There are different forms of family office and understanding the variations and the reasons for these is important for those working in the space.

The following article is from Gilles Erulin, founder of Westwick Melrose & Cromwell, a hands-on consulting firm that supports families with family offices in managing extraordinary challenges. The editors hope these insights about family office models are illuminating.

This news service regularly looks at how family offices are set up. For example, a few days ago, we examined how FOs' use of private equity affects the way family offices are set up. Back in 2021, we reviewed a book by Edward Marshall and Bill Woodson about family offices and all their different formats. 

Remember, these articles are meant to start conversations so please contact the editors with your own views. The usual disclaimers apply to view of outside contributors. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

In the next 10 years, an unprecedented shift in wealth will happen as trillions of dollars will move from one generation to the next. Referred to as “The Great Wealth Transfer,” this phenomenon will have a major impact on the way wealth is managed globally. Merrill Lynch research estimates that $84 trillion will change hands by 2045, with Baby Boomers passing on their fortunes to Gen X, Millennials, and even younger generations. Considering that 70 per cent of families lose their wealth by the second generation (G2) and 90 per cent by the third generation (G3), massive amounts of wealth and numerous assets under control are at risk of disappearing into thin air.

Has anyone among us lived through such a massive transfer? We doubt it. So how have families prepared for this, and with what long-term goal in mind? This question is worth exploring. For principals – the current holders of wealth and power – a family office is probably the greatest tool to plan and execute the transmission of assets to the next generation. Its role is to provide a centralised structure for holding and managing family assets, ensuring that financial, legal, and strategic elements are seamlessly coordinated. 

As discussed below, it can also be the tool for executing a power transfer in an organised way.

Additionally, family offices provide transparency and facilitate alignment among family members, which, as we all know, is the greatest threat to wealth preservation during transition moments. Family life, focused on preserving unity, applies equally to wealth. Unity may seem like a boring concept to many, but it is undisputed that disunity can be extremely costly.

The saying goes, “When you’ve seen one family office, you’ve seen ONE family office.” While they share a common set of characteristics in terms of purpose and modus operandi, a “family office” is not a standardised organisational model. It is a highly customisable entity designed to serve the unique needs of wealthy families or individuals. After analysing the multitude of frameworks now in existence, we concluded that principals can (and need to) choose from three main categories for their family office. Their decision typically depends on family dynamics and expectations regarding how the family will remain united – or not – after their passing.

1. Asset manager
The goal of this type of FO is to grow the family’s wealth for the benefit of both current and future generations, acting as a traditional collective asset manager. It oversees and manages diversified portfolios aligned with the family’s long-term goals and risk appetite. By recruiting an expert team and centralising asset management, the family office pools resources to navigate complex financial markets and invest in alternative assets such as private equity, real estate, or art.

This approach ensures that assets are professionally managed at minimal cost (the FO costs) while accessing diversification opportunities resulting from the unified pool of assets under management.

In this setup, family members determine the long-term strategy and act as ultimate decision-makers on portfolio allocation, relying on the expertise of a specialised asset management team. Occasionally, a family member may take on a more operational role within the asset management FO. However, such a decision does not (or should not) involve a power transfer component.

2. Wealth carrier
This type of family office is primarily dedicated to the transmission of assets that are, at least in part, intended to remain under the family’s control or ownership. This could include the family’s historical company, perhaps one carrying the family’s name, or assets that benefit from direct family involvement in management or oversight. Unlike the asset manager model, this structure focuses not only on regular distributions among heirs but also on maintaining long-term control.

These family offices play a critical role in preserving family operational knowledge and ensuring continuity. Unlike the third model described below, they are not designed to concentrate control in the hands of one family member.

By establishing a clear framework for long-term asset transmission, the FO (and its team) simplifies the operational, tax, financial, and legal challenges that accompany generational transfers. Separating the emotional aspects of succession from the technical management of one or a small group of controlled assets reduces the likelihood of poor or erratic operational management, especially during transition moments.

3. Dynastic succession
This model emerges when the current principal(s) want one or a very small group of heirs to retain full ownership of a family business. The principal(s) aim to keep the dynastic business tightly held, ensuring concentrated power protects what they expect to be a perpetual holding.

Heirs will naturally be divided between those who remain involved and those who exit. The remaining heir(s) are tasked with corporate oversight and the responsibility of extracting sufficient wealth or leveraging dynastic assets to generate distributable wealth. Departing heirs are progressively bought out, initially under the current principal’s watch and later by the chosen heir(s), based on a fair valuation mechanism designed to ensure equitable compensation for their entitlement.

This process usually takes 10 to 20 years and requires sustained efforts to create wealth separate from the “dynastic asset.” Dynastic succession is not merely about wealth transfer; it involves dividing wealth between passive wealth and controlling ownership.

Since this structure relies heavily on the remaining heirs’ skills and preparation, it is also the riskiest. It demands extensive foresight and decisions that are challenging to revisit a decade later. This approach is rarely, if ever, a late-stage strategy, as it requires a significant reserve of “non-dynastic assets” to be successfully accumulated over time. The more exiting heirs there are, the earlier – and more challenging – the process becomes.

In summary, deciding at inception – or very soon thereafter – what the key purpose of the FO is regarding transmission is crucial. The three models outlined here may not be exhaustive but they cover the vast majority of available options. This critical decision should primarily take into account family dynamics and the ability to remain united when the time for difficult conversations about succession arises.

About the author
With over 30 years of experience in corporate family office governance and management—including 26 years as a senior executive at the Pinault family office—Gilles has led a wide range of transactions, advisory mandates, and board roles. In 2013, he founded Westwick Melrose & Cromwell (WMC), a hands-on consulting firm dedicated to supporting families and their family offices.