The Aging Family Office: SFOs Biggest Problem

According to Statista, there are an estimated 323 billionaires worldwide who inherited their wealth, indicating that there are many multi-generational families with sizable assets. Many of these families established a single-family office in the past to oversee various aspects of their wealth, but the leadership of these family offices is aging, and change, as unpleasant as it may seem, is impending. There are several different ways for families to approach the inevitable transition that involves their family offices, but each approach has both long-term and short-term ramifications. In the end, however, there are a host of benefits to such a transition.

Clarifying the Term “Family Office”

single-family office

The family office, and the “family office industry,” has been rapidly evolving for some time depending on how you define when the concept of a family office was first implemented. For the purposes of this article, the family office industry is divided into three categories: single-family offices (SFOs) that serve only one family, multi-family offices (MFOs) that have banded together and serve a number of different families, and firms that provide family office services as one of the services they provide (e.g., RIAs, banks, accounting and law firms). This article will focus on the development, growth, and transition of the single-family office as its leadership begins to age — and how MFOs and other options could take the place of aging single-family offices.

Advent of the Family Office

As mentioned above, the advent of the family office and related “family office industry” can be traced back many years (some credit the Rockefeller family with establishing the first one); however, it is fair to say that the modern concept of the family office industry came of age around 1990. From that time onward, there was a proliferation of family offices. Since 1990, these family offices have changed significantly as the concept behind them matured.

Demographics of Family Offices

The individuals founding family offices (e.g., patriarchs, matriarchs, principals) during the early years of the family office were typically middle-aged and above, mainly in their 50s or 60s. Adding 20 to 30 years to their age, these same individuals would now be anywhere from 70 to 90 years old. The staff running the family offices when they were first founded were also middle-aged or older, indicating that they, too, would be well past retirement age by this time.

Family Office Succession

Because the staff of the single-family offices are now typically at or beyond retirement age, there is a distinct need for either succession or replacement of the single family office and the services it provides. This is a difficult situation for many reasons. For example, the family office has evolved to meet the needs and preferences of the family that it serves, meaning that many of the services and the form they are provided in have been tailored to that family — and customization to a level that will please multiple generations will be challenging. In fact, finding a new person to head the family office will be problematic because there may be different generations involved in the selection, and they may not see eye-to-eye with the original founding generation and founding staff. In addition, the institutional knowledge of the staff is deep and cannot be easily replaced. Change will simply not be easy. Nevertheless, the effects of time on people and institutions cannot be avoided. Another potential area of concern is that there may be no clear successor to the leader of the family office.

Solutions to Aging Family Office Leadership

There are several potential solutions to aging SFO leadership, including the following:

  • Dissolve the SFO and distribute the assets to the next generations;
  • Find replacements for the SFO staff;
  • Merge with another SFO;
  • Or outsource the service to an organization that performs this service.

Ramifications of the Solutions

There are, of course, going to be ramifications and potential complications involved with each of the potential solutions of action just listed.

When it comes to dissolving the SFO, the principals and subsequent generations may not want to lose all of the benefits that a dissolution would entail. A reluctance to give up the benefits of a family office would quickly rule out the possibility of dissolving the SFO, but some branches of the family might prefer to hire their own advisors and handle their own portion of the family wealth. However, the rise in popularity of family offices among the wealthy seems to indicate that this would not be a popular course of action.

Finding replacements for the staff can be problematic for obvious reasons, the least of which is finding qualified persons and attracting them to an organization that is in transition. Furthermore, with the aging of principals and key staff, there is an opportunity to completely reevaluate the SFO and its needs going forward, which could mean that a very different approach to organization and skill sets might be preferable. On the other hand, however, finding replacement staff over time could make it easier to ensure that knowledge gained over many years of serving the family office would not be lost but rather passed on to new employees. This depends heavily on the attitude of the outgoing staff, however.

Finding a compatible merger partner may simply not be feasible, even though similar economies of scale may be achievable and overall costs reduced. One of the major challenges of this approach is potential cultural issues between families. There is also the inherent problem of finding another SFO that is willing to merge at a given time. There can also be potential concerns in connection with privacy, confidentiality, and possible loss of family identity if such a merger is achieved.

Lastly, finding an organization with the right set of capabilities and skills to which to outsource can be a challenge. The vast majority of organizations offering family office services are investment driven, which can seriously complicate the process of developing and evaluating a plan that fits the needs of the SFO as it previously existed. In addition, outsourcing can result in service gaps and become costly.

A final, and perhaps superior option, would entail finding a firm that provides family office services to multiple families. Finding an office that can provide the necessary services and has a cohesive team with the right skill set but is not driven by investment management is feasible. In fact, this seems to be one of the least problematic solutions to the problem of aging family offices.

Benefits of Reinventing the Aging Family Office

One of the positive aspects of reinventing an aging family office is the opportunity to either change or reaffirm family goals, both in terms of financial goals as well as ethics and charity. Another benefit of modernizing the family office is an opportunity to better implement modern cybersecurity measures to protect the family resources from online threats that could easily decimate a family’s wealth if certain information fell into the wrong hands. Such a transition also opens up the door for more involvement of younger generations, ensuring smoother successions of control in the future as well as the chance to establish a more modern family brand. And as fresh views and approaches become part of the family office, there is more opportunity to embrace modern digital methods and approaches to investment, asset management, and financial growth.


family office business

Families with multigenerational wealth are likely to have a family office, and many modern family offices were founded in the 1990s with a middle-aged individual at the helm. However, as time has gone by, the individuals in positions of leadership have reached retirement age and beyond. In most cases, there has been no clear line of succession established and such family offices are now faced with difficulties. While some families may opt to dissolve the family office, there are other options. From merging with another family office to outsourcing family office tasks, there are courses of action that support the continuation of a family office despite aging leadership. In fact, there are many benefits to making a change regarding a single-family office, including reaffirming the family’s goals regarding wealth, switching to a more modern digital approach, and enhanced cybersecurity to better protect the family’s assets from pervasive online threats.

FBO Services

FBO Services is a family business office that combines a wide skill set, encompassing accounting, tax services, and fee-only financial planning. Our expert team is independent and free of conflicts as we assist you with all aspects of your financial affairs and family prosperity. In addition to our family office and tax services, we also provide specialized services such as tax compliance, partnerships and LLCs, forensic accounting, and estate planning. We will also work with your personal attorney or CPA, but note that we do not sell investments packages or provide investment advice.

Contact FBO Services today and let us help you make a smooth, painless transition from an aging single-family office to a more modern office that meets your evolving needs.