Why Set Up a Family Office? Reasons That Hold Up, and Don't

Six months after the sale, the founder has three banks, a holding company in Lisbon, a property company in Madrid and an inbox full of proposals. One bank offers its family office desk. A lawyer suggests a foundation. A friend in Dubai says he built his own office and never looked back. Underneath sits one question: why set up a family office at all? This guide is for founders and families asking it. Our conclusion: most reasons are operating problems a lighter structure can solve, a few need a dedicated office, and one, status, is a reason not to build it.

IMD’s Family Office Navigator lists fourteen triggers that lead families to consider a family office, the private structure that runs a family’s entities, reporting, advisors, investments and governance. We take those reasons seriously, sort them, and ask the question that decides the answer: which of them actually needs an institution? The result is uncomfortable for anyone who sells family offices. Most of the reasons families give are operating problems: one view of the wealth, clear decision rights, a line between family and business, privacy, someone to carry the coordination. Only a few genuinely need a dedicated office.

PWA sells none of the models. We are paid by the family, and only by the family, so we can say which reason sits where. And whatever reason is pushing your family, and whether the right answer turns out to be a full single-family office or something much lighter, that structure is what we design.

The numbers frame the problem. Family offices are multiplying. Deloitte links the growth to wealth concentration, generational transfers and active private equity and M&A markets, which suggests that many offices start after an exit. Many serve the founder who built the wealth. And most of them, once built, still have not answered the question of who runs things next. An office is not the same as an operating model.

Why set up a family office: the reasons families actually give

The Family Office Navigator (Peter Vogel and Mario Marconi, IMD, 2023, pp. 36–37) is a useful map because it lists what families say, not what providers would like them to say. Its triggers range from managing new liquidity to protecting privacy, building a hub for several branches, and, candidly, status. We have regrouped them in our own words and added the test the book leaves to the reader: what does each reason really ask for, and does that need a dedicated office?

Reasons that can justify a dedicated office

A large exit the family wants invested together. This is the most common trigger, and the most legitimate. A liquidity event turns a company into cash, and cash needs a policy, a process and people. Below a certain size, a good bank or a multi-family office, a firm that serves several families from one shared team, can run that process under a written brief. Above it, a family that wants its own investment team, answering only to the family, has a real case. If you are in the first months after a sale, read sold my company, now what before signing anything. Our part here is the structure around the money: how the investment policy is set and who approves it, how managers are chosen and monitored, the reporting and the decision rights. The investing itself stays with the managers the family appoints.

Direct deals at volume. Venture, direct stakes and impact investments generate a weekly flow of work: sourcing, due diligence, legal documents, board seats, monitoring. When the flow is real and recurring, outsourcing it piece by piece costs more than a small team and loses the knowledge between deals. This is the clearest case for a dedicated single-family office, set up by one family with staff who work for that family only. The test is volume, not ambition: one or two deals a year do not need a team.

Several branches, one hub, apart from the business. In many founder families, the company’s finance director and legal team quietly handle the family’s private affairs for years. It works until the second generation marries, a sibling leaves the business, or a branch moves country. Then the family needs a place that serves every household equally and keeps private matters out of the company’s books. With three or four households, that place can justify its own staff. We design that separation: what moves out of the company, into which structure, with whose approvals.

Reasons a lighter structure usually meets

One view and a central risk picture. Families with several banks rarely see their total exposure to one currency, one sector or one counterparty. They need consolidated reporting, one regular report of everything the family owns across every custodian and entity, valued on one date. They do not need a building. Pedro Souto built financial data and reporting systems at FRC Group and Banco de Portugal before founding PWA, and the lesson carries over: a consolidated view is a data problem before it is a staffing problem. We cover the mechanics in consolidated reporting across multiple banks, and the case of a founder with four banks, no single view shows how quickly the gaps add up. This is work our administrative and back-office service does: the data layer, the entity map and one report the family can trust.

Governance and decision rights. Who can sign, who decides on a new investment, what happens when siblings disagree. These are questions for a family council, written decision rights and a family constitution, the written agreement in which a family sets out its values, decision rights and ownership rules. All of them exist without an office. Our guide to family governance and next-generation succession sets out how they fit together.

Delegating the burden. Most principals who say they want to delegate mean they are tired of being the only person who connects the lawyer, the accountant and the three banks. One coordinator, a calendar of obligations and a document register solve most of that.

Privacy and confidentiality. Privacy depends on how entities are designed and on who receives which information, not on having staff. An office with ten people and loose information rules is less private than a well-designed holding structure with three.

Personalisation, dissatisfaction, control. Families unhappy with returns or service, or wanting more control, usually need a written investment policy, honest benchmarks and someone on their side who earns nothing from products. Changing provider is cheaper than building one.

The next generation and preservation across generations. Heirs who want to reshape the portfolio, and founders who want the wealth to outlast them, both need succession planning, education and agreed rules for change. UBS, presenting its 2025 survey of 317 family offices with an average family net worth of $2.7bn, described them as focused first on “preserving wealth across the next generations”; yet only 53% had wealth succession plans for family members in place. An office can house these plans. It cannot replace them.

The reason not to: status

Some families build an office because peers have one. We return to this below, because it is the most expensive reason on the list.

Why people set up family offices instead of staying with a private bank

The honest version of this reason is not that banks are bad. It is that a bank is one provider, with its own products, its own view of the wealth it holds and no view of the wealth it does not. Families who move towards a family office usually give three reasons.

Control. The family wants decisions taken by people who work for the family. A private banker works for the bank, however good the relationship.

Conflicts of interest. A bank earns from products, custody and, in some markets, retrocessions on the funds it places. Our guide to hidden private banking fees and retrocessions shows where that money sits. A family office paid only by the family removes the conflict, provided the people inside it are paid that way too.

One view across several banks. No single bank can report on the assets held at its competitors. Once wealth sits with three or four custodians, someone outside all of them has to put the picture together.

Why have a family office at all when the bank already reports?

Because each bank reports on its own slice, and nobody reports on the whole. That does not automatically mean an office. It means the family needs someone independent of every bank, which can be an office, a multi-family office or an independent advisor. The choice between those is covered in do I need a private wealth advisor. If you are weighing a family office against staying with your banks, talk to Pedro about that choice before either side makes the case for you.

What is the purpose of a family office, if not managing money?

A family office exists to coordinate complex wealth. It keeps one complete picture of assets, entities and obligations, sets out who decides what, makes the bank, the lawyer and the accountant work from the same facts, and keeps things running when the principal is absent. Managing investments is one of its functions, not its purpose.

That is not how most offices begin. J.P. Morgan Private Bank, presenting its 2026 survey of 333 family offices in 30 countries, puts it plainly: most family offices “are created to oversee investments”. The same survey found that 86% have no clear succession plan for their decision makers. An office built around investments, with no plan for its own continuity, has solved the visible problem and left the structural one open.

The benefits of a family office, function by function

The benefits come from the functions, not the premises: reporting, governance, administration, risk, succession and investment oversight. We set out the six functions a family office performs elsewhere and do not repeat them here. The point for this piece is simpler. Every benefit on a brochure maps to one of those functions, and each function can be run in-house, outsourced or coordinated. The reason you give determines which.

Family office advantages and disadvantages

Every list of advantages is written by someone who sells the office, the jurisdiction or the set-up. Here are both columns, as we would put them to a family across the table.

Advantages of setting up a family office, and their condition

Each advantage holds only if the office is designed for it. Control means nothing if the family never writes down who decides. Alignment disappears if the chief investment officer is paid a bonus tied to assets. Continuity fails if the office itself has no succession plan, which, on J.P. Morgan’s figures, is most of them.

The disadvantages, weighed honestly

The fixed cost is the obvious one. J.P. Morgan’s 2026 survey puts average operating costs at $0.9M a year for offices overseeing $250M or less, and $2.5M in Europe and the Middle East; we compare what each model costs a year in a separate guide. The less obvious disadvantages are human. A family that cannot agree at the dinner table will not agree in a board meeting of its own office. And “tax advantages”, which appear on many vendor lists, are not a reason we give: they depend on the jurisdiction, change with the law and need advice in each country, whether the family lives in Portugal, Spain or the UAE.

Status is not a reason

Some families build an office because a peer has one, because a bank suggested it at a dinner, or because it sounds like what serious money does. The book names status among its triggers, and is right to: it is real, and it is common.

It is also the most expensive reason on the list. An office built as a symbol carries the full fixed cost, the staffing burden and the governance load, with no defined job to justify them. It tends to drift towards what looks impressive, such as a deal team or a glossy annual meeting, rather than what the family needs, which is usually a reliable report and a clear set of decision rights. And because offices are hard to unwind, the family pays for the symbol long after the pride has faded.

The test is simple: would you still build it if nobody outside the family ever knew it existed? If the answer is no, the reason is status. If you are unsure, the honest answer is probably the same.

Five questions to test your family’s reasons

These are our questions, not the book’s. Answer them in writing; the gaps are the useful part.

1. How many banks, custodians and entities hold your wealth today? Count them. More than three custodians or more than five entities usually means a coordination problem, whatever structure you choose.
2. Who holds the whole picture today? Name the person. If the answer is “me, in my head” or “nobody”, that is a tier 2 reason, and it is urgent.
3. Who decides, in writing? Not who decides in practice. Where is it written, and who else knows?
4. What happens if the principal is absent for six months? Who signs, who pays, who answers the bank? If nobody knows, continuity is your reason.
5. Which reason in the table above is yours, and which tier does it sit in? Be honest about status.

If most of your answers land in tier 2, start with the functions, not the office. Read do I need a family office for the decision and its costs, and our piece on the family office operating model for what running one looks like day to day. If your answers land in tier 1, you may well need a dedicated office. Then the work is to design it before you hire for it.

Whatever the reason, where PWA comes in

Whichever reason is pushing your family, and whether the right answer is a full single-family office or something lighter, we design and coordinate the structure that answers it. Pedro leads every engagement personally. Here is how each reason maps to what we do.

• The build-or-stay-light decision. We test your reasons against the three tiers, decide with you whether a dedicated office is justified, and sequence the steps: what to set up first, what to outsource, what to postpone.
• A dedicated office, if you need one. We design the operating model: roles, reporting lines, what stays in-house, what is outsourced, which systems it runs on, and how the family oversees it. We help you choose providers and staff against that design, and then oversee them on the family’s behalf.
• One view and risk. Consolidated reporting and the data layer underneath it: custodian feeds, an entity map and one report, through our administrative and back-office service.
• Governance, succession and the next generation. Decision rights, a family constitution, a family council and education for heirs, through our family governance and education service.
• Separating family from business. We map what the company does for the family today and move it to a family-side structure with its own records and approvals.
• Privacy. We design the information flows: who sees what, which entity holds what, where documents live and who has access.
• Delegation, dissatisfaction and control. We write the brief your banks and managers work to, check their reporting and fees against it, and sit on the family’s side of the table.
• Status. If that is the real reason, we will say so, and save you the cost of the symbol.

What we do not do is equally clear. PWA does not manage money, hold mandates, take commissions or give regulated investment, tax or legal advice. We work alongside the family’s banks, managers, lawyers and tax advisors, and make sure they work from the same facts.

The fastest start is a conversation about your reason. Tell us which of these is driving your family, and we will show you the smallest structure that answers it.

Questions we hear

Why do wealthy families set up a family office?

Most give operating reasons: one view of wealth spread across several banks and entities, clear decision rights, privacy, and relief from coordinating advisors themselves. A smaller group has reasons that need a dedicated team, such as investing a large exit together or doing direct deals at scale. Status is a reason too, and the weakest one.

What are the advantages and disadvantages of a family office?

The advantages are control, privacy, one complete view of the wealth, advice aligned with the family rather than a product shelf, and continuity across generations. The disadvantages are a high fixed cost, dependence on a few key people, the work of hiring and keeping staff, a governance burden, and a structure that is hard to unwind.

What is the purpose of a family office?

A family office exists to coordinate complex wealth. It keeps one complete picture of assets, entities and obligations, sets out who decides what, makes the bank, the lawyer and the accountant work from the same facts, and keeps things running when the principal is absent. Managing investments is one of its functions, not its purpose.

What usually triggers a family to set up a family office?

Usually a change in the size or shape of the wealth: the sale of a business or a large dividend, an inheritance, a move to another country, or the second generation taking part. Each turns a portfolio into a set of decisions that someone must coordinate. The trigger is real; the structure it calls for is a separate question.

Is status a good reason to set up a family office?

No. An office built to signal success carries the full fixed cost and staffing burden without a job to justify them, and it tends to drift towards the activities that look impressive rather than the ones the family needs. A useful test: would you still build it if nobody outside the family ever knew it existed?

Can a family get the benefits of a family office without setting one up?

Often, yes. Consolidated reporting, written decision rights, a family constitution, privacy rules and one person who coordinates the advisors can all exist without a dedicated office. A multi-family office or an outsourced set-up can run some functions. What a lighter structure cannot replace is in-house deal sourcing at scale, or a team the family wants under its own roof.

Sources

All pages opened and checked on 26 October 2026.

• Peter Vogel and Mario Marconi, Family Office Navigator: Your Guide to Building a Multigenerational Family Office, IMD International, December 2023 (ISBN 978-2-940485-37-6), a collaboration of IMD, the Cambridge Family Enterprise Group and the Family Business Network, pp. 36–37. Supports: the fourteen triggers that lead families to consider a family office, including status, regrouped and paraphrased here; the three tiers and verdicts are ours. imd.org
• Deloitte Private, “Defining the Family Office Landscape” (global edition), press release, 4 September 2024. Supports: an estimated 8,030 single-family offices in 2024, up from 6,130 in 2019, 10,720 projected by 2030; growth linked to wealth concentration, generational wealth transfers and private equity and M&A markets; 41% of family offices serve a first-generation family. deloitte.com
• UBS, “UBS Global Family Office Report 2025”, press release, 21 May 2025. Supports: 317 single-family offices in more than 30 markets; average net worth USD 2.7 billion; family offices focused on “preserving wealth across the next generations” (Benjamin Cavalli, UBS); 53% with wealth succession plans for family members in place. ubs.com
• J.P. Morgan Private Bank, “2026 Global Family Office Report”, February 2026 (333 family offices in 30 countries, average net worth $1.6bn). Supports: 86% without clear succession plans for decision makers; “most family offices are created to oversee investments” (report page); average operating costs of $0.9M for offices with $250M or less and $2.5M in Europe and the Middle East. privatebank.jpmorgan.com

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Pedro Souto is the founder of PWA — Private Wealth Advisory. He works with UHNW founders, families, and single-family offices to build an independent operating layer around complex wealth — combining markets, analytics, technology, and governance to turn fragmented advice into one coherent picture, and to make someone, finally, responsible for the whole of it.