The History of the Family Office

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The original U.S. family offices were created by wealthy merchants early in the 19th century who hired trusted comrades or advisors to oversee their wealth and provide for their families while they were traveling.

Traditionally, a family office was a private group of advisors and staff hired to work exclusively for a family of wealth. These were the first fiduciary relationships. They represented the foundation for the relationships provided by bank trust officers, which blossomed during the Industrial Revolution.

In 19th century America, most wealth was in the form of local business ventures or real estate and was easily managed by its owners. There was little available in the form of cash instruments.

After the signing of the Buttonwood Agreement in 1792, the New York Stock and Exchange Board (later to be renamed the New York Stock Exchange) was founded in 1817.

The establishment of the Federal Reserve in 1913 gave stability to the growing financial markets, which contributed greatly to restoring prosperity in the United States during this great industrial period. By the beginning of the 20th century, the securitization of more and more large companies initiated a shift in the creation of wealth.

Publicly traded securities grew to include railroad companies, banks, insurance companies, and mining companies. Some entrepreneurs became executives of the new large corporations that were springing up, while others continued to grow their businesses or start new ones. Both types of entrepreneurs had built up enough capital to invest in other companies, which diversified their holdings and contributed to the growth of liquidity in the market-place.

As early as the mid-19th century, the pioneering entrepreneurs found themselves immersed not only in the day-to-day operations of the larger-than-life businesses they had built, but also inadvertently in the business of managing the by-product of those businesses – their enormous wealth.

The businesses they founded grew to require more and more of their time. Wealth management was becoming an increasingly involved process and the entrepreneurs had neither the time to give nor the expertise required for successful management.

This eventually led to the creation of the separate legal entity known today as the Family Office.

Today, family offices provide services ranging from all forms of wealth management; tax, estate, and succession planning; trust management and services; and personal services including walking the family dog, hiring nannies for the children, keeping the family calendar, and managing vacation properties, yachts, and, yes, even racing cars!

It used to require about $200 million in assets to be able to afford a traditional family office. Today, that number is closer to $500 million.

Technological advancements, rising costs, and regulatory restrictions imposed by the Dodd-Frank Act have led to the creation of new options for families who need family office level services.

Aspen Family Office combines the best of those options to offer you a streamlined, yet highly customized offering that enables us to provide personal attention and services on demand.

*The History of the Family Office is excerpted with permission from “The New Family Office: Innovative Strategies for Consulting to the Affluent” by Lisa Gray, Euromoney Books, London, UK, 2004.