There has been a notable increase in the number of family offices being established across the world over the past 10 years. It is a trend that is gaining more and more attention but one that people still have plenty of questions about. Here, Siobhan Riley, head of Carey Olsen's trusts and private wealth practice in Jersey, puts answers to some of the most pertinent family office queries.

Why were family offices first established?

The roots of family offices are recorded as early as the sixth century and involved managing royal wealth. The aristocracy across the ages have also recognised the value of the stewardship of family wealth seen most vividly with family offices used to run landed estates.

The New York Times reports that the Rockefellers first pioneered a more modern family office in the United States in the late 19th century. The family office that they founded is still in existence although it now manages billions of dollars in assets for a range of families, individuals and institutions and not just for family members.

The reasons for creating a family office remain relevant to this day. It helps with the efficient and orderly management of a family's wealth and insulates the family from having to deal with that administrative burden.

With the right support team the family office provides peace of mind that the family's affairs are being well-managed. A good family office will shield the family from having to deal with multiple professionals about multiple issues and will also help the family take informed decisions about their strategic priorities whether in relation to their wealth, their well-being or their cohesion as a family.

What are the different kinds?

Some family offices exist only to support the lifestyle of a family and are therefore known as providing 'concierge' services. Those offices primarily concern lifestyle management and personal assistance and can include emergency dog-walking when required!

More commonly now and certainly for more business-orientated families, a single dedicated office is usually set up to help co-ordinate (in the main) investment. Lifestyle support may be provided as part of the family office's services but it is not the main focus of its work.

Just as the Rockefeller family office started off as a single-family venture, family offices run well usually attract interest from wealthy friends and business associates who desire a similar level of service and support for their own financial affairs. If the family is amenable, a single family office can evolve into a multi-family office which then shares running costs.

Some 'self-styled' multi-family offices are established as such from day one and tend to be niche trust company businesses with very experienced personnel who have elected to serve only a small number of very high net worth clients. They can still provide a family with an excellent, well-priced service managing both the financial and lifestyle affairs of the family.

What has led to their increase in numbers in recent years?

The increasing complexity of tax reporting and the burden of regulatory compliance is certainly one aspect that has led to an increase in the number of family offices being established. Families need bespoke assistance to help manage their affairs across a number of different jurisdictions and it is often more cost-effective and less stressful for the family office to manage that ongoing process than for family members to try to co-ordinate that process themselves with the help of various third parties.

Historically, these matters were simpler to manage. Families tended to live in one or two locations and reporting requirements were more straightforward and could be managed by the finance arm of the family's business. Reporting requirements are now so extensive and specialist this is no longer viable or advisable from a risk perspective.

This can be particularly difficult and time-consuming for large families which have multi-horizontal and vertical strands where it can be extremely time-consuming for one or more of the family members to co-ordinate the team of advisers needed to ensure the family's affairs are properly planned and correctly reported to relevant authorities.

Preserving the wealth of a family is difficult even when a family get on well and have shared beliefs about wealth management. It is even more difficult if there is no common ethos shared by the whole family about how the wealth is to be used. Some families react very strongly to ostentatious shows of wealth by family members; others have no such inhibitions and the family's wealth is spent at a furious rate without much regard to its longer-term preservation or replenishment.

Many families train their young to be good stewards of the wealth and to understand the responsibility and privilege which comes with having a lot of money. Family offices can be used to help reinforce and encourage those common values.

The family office can also help to educate and indeed regulate certain of the activities of family members particularly where there is concern that certain behaviours from one or more members of the family will cause the wider family reputational damage, or indeed where excessive spending is risking the longer term financial security of the whole family.

These sorts of discussion amongst family members can be emotionally charged and can be very difficult for families to manage from within. Experienced family office personnel can help raise these sorts of sensitive issues in a non-confrontational way and help steer the family toward an agreed protocol on conduct or levels of expenditure to help diffuse disagreement before it becomes more damaging to family relations.

What role has Jersey played in this growth?

Jersey is an ideal location for family offices for a number of reasons. The island has a prime location geographically, being almost equidistant between the Americas and Asia, lending itself to maximise investment windows within each of the market time zones and also to be on call for family members whichever side of the world they happen to live in.

Jersey also has a very large community of professionals such as accountants, trustees, investment specialists and lawyers which provides a strong pool of candidates from which to select a family office team.

Will HNWIs abandon using traditional trust company businesses in favour of a family office?

There's no expectation that they will be abandoning traditional trust companies as such because trust company services still provide a cost-effective way of managing a family's affairs without needing to rent exclusive space or hire dedicated staff.

We do however see families consolidating their affairs into Jersey because it is easier than dealing with three or four different service providers. We also see families wanting to hand-pick staff they know and trust and they enjoy receiving exclusive service from the professionals they employ.

How do you think the family office will develop in the future?

It is likely that the number of family offices will continue to increase in number and will evolve into even more sophisticated organisations than they are already. Some family offices are already starting to look like multi-disciplinary partnerships of expert accountants, lawyers, tax advisers, compliance professionals and investment consultants.

There is also the possibility that family offices will increasingly become the enforcers of the family's values and will help to educate the family's young and manage non-financial issues such as cybersecurity, well-being and the family's media profile.

How are they regulated and are any regulatory changes imminent?

The regulation of family offices in Jersey is relatively light-touch, after all it is the family's own money which is being managed by the family office.

Given their prominence and increasing importance to Jersey's economy, the status of family offices will be kept under review to ensure that Jersey offers a suitable framework with an appropriate level of reassurance to the families seeking to establish offices here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.