealth has become a job that pulls you away from the work only you can do. Start by naming the problems you want it to solve, then decide whether a dedicated office is the right structure.

In my experience, families often explore an office after advisors fail to coordinate, take a full-balance-sheet view, or put the family's interests first. Creating an office does not mean you must end a relationship with your wealth advisor or private bank. It can add staff to coordinate the family's needs while those existing relationships continue.

A single family office is a wealth management solution for one affluent individual or family. Its form depends on what you need managed and how much responsibility you want to keep in-house. For a broader definition, see what a single family office is.

Look for Coordination Gaps

When you own operating businesses, real estate, and other assets, you may manage people and make decisions across several parts of your financial life. Your CPA, insurance agent, and wealth advisor may speak only occasionally. If no one connects their work, you can end up carrying the coordination burden yourself.

That means passing information between advisors, tracking deadlines, and connecting decisions about an asset, a deal, or an entity. You may be the only person who sees how one choice affects another. That is a poor use of your attention, especially when your time is already committed to running a business, developing property, or leading a family.

Write down the handoffs that depend on you. Note where information gets lost, where a decision has no clear owner, and which commitments repeatedly take your attention. Those are concrete signs that coordination support could help. If the family is still deciding whether to form an office, begin with the questions to answer before forming one.

Understand the Cost of a Mistake

As wealth grows, the financial effect of a small percentage mistake grows with it. A 5% mistake on $1 million is $50,000. A 5% taxation mistake on a $100 million estate is $5 million. A mistake at that scale can represent years of team costs, before considering other errors a coordinated office might help prevent.

A family office cannot prevent every mistake. Fragmented oversight can make it harder to see a problem early or assign someone to handle it. Think about the cost of an error in your own circumstances, including the time spent correcting it and the decisions delayed while you deal with it. For a practical comparison, review how much money you need to start a family office.

Decide What You Want to Keep Doing

A well-set-up office can give you more room to focus on your unique ability. That may be negotiating deals, acquiring competitors, or developing real estate. Families that built wealth by operating businesses or managing real assets may also want direct involvement in investment decisions or asset management.

Direct investing can be one reason to create an office. An in-house team can help source and execute deals and manage assets directly, with funds or outside sponsors as other options. The office should fit the way your family wants to work. Be specific about which decisions you want to keep, which tasks you want staff to own, and where outside expertise still matters.

Match the Structure to Your Needs

You do not have to begin with a large staff. A virtual family office can use one or two full-time professionals, with other services outsourced. This structure can suit a family that wants coordination and dedicated attention without the cost or overhead of a larger internal team. Some families also build from an existing holding company and formalize their holdings and philanthropy over time.

The right starting point depends on your family's needs and tolerance for overhead. Consider whether your current advisors can coordinate more effectively, whether a virtual office would cover the gaps, or whether a dedicated single family office is warranted. If you are weighing the tradeoffs with your bank, read whether to start an office or keep using your private bank. You can also use the family office readiness score to organize your thinking.

Before deciding, write a plain-language purpose for the office and list the work it must own. Discuss family priorities and responsibilities together. Where tax or legal structure is involved, talk with your attorney or CPA. A clear reason for starting gives you a basis for choosing a structure, assigning staff, and selecting services in the next steps.

Creating a family office doesn't necessarily mean completely leaving your wealth management advisor or private bank, it simply means supplementing that relationship with more holistic staff that is dedicated to serving only you.