Family Offices Industry History

Family Offices Industry History

Free Video on the History of Family Offices

In the following video, recorded in Switzerland, I speak about the booming growth of the family office industry and trace the industry's history.  The more conferences on family offices that I speak on and the more interviews I conduct with family office managers for my upcoming book, the more that I realize how important this investor is to the hedge fund industry.

I predict a continued surge in the family office industry making family offices even more important to hedge funds looking to raise capital and find new investment partners.   With that in mind, you should watch this video to become more familiar with the family office industry and how it has developed. If you are reading this via RSS or email, 
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Transcript for History of Family Offices

Hello, this is Richard Wilson coming to you from the Swiss Alps here in Switzerland. I’m actually in town to speak at a family office conference. I’m traveling from Zurich to Liechtenstein and I thought it was only appropriate to record a video here at about 10,000-feet elevation since I’m often trying to provide a 10,000-foot view of the family office industry. And today I wanted to talk to you about the history of family offices; how they got started, what’s the background behind them and how they are the way they are today.

So first of all, if you think back the word “family office” hasn’t always existed. But it really originated from thousands of years ago. If you had the king cavemen or even before that, they just look at animals and how they protect their land and protect their resources, and they’re territorial, we think back the cavemen, the biggest caveman, leader of his tribe. You know he might have had a bigger cave and more extra firewood and furs or whatever. And he probably had some protection while he was gone. He probably didn’t leave there in the open while he went off hunting or something.

From there I really think you can go to kind of the renaissance era or kind of the dark ages’ type era where people had lands and there were nobles and kingdoms. If you think about it, a noble, when he went and traveled to go off and marry some other noble’s daughter, he probably didn’t leave his land with no one there, someone was trusted to protect it.

And I recently learned from Thomas Handler, a trust in the States Executive in the family office space, actually the word “trust” and the whole concept of a trust being set up is backed during those times when somebody would appoint someone in charge of looking over their lands and belongings while there were off traveling, then they would appoint somebody else to make sure that this first person did their job. And if they weren’t doing their job there were supposed to kill them or get rid of them and replace them and have someone else who was trusted to watch over everything.

And that’s really how the word “trust” came about. And if you’re not familiar with that already, private banks were sometimes called Trust. It could be called Trust Services and Private Banking Services, and really that’s where the word trust came from when you’re setting up a trust. And it’s partially where the word trust came from. And so from there, it really evolved in the 1800s and the 1900s with big families like Rockefeller and families that made a lot of money in the oil business and the railroad business and the industrial revolution, and they started having so much money in the current financial system. It was more about paper money than it was about goods or land, and it was really about protecting and reinvesting the paper money.

And that’s when the modern family office started to really develop. It still wasn’t called the family office. Many times this was the beginning of private banks and trust services in a more modern form instead of having just somebody trusted with your assets is more of a modern form of private banking, but nobody really use the term family office. It was really private banking for very wealthy families. Late in 1800s and early 1900s, these became more popular. In the mid-1900s, the first uses of the term single family office or family office started to be used. It picked up steam a bit in the 1950s, 60s and 70s.

And in the 1970s private banking was already relatively popular, that’s when people started realizing that they could manage the wealth of 1 or 2 other families in addition to their own. And so the term family office grew in definition from managing one family’s wealth to managing a few families wealth that maybe are involved in the same operating business or a very strong long term ties. From there, the term further evolved and has resulted in a lot of confusion in the industry. Some people believe that it’s not a family office unless it serves only 1 family or 2 or 3 families at the very most but really just 1 family. Otherwise, it’s not a family office.

But the reality is that modern day, a single family office is that which serves 1 family or maybe 2 at most, and a multi-family office is a family office that serves 2, 3, 4, 5 families or sometimes hundreds of families. I just interviewed a family office that works with over 425 clients. Many various successful family offices only have 50 or 100 or 150 clients and they’re very successful in doing that because every client has $20M, $50M, $100M to manage so their assets are enormous even if they only have 50 clients many times. Many family offices require $20M, $30M, $50M or much more to join their family office. I think that’s important to know about the history of the industry and where it’s at right now in the past. You had to have more wealth. Now from $30M and $50M, it’s down to $15M and $20M, and $20M is really where most family offices require you to have that amount of money.

And really to summarize, it has always been about the protection and preservation of assets and secondarily the growth of assets and the efficient taxation and income that can come from those assets and that really has been true for the last couple of thousands years if you think about it. And it has changed the most over the past 100 years, and I think this industry is really thriving right now because people are actually getting familiar with what it means to be a family office, more people than ever are having enough wealth to use family office services and become ultra affluent. And I think that the family office trend is not slowing down at all. So I have a separate video on the future of family offices. I would encourage you to watch that.

If you haven’t been to I would encourage you to visit our website, and thank you for joining me today. This is Richard Wilson from the Family Offices Group coming to you from the Swiss Alps.

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