Family offices blur traditional financial roles. They are asset owners, asset managers, and wealth advisors simultaneously. Can the industry manage this complexity effectively?
If you ask five different professionals what exactly a family office is, you will likely get five different answers, perhaps more if someone is particularly creative. Over the past decade, family offices have quietly reshaped the financial landscape, evolving from guardians of inherited wealth into global investment powerhouses. Today they juggle roles so diverse it makes classification challenging. They invest directly, allocate assets through private banks, co-invest alongside asset managers, and increasingly manage capital for multiple wealthy families.
In other words, family offices suffer from a profound identity crisis that creates headaches across the industry.
Consider the typical family office today. Perhaps it began as a single-family endeavour primarily concerned with preserving and cautiously expanding wealth. Over time, ambition broadened their horizons. Suddenly, investments spanned the globe and included diverse asset classes, from Silicon Valley startups and Southeast Asian infrastructure projects to European listed equities and African private debt.
What began as a simple portfolio now resembles a small investment bank combined with private equity sophistication and the personalized service of boutique wealth management. Yet traditional banks and service providers often greet family offices with confusion: are they asset owners, asset managers, or wealth advisors?
The truth is that family offices perform all these roles at once. This hybrid identity poses unique challenges for service providers.
A Luxembourg-based investment professional recently summed it up well: “We used to clearly separate clients by type. Family offices are forcing us to rethink everything we thought we knew about segmentation.”
Family offices not only face internal complexity but must also navigate challenging regulatory environments. Operating vehicles across multiple jurisdictions, some regulated and others not, they leave compliance teams perpetually anxious. As one fund administrator confided, family offices are “the square peg constantly pushed into a round regulatory hole.”
Fortunately, the market is adapting. A new generation of technology-enabled service providers is emerging, specifically designed to handle the sophisticated and multi-dimensional reality of family offices. Leveraging AI-powered tools and flexible platforms, these providers support complex strategies and multi-jurisdictional demands, deftly managing even the significant personalities involved.
Yet a fundamental question remains: Should family offices become their own dedicated client category, or should providers continue adapting existing client definitions to serve their blended needs?
We must recognize family offices for what they truly are, a hybrid requiring tailored services rather than awkward compromises. Explicitly acknowledging their complexity will empower the industry to serve them effectively.
Clarity begins with honesty. Family offices are no longer peripheral financial players. They have become a distinct breed of client that deserves a category all its own.
Christophe Santer is a columnist for Investment Officer Luxembourg. A Luxembourg native, Santer has nearly two decades of experience in fund administration, investor services, and private markets. He also works as director of business development manager at bunch.