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David has been writing and publishing since 2006.  

This post was written and published prior to September 2023 when David and his prior firm, Family Capital Strategy, merged with Greycourt.  Views expressed reflected David’s personal views at the time and do not necessarily reflect the views of Greycourt.  Posts and information may be out of date and should not be relied upon for investment advice.

How a Family Office Works

Oct 31, 2019 | Family Wealth

In our last post, we considered what a family office is (here). We called out two important factors in that discussion. First, that a family office (FO) is a professional services firm that helps manage the complexity of a family of significant means. Secondly, that such a family is willing to invest in the development of a new firm to deliver these services because they are unable to readily procure those services from the open market or do so at a reasonable cost.

This week, we want to build off this general conception and highlight what family offices actually do in pursuit of that goal. Similar to how Michael Porter outlined that there are really only two strategies that businesses can follow – being the low cost competitor or being highly differentiated, similarly there are two primary strategies that family offices can pursue – exceptional coordination or exceptional comprehensiveness.

FO’s that pursue the exceptional coordination approach build out a team of highly sophisticated professionals that bring a degree of integration in services that are difficult to replicate. Inherently, this structure recognizes that supporting a family is multi-faceted and multi-disciplinary, and building the “Seal Team 6” equivalent is the best way to serve the family. Doing this well, also means carefully monitoring and assessing where services are best delivered by a third-party vs. done in-house.

The other option is the comprehensive approach. Under this framework, the family office goes extremely broad in its offering, but is likely limited in how deep it can get. As the classic saying goes, work expands to fill the time available, and the same is true for the range of possible work the family office is asked to engage. FO’s pursuing a comprehensive strategy embrace this and build out a team, likely more of generalists, who are able to cover a wide-range of roles.

In terms of the actual workflow that FO’s oversee and manage, it is helpful to think of them as modular buckets. By being modular, the family office services can pick and choose from each bucket. The typical buckets are:

Module 1 – Integrated Planning – Covering tax, estate, risk management, and wealth planning, this offering is about ensuring the alignment of the family’s financial capital with its long-term goals. Because of the number of moving pieces, breaking the silo’d mentality that this advice is typically delivered in is extremely helpful.

Module 2 – Administration – The natural output from planning work is the administration of the “plan.” This may cover everything from general ledger accounting and tax return preparation to data aggregation / reporting. Because of how closely this follows behind module 1, FO’s can slip into doing more of this work than they are ready for. Administrative work generally seems to expand at an exponential pace and can quickly overwhelm the team if it is not carefully managed.

Module 3 – Investments – Family offices tackle the question of investment in a myriad of ways. Some build out robust internal teams to manage public investments. Other may launch an in-house private equity or venture capital-like fund. Still others, may hire an Outsourced Chief Investment officer (OCIO) firm to take over the entire management of the family’s assets. Or perhaps more likely, some bits and pieces of each. We have talked about some of the challenges of doing this well. See our posts here and here.

Module 4 – Family Support – The final bucket is what we call family support. This may include things that are traditionally thought of as “concierge services” – household management, etc. But as well, it may include supporting the family’s governance entities such as a family council, helping to plan family retreats, coordinate family educational initiatives, etc.

While each family office is unique in the services it delivers, generally that offering derives from the family choosing (consciously or not) which of the four modules above they want to build an in-house capacity to address. That selection is a direct outflow of whether the FO is pursuing a coordination or comprehensive strategy. But keep in mind, all these choices are about helping manage complexity to enable the family to pursue its hopefully greater goal of continuing to live life together.


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