A family office is a private wealth management advisory firm that serves ultra-high-net-worth individuals or families.
Family offices are different from traditional wealth management shops in that they offer a total solution to managing the financial and investment needs of an affluent individual or family, according to Investopedia.
In addition to financial planning and investment management, many family offices offer budgeting, insurance, charitable giving, wealth transfer planning and tax services.
Single-family vs. multi-family offices
The need for a family office is usually determined by the extent and complexity of a family's wealth. Family offices are also responsible for educating future generations on how to handle and manage their wealth.
A key difference between single-family and multi-family offices is that single-family offices serve one individual and their family, while multi-family offices serve more than one family.
Multi-family offices are therefore less expensive due to economies of scale. However, a single-family office can tailor its services to the unique requirements and preferences of one ultra-wealthy family.
Family offices in Luxembourg
Luxembourg is known to be a significant hub for family offices, and it has a substantial presence of both single-family and multi-family offices. According to data from the Commission de Surveillance du Secteur Financier, there are over 70 family offices based in Luxembourg, although many other firms in Luxembourg offer wealth planning services to individuals and families.
Wealthy families and investors chose Luxembourg as their preferred location to establish family offices due to the country’s favourable regulatory environment and its reputation as a global financial centre.