PERSPECTIVE3-5 min to read

From a family business to a family office: when is it time to make the transition?

The services of a family office can play a valuable role when business owners start to think about their family’s long-term wealth strategy.

Large family stands in a line on the beach watching the sunset


Charlotte Filsell
Head of Family Office Services

The sale of the Provincial Insurance Company in 1994, after almost a century of family ownership, marked the beginning of a new era for the Scott family. Until this point, the family’s wealth had largely been managed by the Cumbria-based insurance business. After the sale, however, the family found themselves with no natural means of managing their newly-liquid wealth.

Over the following year, Alexander Scott, now Chairman of Schroders Family Office Service, reviewed the family’s options. He set up the Sandaire multi-family office, identifying an opportunity to join together with other families to hire talented professionals from across the full range of investment disciplines. Sandaire was sold to Schroders in 2020. Scott took comfort from the Schroder family’s continued involvement in the firm, helping it to retain the culture of a family business.

The path to a family office tends to look very different for different families - as does the end result: “once you’ve seen one family office, you’ve seen one family office,” as family office advisers often say. A business sale can be a catalyst for the transition, but this is far from always the case. Family offices can come into being almost by accident, as families hire individuals to look after investments, homes and other assets.

“It’s not simply about reaching a certain level of wealth - it's more a question of when a business owner starts to think and act beyond the confines of the family business, either financially or organisationally.”

Alexander Scott

Ideally, however, they should be the outcome of a more considered thought process about what a family’s future might like look. “It’s not simply about reaching a certain level of wealth,” notes Scott. “It's more a question of when a business owner starts to think and act beyond the confines of the family business, either financially or organisationally.”

Beyond the family business

In its simplest sense, this can be about creating a clearer distinction between a family’s business and its wealth. “There comes a time when it becomes awkward to have your personal wealth and business integrated,” suggests Scott. A family office allows the managers of an operating business to focus on what they do best, while the family office can hire the more specialist wealth management expertise it needs.

There are likely to be bigger, strategic considerations too. Family businesses can be incredible engines for the growth of a family’s capital. However, in most cases, there comes a time when a business owner needs to start thinking about the long-term strategy for that capital.

One key consideration is diversification, which was one of the motives for the sale of Provincial. “We realised that the risks we were carrying by owning a single company were inconsistent with our state of evolution as a family,” says Scott. Alternatively, a family may find itself with capital that is excess to the needs of the business and create structures to manage it. “This requires direction and oversight, especially if a family’s energy is still focused on the operating business.”

A family office is not the only way to deal with these issues. There are strategies to diversify wealth, for instance, that do not require a family office. However, the flexibility and resource that comes from having an experienced, specialist team focused on serving the long-term needs of your family mean they can be an invaluable part of any solution.

What kind of family office?

Setting up a private family office is not a feasible option for most families, given the costs involved. “Realistically, you need an asset base in the hundreds of millions for it to be worthwhile,” reckons Scott. It’s not just a question of cost though. “Someone in the family has to take responsibility for overseeing it. The founder of a family business may be happy to take this on. But will his or her children and grandchildren?”

In many cases, it will be more appropriate to employ the services of a family office rather than set one up. The multi-family office, which Scott pioneered in the UK, is one way to go about it. It allows clients to reach the scale required to hire talented investment specialists as well as the additional services they may need – such as reporting, administration and philanthropy advice.

Schroders Family Office Service offers an alternative – or complementary – approach. It provides clients with tried-and-tested investment and wealth management expertise and is far more cost-effective than a single family office. It also offers the depth of resource and stability of the Schroders group. “Many of our clients have sufficient wealth to justify a single family office, but they don’t want the burden of setting up and managing another business,” explains Scott. “The Schroders team effectively becomes their family office.” By design, the service is very flexible, allowing clients to opt for a more hybrid approach. “Some of our clients use us as an extension to their existing family office. They may use their in-house team in areas where they have particular expertise, while outsourcing other services to us” adds Scott. In addition to investment, this could include areas such as wealth planning, philanthropy and advice on family governance.

Family capital

For business families, a family office service comes with many practical benefits. It can free up time for founders, allowing them to focus on the operating business or other interests. It can cater to the wealth management needs of individual family members, which over time can grow to a large number of people. And it provides a more holistic perspective on a family’s wealth, including and extending beyond the operating business and investment management.

“If you're fortunate enough to inherit substantial capital, you need to bear some responsibility for it. At the same time, family members need the freedom to explore their own potential.”

Alexander Scott

A successful family office service can, however, take on a far more significant role in the evolution of a family. A centralised team, along with effective governance, increase the likelihood of family wealth remaining intact over successive generations, providing unity and a sense of common purpose. Trusted family office staff can act as a valuable external voice in family debate, bringing an objective perspective and helping to defuse tensions. They can also advise on the structures put in place to manage the family’s operating business and other assets. Whatever form these arrangements take, they should be designed to help the family make good decisions: “If there is no formal governance in place, sibling-parent-child relationships can get in the way of good decision-making” Scott points out.

For Scott, a family office is fundamentally about managing what he calls “family capital.” “It’s not just financial – it’s also human,” he notes. “If you're fortunate enough to inherit substantial capital, you need to bear some responsibility for it. At the same time, family members need the freedom to explore their own potential.” A well-designed family office service can shoulder much of this responsibility, granting a family the freedom to take on as much – or as little – as it wants. The stakes could not be higher. “At the end of the day, being able to achieve one's potential is what makes us happy,” Scott concludes. “It certainly isn't just money.”

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.



Charlotte Filsell
Head of Family Office Services


Family offices
Business owners

Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at 40 Esplanade, St. Helier, Jersey JE2 3QB, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.