There is a saying in the business world: "If you have seen one family office, you have seen one." Catherine Fankhauser of Ernst & Young points out that this is because family offices vary greatly in valuation, scale, and investment mission, making them almost impossible to simply categorize.

"If you look at family offices as a source of capital, it is not a homogeneous group," Fankhauser told CFO Dive. She is a partner and practice leader in Ernst & Young's family enterprise services business. "This can bring volatility."

Although family offices come in many forms, according to Fankhauser, Ernst & Young views them as businesses owned or operated for the benefit of a specific family, typically providing tax planning, legal advice, investment advice, and concierge services to that group.

Similarly, Bank of America defines a family office as a private company that employs staff to help manage family assets and needs. In 2011, the U.S. Securities and Exchange Commission (SEC) provided some clarity by excluding them from the definition of investment adviser.

The term "family office" might evoke images of a cozy, small-scale back office where retirees occasionally drop by to check in. But the 2021 collapse of Bill Hwang's Archegos Capital Management highlighted the scale and risk of this "lightly regulated" sector, according to a 2023 Congressional Research Service report.

In fact, many family offices are multi-generational organizations with substantial wealth, offering an attractive source of funding for financial leaders—though accompanied by unique challenges.

This group includes the family office of the Walmart heirs, reported by CNBC as the wealthiest family in the United States. These enterprises also span the globe, including AC Limited, reported by Bloomberg as the family office of Sheikh Mohammed bin Zayed Al Nahyan, President of the UAE and ruler of Abu Dhabi, whose trading team reportedly manages assets worth tens of billions of dollars.

Overall, the number of family offices globally is growing, with investable capital estimated by Fankhauser to be in the "trillions" of dollars. Meanwhile, over the past five to seven years, as markets have created new billionaires, the term "family office" has gained greater traction in public awareness, she said.

For CFOs looking to treat family offices as investors, there is a "duality" in how opportunities present themselves, Fankhauser said. On one hand, they can be idiosyncratic, but on the other hand, the advantage is that they are often not as regulated as some other investors. Additionally, they often provide more "patient capital" compared to the typical five-to-seven-year investment horizon common in private equity, as they do not have to answer to shareholders.

"They obviously want to achieve returns for family members, but they often consider longer time horizons than private equity or other types of vehicles or capital," she said.

Furthermore, the mission of a family office can vary from person to person and from generation to generation, said Joseph Medina, a partner in Ernst & Young's private tax group. This means you may need to navigate multiple time horizons within that group.

"An 80-year-old has a very different time horizon than an 8-month-old," Medina told CFO Dive in an interview. "So even within a family, you might say, 'This investment is great for our second generation, and this investment is great for our fourth generation.'"

Another typical consideration for family office investors is that they often focus more on the after-tax impact of certain investments than private equity does. "While taxes do not dominate decisions, they do influence investment philosophy," he said.

CFOs working with family office investors should ensure they understand the family office's expectations regarding reporting frequency—that is, how often they need to provide updates on investment progress, Medina said. This is important not only from a transparency perspective, but also because this information often needs to be available at specific times for tax compliance purposes, he said.

Fankhauser and Medina also offered some advice for CFOs pursuing family office investment, advice that perhaps all families can understand. Medina said to ensure your goals align with the family; they do not want to be seen merely as a "checkbook." Meanwhile, Fankhauser emphasized that protecting family privacy is crucial, and any information shared by the organization must not be disclosed.

Otherwise, "you can guarantee you won't work for that family office for long," she said.