Is a Family Office Right For My Family?

History Of The Family Office

In the Gilded Age of America, amidst sprawling railroads and glittering mansions, fortunes soared to unimaginable heights.  Men like Carnegie, Rockefeller, and Vanderbilt found themselves burdened by a new kind of problem—incredible wealth that demanded more than just a stack of dusty bonds.  Banks catered to the masses.  However, these titans yearned for a bespoke touch overseen by experts in each category of legal, tax, estate planning, and finance.  They wanted a consigliere and a confidante, fluent in the language of fixing matters which were important to the family while quietly creating empires.

Enter the dawn of the Family Office.  In the shadows of Fifth Avenue discreet offices materialized, staffed with handpicked wizards of finance, legal eagles, taxation experts, and shrewd investment minds.  These were not mere servants.  Members of the Family Office became trusted stewards, creating tapestries of wealth preservation and estate planning strategies with an eye towards controlling risk and orchestrating growth over time.

The Rockefellers, perhaps the first true patrons, built a fortress of expertise within their own walls, managing not just investments, but philanthropic ventures, art collections, and even the family’s sprawling estates, while helping to educate the generation to come.

These early Family Offices were shrouded in secrecy, whispers exchanged in hushed tones amidst mahogany furniture and leather-bound ledgers.  Most often, the Family Office was directed to remain discrete and keep the family’s affairs out of the public’s eye.  However, the model—driven by an insatiable passion for control and personalized service—spread like wildfire.  European nobility, witnessing the success achieved with the Family Office and emboldened by their American counterparts, soon followed suit, forming their own sanctuaries of wealth.

Today, the Family Office model has evolved into a multifaceted bastion of expertise, employing on-demand experts in almost every imaginable category of law, personal wealth, tax, and security.   

Over the last 25 years, technology has allowed the Family Office structure to become more available than ever.  The Family Office model is no longer confined to the ultra-wealthy industrial aristocracy.  Tech titans, hedge fund kings, and first generation business owners, all demanding category experts offering a personal kind of care, have joined the fold. What they have in common: a sufficient net-worth with personal family demands that traditional wealth management simply cannot keep pace with. 

Modern Family Offices are intricate ecosystems, offering not just financial stewardship, but lifestyle management, legal counsel, security, family education, philanthropic guidance, and even access to medical experts when a healthcare crisis strikes.  Family Offices navigate the complex world of private investments, sniffing out uncovered opportunities in hedge funds, venture capital, and real estate.  They often help manage the delicate dance of succession planning, ensuring the family’s wealth survives generations unscathed while optimizing legal tax avoidance.

Yet in the heart of this gilded machine, the same core principle remains—trust.  These are vaults of not just money, but legacies and dreams intertwined with spreadsheets, investment strategies, and legal asset protection.  Family Offices render not just market updates, they become facilitating stewards of the present, while laying the groundwork for the future for generations to come.

So, the next time you catch a glimpse of a discreet townhouse with smoked-glass windows on Park Avenue, remember, within those walls might lie the beating heart of an empire, meticulously nurtured by the unseen hands of a Family Office.  For in the realm of unimaginable wealth, expertise, trust, and discretion are the ultimate currencies, and the Family Office is their silent, watchful king.

Why Have Family Offices Become So Popular?

During the late 1800’s, John Rockefeller was incredibly busy building his empire of energy assets.  Some say he was a genius, others a manipulative and hard driving businessman determined to build a monopoly and change the world.  Regardless of the opinion, he built one of the most successful business empires the modern world has ever witnessed. 

His success required an almost singular focus on his talents.  Rockefeller focused on becoming an unrivaled expert in the energy market.  Long before Warren Buffett verbalized the advice given to all investors about the importance of defining your “circle of competence” and staying within that circle at all costs, John Rockefeller had been adhering to this concept quietly and humbly all his life. 

In short, the concept behind intelligent individuals staying within their “circle of competence” lies in its simplicity. 

A person’s “circle of competence” is defined by their expertise and proven by their continuous successes. 

For some, it is athletics.  For others it is computer programming or authoring books.  It can even be a specific category of medicine.  Yet for everyone, the concept which defines a person’s “circle of competence” is the realization that you cannot be the best in all things.  Once you figure out what you are genuinely interested in—and best at—you must focus on that skill.  Make that skill your calling card.  Become an acknowledged expert.  Align your interests and your efforts, and become dominant in your “circle of competence.” 

The opposite—yet key—ingredient to this concept?  Humility.  While honing your expertise, you must become intelligent enough, and humble enough, to understand no matter how dominant you are in your category of life, step outside your circle and you become ordinary, average (or worse).  As you understand how easy it is for you to outsmart others who wander into your “circle of competence,” it is just as simple for you to fall prey once you wander into another’s “circle of competence.” 

The richest and most intelligent businessperson on earth will be sorely reminded of their shortfalls if they make the mistake of believing they are also an equally skilled athlete, once they step on the tennis court with John McEnroe. 

The most intelligent professional basketball player will be easily outwitted and quickly relieved of their wealth when dealing with a private equity expert selling an oil well investment in the private equity space. 

An incredibly skilled medical doctor, capable of restoring life by removing and replacing a human heart is no match for a skilled plumber when a major pipe breaks, or a top-notch car mechanic when your car breaks down driving across town in rush hour traffic.  It is for these reasons experts exist.  Warren Buffett’s catchphrase of staying within your “circle of competence” remains a topical discussion point worthy of adhering to at all costs.  The proliferation of the Family Office correlates quite well with John Rockefeller’s creation of the first Family Office.  And the concept of staying within your “circle of competence” continues to support the evolution of the Family Office today.

A Unique Approach

The Abernathy Group II Family Office is a legal fiduciary bound to offer advice serving the best interests of those we represent. Unlike traditional wealth management organizations, where advisors are generally incentivized to provide advice in the interest of their employer-firm, a Family Office works directly for its member families.

We are different from traditional wealth managers in many respects:

  • We can provide access to a highly-respected network of professional investors with audited track records, estate-planning attorneys, corporate attorneys, and CPAs to manage the Family’s day-to-day activities.
  • Our Family’s wealth represents a large portion of the firm’s total asset pool. Therefore, we are able to act in true fiduciary fashion because we are not dependent on fees to secure our future. We are free to act ONLY in your best interest.
  • We recognize that no two families are alike. We customize each family’s experience based on their personal needs and goals.
  • We provide the collaborative platform for integrating all advisors from multiple disciplines under one purpose – your family’s personal and financial well-being.
  • We focus first on Capital Preservation and second on a combination of income generation and capital appreciation, so you and your family can sleep better at night knowing your assets are safe and your purchasing power is secure.
  • We help you to construct your own Family Enterprise which puts you in control as the CEO and puts us in the supporting role as your family’s CFO. This means our incentives are directly aligned with yours so you can make well researched and well informed financial, legal, and familial-decisions for you and your family.
  • We are business owners as well, so we are intimately familiar with the daunting challenge our business owner clients face in trying to navigate the complexities of their family wealth while managing a successful business enterprise. We understand and have the experience needed to know the “Family’s Business” must be treated differently from the “Business of Family.”

Frequently Asked Questions About the Family Office Structure

What is a Family Office?

A Family Office is a group of experts in many types of affairs working in tandem for the benefit of the family they serve.  Family Offices were built to serve wealthy families’ private affairs, and at times offer expert advice for the family’s business and medical affairs. 

The benefits: each expert within the Family Office communicates with each other.  The goal: offering the best advice available and saving the family’s decision-maker time and research.  This allows the family’s decision maker to discuss decisions with category experts and to understand all legal and financial options available to the family with the intent of making the best decision given current circumstances. 

A Family Office offers access to experts in the following areas:

  • Legal affairs – Family personal legal affairs and at times corporate affairs.
  • Tax and accounting – Primarily for the family’s personal affairs and especially for the family who would like their personal wealth managed with the same expertise required when managing their business.
  • Estate Planning – One often consistent goal for wealthy families is the intention to pass along both their wealth and their status in their geography’s social framework.  Estate Planning experts often help achieve this goal.
  • Financial Asset Allocation – Intelligent asset allocation includes diversification outside of the family business, diverse asset categories, risk parameters, and maturity estimates. 
  • Medical – When a health-crisis strikes a family, finding the best medical advice dominates every moment.  Some Family Office structures today can offer relationships with many expert healthcare organizations to manage a family’s healthcare crisis. 

Why haven’t I heard of a Family Office? 

  • Historically, the cost of creating and administering a Family Office made it virtually impossible for families with less than $100,000,000 to afford the costs of a Family Office.  Further, most Family Office structures today are built to keep the family’s affairs out of the public eye.  (If a family wants to be in the public spotlight, the Family Office will contract public relations experts.)
  • As a general rule, most families want to keep the cost of overseeing their family’s wealth at less than ¾ of 1% per year. 
  • Today, due to advances in technology and collaboration, the Family Office model is available to families with $5,000,000 – $100,000,000.  *The costs of working with a Family Office are often less than the costs of a brokerage account. 
  • There are over 3,000 Family Offices in existence today, each with a slightly different expertise. 

What kind of family is the best fit for a Family Office?

  • Business Owners who are running medium to large businesses, are best served by the Family Office model today.  Reason: Dedicating the time demanded in running a business and keeping up with the pace of legal, tax, and financial developments often produces hasty or poorly researched decisions, affecting their family’s personal finances. 
  • Medical Doctors managing, or partners in large practices have also begun the use of the Family Office.  Reason: legal challenges and documentation requirements for each clinical visit or procedure leave little time to maintain educational requirements and to balance family life. 
  • In every instance – so much time is spent dealing with ensuring the business is operating optimally, there is little time left for family activities, enjoying hobbies, and importantly, the family’s finances. 
  • An often-heard refrain from the business owner: “I am spending 12-15 hours a day creating wealth for my family, and I am spending almost 0 hours ensuring this wealth is well-cared for.  It makes little sense to work this hard to create wealth and not protect my family’s wealth legally, pay the least amount of taxes legally, and have my assets invested conservatively with intelligent risk levels.” 

Who uses a Family Office?

  • Business owners, medical doctors, and any other type of individual who is too busy running their business to commit the time and effort necessary to make intelligent, professionally researched decisions about their family’s:
  • Legal asset protection,
  • Legal tax avoidance, (in most instances, the cost of a Family Office structure is tax deductible)
  • Estate structure – assuring their families assets are allocated in line with the family’s decision makers wishes,
  • Asset allocation – commensurate with risk levels demanded by the family,
  • Health – any crisis of which demands the best medical care available immediately. 

Why is a Family Office better than a stockbroker?

  • Stockbrokers are generally salespeople.  They are not financial analysts or portfolio managers. 
  • They do not have personal track-records demonstrating investment success. 
  • They cannot comment on legal affairs due to regulatory rules and employer limitations.
  • They cannot offer tax advice due to regulatory rules and employer limitations.
  • The vast majority of stockbrokers are NOT fiduciaries, and even more often they are not ALWAYS fiduciaries, meaning at times they have conflicts of interest.  Most intelligent family decision-makers know better than to rely on advice from conflicted advisors.  The vast majority of legal, tax, estate planning, financial, and medical experts within a Family Office are legal fiduciaries and have no conflicts of interest. 
  • In most cases, the Family Office structure is less expensive than a stockbroker, despite the broad list of categories covered by experts within a Family Office.  (*Most Family Office structures are tax-deductible while fees for brokerage advice are not tax-deductible.)

Why is a Family Office better than a Registered Investment Advisor?

  • The same reasons supporting wealthy families avoiding stockbrokers, also applies to registered investment advisors.  See the above recitation of valid reasons intelligent decision-makers avoid stockbrokers and work with Family Offices.
  • While some registered investment advisors will tell you they are acting as fiduciaries, at times they may NOT be acting as fiduciaries.  *It is up to the family’s decision-maker to determine when the investment advisor is acting as a fiduciary and when there is a conflict of interest allowing the investment advisor to benefit from a product’s sales incentives.  Most family decision-makers do not want to have to determine when an advisor is acting in the advisor’s best interests, or the family’s best interests. 
  • *Always demand that every advisor sign a document/contract stating their guarantee that the advisor will ALWAYS function as a legal fiduciary. 
  • For a copy of this document, speak with your attorney or call us for a copy.  Either can supply you with a document that will guarantee an advisor always acts as a fiduciary. 
  • If they will not sign it, buyer beware.