While most business-owning families manage their personal wealth inside the operating company, there are factors increasingly prompting them to separate the two, according to research by the Family Office Exchange. 

FOX sees three factors driving this change: the retirement of the baby boom generation; a greater desire for income diversification; and increased awareness of non-investment risks.

“Business-owning families are aware of the risks of trying to manage personal wealth inside their companies but have not acted because they believe change would be difficult, they do not have family support or they are too busy operating the business,” Lisa Ottum, senior research analyst for FOX and lead author of the study, said.

The study, “Taking Care of Business: Case Examples of Separating Personal Wealth Management from the Family Business,” is the latest installment in an ongoing research series by FOX on ways for business-owning families to manage their personal wealth.

It details the steps involved in making a transition from managing family wealth inside the family business to setting up a family office or selecting an outside wealth advisor. It also identifies techniques and strategies that families have applied with success and provides the insight of advisors and family office executives who have been through the separation process.

“There are intermediate steps, such as creating a virtual family office or devoting one full-time employee to the family's personal wealth, that make the process more manageable and less overwhelming,” Ottum said.