At NH Management, we have observed the evolving needs of families over multiple generations, having managed both single-family and multi-family offices for over twenty years. Our experience with first to seventh-generation family members reveals that a family’s unique circumstances and needs dictate the complexity and structure of their family office.

The concept of a product life cycle, theorized in the 1960s by Raymond Vernon, has become a cornerstone of modern marketing. Similarly, we have identified a life cycle for family offices that aligns closely with the stages of a wealthy family’s evolution. Understanding this correlation can help private wealth practitioners effectively complement the services that a family office offers.

Stages of the Family Office Life Cycle

Stage 1: The Entrepreneurial Business Family

• • Description: At this stage, the family is cash-poor and time-poor, with the majority of their wealth tied up in the business. The founders are deeply involved in increasing the business’s value.

• • Family Office Impact: Limited need for a dedicated family office; reliance on external advisers such as lawyers and accountants. Financial directors of the business may handle some family office functions.

Stage 2: The Wealthy Business Family

• • Description: The family experiences shareholder events that create liquid wealth, though a large portion remains invested in the business.

• • Family Office Impact: The need for a family office grows as the family seeks to manage overall wealth, plan for the future, and de-risk or hedge concentrated assets.

Stage 3: The Diversified Wealthy Family

• • Description: The family’s assets are diversified beyond the original business, and the founder actively oversees investments.

• • Family Office Impact: Requires significant day-to-day support for diverse investment activities and ongoing management by trusted advisers.

Stage 4: Pre-Transition of Wealth

• • Description: The family head becomes less active, focusing on enjoying their wealth and planning its transition to the next generation.

• • Family Office Impact: Shift towards preserving capital and using external managers. The family office manages wealth transition issues.

Stage 5: Post-Transition of Wealth

• • Description: The second generation inherits the wealth, deciding whether to invest together or independently.

• • Family Office Impact: The family office’s role depends on whether the family chooses to stay together. It can provide continuity and support or transition to external advisers if interests diverge.

Stage 6: Multi-Generational Family

• • Description: The family invests communally or splits based on interests. The family office may evolve into a business owned by the family.

• • Family Office Impact: The family office could become a standalone business serving multiple generations or dissolve as family members pursue individual paths.

Impact on Private Wealth Professionals

Private wealth professionals, including trustees, accountants, lawyers, and investment managers, play a crucial role throughout the family office life cycle. They may advise families as their needs grow more complex and eventually succeed family offices when families become less active. Recognizing the current and future life cycle stages of a family is vital for tailoring advice and ensuring long-term relationships.

Download the Family Office Formation Guide

Every family office is uniquely tailored to meet the demands of a specific client family. There is no one-size-fits-all approach. To provide clarity and address key considerations for establishing or operating a family office, NH Management has produced “A Guide to Family Offices in the UAE” Download the full guide via the form below to access expert insights and practical advice.