Setting Up a Family Office: Costs, Governance, and Investment Mandate

The decision to establish a family office is one of the most significant organisational choices a wealthy family can make. Done well, it creates an enduring institution that manages and grows family wealth across generations with coherence, privacy, and alignment. Done poorly, it becomes an expensive bureaucracy that consumes resources without adding commensurate value. This guide walks through the practical steps of family office establishment — from the initial cost analysis to governance design, investment mandate development, and the regulatory considerations that apply in different jurisdictions, as of 2026.

Is a Family Office the Right Choice?

Before committing to the cost and organisational complexity of a standalone family office, families should honestly assess whether the model is appropriate. The primary driver is usually cost-relative-to-assets, but other factors matter equally:

Complexity: a family with assets in one country, a straightforward investment portfolio, and a single generation of beneficiaries may be well-served by a private bank or multi-family office. A family with assets across five jurisdictions, operating companies, trusts, foundations, multiple generations of beneficiaries, and complex estate planning needs has far greater reason to centralise that coordination in a dedicated office.

Family alignment: a family office requires ongoing family engagement. If family members are dispersed, disinterested, or in dispute, the governance of a family office becomes a battleground. Families should resolve significant governance issues before establishing a permanent institution.

Long-term commitment: establishing a family office involves fixed costs, employment obligations, technology investment, and professional relationships. This is a 10–20+ year commitment, not a trial. The decision should be made with long-term intentions.

Step One: Cost Modelling

The first practical step is understanding what the family office will cost. Costs can be grouped:

Staff Costs

The single largest expense in most family offices is staff. A minimal viable SFO typically requires:

• Chief Investment Officer / Head of Wealth: responsible for investment strategy, manager selection, and overall coordination. A qualified, experienced CIO commands £200,000–£500,000 per annum including bonuses in the UK or equivalent major markets. For a truly senior appointment, more.
• Financial Controller / CFO: manages accounting, cash management, and financial reporting. £80,000–£150,000 per annum.
• Tax Manager or Senior Accountant: handles multi-jurisdiction tax compliance, working alongside external advisers. £80,000–£140,000 per annum.
• Administrator / EA: executive assistance and day-to-day coordination. £40,000–£70,000 per annum.

A four-person team at these levels costs approximately £400,000–£900,000 per annum in salaries alone, before employer's NIC (approximately 15% additional), pension contributions, healthcare, bonus provisions, and other employment costs. Total employment cost for a small team typically runs £600,000–£1.2 million per annum.

Larger family offices add: a dedicated risk officer, an economist or strategist, a technology officer, a philanthropy coordinator, an estate administrator, and lifestyle services staff. Mid-size SFOs can easily employ 10–20 people with total staff costs of £2–5 million per annum.

Technology and Systems

Family offices require technology for:

• Portfolio management and reporting: systems such as Addepar, BlackDiamond, or Masttro provide consolidated reporting across custodians, asset classes, and entities. Licensing costs range from £30,000 to £200,000+ per annum depending on scope.
• Accounting: dedicated family office accounting software (Dynamics, NetSuite, or bespoke solutions). £20,000–£60,000 per annum.
• Security / cybersecurity: family office data — including asset values, trust structures, personal information — is a target for cybercriminals. Professional-grade security infrastructure is non-negotiable. £20,000–£100,000 per annum.

Professional Services

Even with in-house staff, the family office will engage external specialists:

• Legal advisers across relevant jurisdictions
• Tax advisers for specialist work
• Auditors (annual family office accounts)
• Trustee professionals (where trusts are administered externally)
• Investment manager due diligence and research services
• Insurance brokers and advisers

External professional services for a well-run SFO typically cost £150,000–£500,000 per annum.

Premises and Overheads

Office costs (rent, utilities, IT infrastructure, insurance) for a small team in a major city: £50,000–£200,000 per annum.

Total Cost Summary

A well-resourced, properly staffed SFO serving a family with £100–500 million in assets will typically cost:

Component	Annual Cost Range
Staff	£600,000 – £2,000,000
Technology	£70,000 – £350,000
Professional services	£150,000 – £500,000
Premises and overheads	£50,000 – £200,000
Total	£870,000 – £3,050,000

Expressed as a percentage of assets, a £1 billion family might run a family office at 0.1–0.3% of AUM per annum. A family with £100 million managing costs of £1 million is spending 1% — roughly equivalent to a private bank's all-in fee — but for a fundamentally different and more bespoke service.

Step Two: Legal Structure and Domicile

The family office itself needs a legal home. Common structures include:

UK limited company: simple, familiar, low corporate tax (25% on company profits as of 2026). Commonly used for UK-based families. The company charges the family trust or individuals for services rendered.

Channel Islands / offshore holding company: some families domicile the family office entity in Jersey, Guernsey, or the Cayman Islands, particularly where significant assets are held offshore. Regulatory considerations apply.

UAE free zone company: for families with Middle East presence, establishing the family office entity in a UAE free zone (DIFC, ADGM) is common. The UAE has specific regulatory frameworks for single-family offices that exempt them from financial regulation provided they serve only the founding family.

Singapore variable capital company (VCC): Singapore has developed family office structures specifically designed to attract wealth management activity, including tax incentives for qualifying family offices managing investment assets.

The choice of domicile for the family office entity affects corporate tax on management charges, regulatory obligations, the location of staff, and the ease of engaging external advisers. Professional advice is essential.

Step Three: Governance Design

Good governance is the difference between a family office that endures across generations and one that becomes a source of conflict. Key governance elements:

Board and Oversight

A formal board (or investment committee) provides oversight of the family office's activities. This may include:

• Senior family members
• Independent non-executive directors with relevant expertise
• The family office CEO or CIO (typically as an executive director)

The board sets strategy, approves the investment mandate, oversees risk management, and ensures the family office serves the family's long-term objectives rather than becoming entrenched in its own perpetuation.

Investment Committee

Separate from the board, an investment committee provides day-to-day oversight of investment decisions. A well-constituted investment committee includes the CIO, senior family members with genuine investment interest, and ideally one or two external investment professionals providing independent challenge.

Segregation of Duties

As with any financial institution, effective internal controls require that no single individual has unchecked authority over both investment decisions and cash movements. Even small family offices should implement dual-authorisation for payments above a threshold and regular independent review of portfolio valuations.

Family Council

Separate from the governance of the office itself, many families establish a family council — a forum for all family members (across generations) to engage with the wealth, understand the family's financial situation, and participate in decisions about its use. The family council is the mechanism through which the family office remains connected to the family's values and evolving objectives.

Step Four: Investment Mandate

The investment mandate is the formal statement of the family office's investment philosophy, objectives, and constraints. It should be:

Specific about objectives: capital preservation? Real returns above inflation? Income generation? A specific target return? Different family members may have different views; the mandate must reflect the family's agreed position.

Clear about risk tolerance: what is the maximum drawdown the family can withstand? How is risk measured and monitored? What leverage (if any) is permissible?

Asset class guidance: what asset classes are included in the strategic asset allocation? What are the ranges (minimum and maximum) for each asset class? Is there a liquid/illiquid split target?

Manager selection criteria: how are external investment managers selected and monitored? What are the minimum track record, AUM, and operational quality requirements?

ESG and ethical constraints: are there sectors or activities excluded on ethical grounds? How is ESG integrated into manager and security selection?

Liquidity requirements: how much of the portfolio must remain in liquid assets to meet family spending needs? What is the investment horizon for illiquid allocations?

Currency policy: how is currency risk managed? Is hedging permissible? What is the base currency of the portfolio?

The investment mandate should be reviewed at least annually and updated when family circumstances change materially.

Step Five: Selecting and Onboarding External Managers

Few family offices manage all investments in-house; most delegate execution to specialist external managers while maintaining oversight internally. The manager selection process should be rigorous:

• Request for proposals with standardised questionnaires
• Quantitative analysis of track records on a risk-adjusted basis
• Operational due diligence (prime brokers, auditors, compliance)
• Reference checks with existing institutional investors
• Terms negotiation (management fees, performance fees, reporting standards)
• Ongoing monitoring with defined performance review triggers

Regulatory Considerations

In most jurisdictions, a family office that manages only the founding family's assets is exempt from investment management regulation. However:

• UK: AIFMD and FCA authorisation may apply if the family office manages discretionary portfolios or acts as an alternative investment fund manager. HMRC employment obligations apply to all UK-based staff.
• UAE: DIFC and ADGM have specific family office frameworks; regulatory registration (even at exempt level) is recommended.
• EU: AIFMD and MIFID II have implications for family offices managing assets in EU jurisdictions.
• US persons: US regulatory requirements (SEC investment adviser registration at certain AUM levels) may apply regardless of family office location.

How Global Investments Can Help

Global Investments supports families contemplating or in the process of establishing a family office at every stage — from initial cost analysis and domicile assessment to governance design, investment mandate drafting, and manager selection. Our international perspective is particularly relevant for families spanning multiple jurisdictions who need the family office structure to function coherently across borders.

We can also act as an outsourced investment function or family office director for families at an earlier stage of wealth — providing the professional oversight of a senior investment professional without the full cost of an in-house hire.

This guide is for general information only and does not constitute financial, legal, or regulatory advice. Costs and regulatory requirements vary significantly by jurisdiction and family circumstances. All figures reflect our understanding as of 2026 and are indicative only. Always seek professional advice specific to your situation.