What Is a Family Office? Structure, Costs and Purpose

A family with substantial wealth eventually faces a question that has nothing to do with markets: who actually runs this. Not which fund to buy, but who keeps track of the assets, the tax filings, the succession plan, the property, the external lawyers and the reporting across several countries and generations.

The structure built for that job is the family office. This article explains what a family office is, how single and multi family offices differ, what it costs to run one, and why Switzerland became the European centre for them.

What is a family office?

The family office definition is straightforward: a company whose purpose is to manage the private wealth of one owning family. That is the short version of the family office meaning; in practice its remit is not limited to investing — it typically also covers accounting, controlling, office organisation, mediation, coordination of external lawyers and tax advisors, travel planning and security.

The decisive difference from an ordinary asset manager is control. A family office sits under the control of the investing family itself; an asset manager is controlled by a third party. That difference has a regulatory consequence: an asset manager requires authorisation from the supervisor, while a pure single family office generally does not, because the investor and the owner of the office are the same people. In Germany, BaFin has published guidance on when family office activity does trigger a licensing requirement under the KWG and KAGB.

The first family office is generally considered to be the House of Morgan, founded in 1838. The Rockefeller family office followed in 1882.

Single family office or multi family office?

A single family office serves one family; a multi family office serves several and therefore usually manages smaller individual portfolios. The economics of the two are very different.

Figures on the European market come from the consultancy Celent, cited in German-language reference literature. Germany alone has at least 300 single family offices, most of them founded from 1970 onwards.

From what level of wealth does a family office make sense?

A dedicated single family office only becomes economically sensible from roughly EUR 250 million in assets. Below that, the cost of running the office usually exceeds the management fees a family would pay an external manager.

A full-service family office costs at least EUR 1 million per year, of which around 60 percent is personnel. Leaner setups — sometimes called virtual family offices — reduce that considerably by outsourcing most functions and keeping only a small coordinating core.

The trade-off is straightforward. The family gains a high degree of control over its own assets and pays no management fee to a third party, since investor and owner are identical. What it takes on instead is an operating business with staff, systems and fixed costs.

What does a family office actually invest in?

For most family offices, capital preservation ranks first among objectives, ahead of absolute return and steady cash flow. That ordering shapes everything downstream.

It explains the long horizons. Family offices invest directly in established companies and start-ups in a way that resembles private equity, but they hold far longer — an average holding period of around 19 years for direct investments, well beyond a typical private equity cycle.

It also explains the interest in alternative investments. A portfolio built around preserving capital across generations needs return streams that do not all depend on equity markets moving in the same direction. That is the practical reason family offices allocate to hedge fund strategies, and why a fund of hedge funds — one vehicle, several managers, several strategies — fits the mandate better than a single-manager position.

Capital preservation first, absolute return second. Reverse that order and you are no longer running a family office mandate.

Family office wealth management: why Switzerland is the European centre

Family office wealth management is concentrated in a handful of jurisdictions, and Switzerland is the largest of them in Europe. The country hosts an estimated 300 to 400 family offices, mostly serving foreign clients, with an average of around 20 employees each. A dozen of them manage individual family fortunes in the range of USD 10 to 15 billion.

The reasons are structural rather than promotional: political and currency stability, a deep pool of investment and legal expertise concentrated in Zurich and Geneva, and a supervisory framework under FINMA that international families understand. The Swiss Single Family Office Association represents the segment domestically.

For managers based there, this proximity matters. AQUIS Capital, a boutique asset manager in Zurich, works with institutional investors, family offices, banks and external asset managers — the same client base described above.

Family office or private bank: what is the difference?

Banks and private banks increasingly market in-house multi family offices to the same clientele. Independent family offices argue that a bank-owned unit lacks distance when making allocation decisions and is oriented towards commissions.

The counter-argument from independents is about incentives: they tend to bill strictly for work performed rather than as a percentage of assets or profits. Whether that holds in a specific case is a question of the individual contract, not of the label on the door.

One practical note: where a company or bank department sells family office services to third parties, that activity is a regulated financial service. The absence of licensing applies to genuine single family offices, not to the marketing term.

Frequently asked questions

What exactly does a family office do?

It manages a family's private wealth and the administration around it — investments, accounting, controlling, coordination of lawyers and tax advisors, succession planning, and often practical matters such as property, travel and security.

How much wealth do you need for a family office?

A dedicated single family office generally becomes worthwhile from around EUR 250 million. Single family offices typically manage at least USD 100 million, with a recommended minimum closer to CHF 500 million. Multi family offices serve clients with portfolios of roughly USD 25–50 million.

What does a family office cost?

A full-service office costs at least EUR 1 million per year, around 60 percent of it personnel. Leaner virtual structures cost significantly less by outsourcing most functions.

Is a family office regulated?

A genuine single family office often falls outside licensing requirements, because the investor and the owner of the office are the same. Once family office services are offered to third parties, the activity becomes a regulated financial service.

How is a family office different from an asset manager?

Control. A family office is controlled by the family itself; an asset manager is controlled by a third party and requires supervisory authorisation.

Why do family offices invest in hedge funds?

Because their first objective is preserving capital across generations, they look for return streams with low correlation to equity markets. Hedge fund strategies and multi-manager structures are used as diversifiers rather than as the core of a portfolio.

A family office is not a product you buy. It is an operating decision — whether a family wants to run the machinery of its own wealth, or delegate it. The numbers above set the threshold; the rest depends on how much control the family wants to keep.

This article is for general information only and does not constitute financial, investment, tax or legal advice. Figures on market size, thresholds and costs are drawn from published German-language reference sources and industry estimates and will vary by case. Consult a licensed professional before making decisions.