The classic and essential task of a Family Office is to protect, preserve and develop the wealth of a family in the long term and down the generations. Alongside wealth management itself, the areas of activity for a Family Office can include the development of an investment and asset allocation strategy, wealth structuring, inheritance planning and risk management. Administrative functions mainly include reporting activities, be it to administrations or to family members.
Regulation of the Family Office
In the interest of ensuring a high quality of service and optimal client protection, the legislator has chosen to regulate the exercise of Family Office activities and the use of that title.
The law of 21 December 2012 relative to Family Office activities creates a legal framework for the activity of Family Office and reserves the provision of these services to certain categories of regulated professionals.
Luxembourg regulation is aimed exclusively at Family Offices which offer their services to several families or at entities belonging to several families (multi-family offices). The Family Offices created by one family or supporting one family do not fall within the scope of the law. The law is aimed uniquely at professional advice and services related to wealth management and structuring such as estate planning and administration, the co-ordination of service providers and the follow up or evaluation of their performance.
Activities relative to non-financial assets such as the management of buildings or collections of art or other precious objects are not, therefore, subject to regulation. Other activities that are not regulated within the framework of the law are family estate management arrangements that take the form of other legal entities. Such arrangements include the role of company agent, board member of a foundation, trustee, fiduciary agent or court appointed official.
The law reserves the exercise of Family Office services to the following regulated professions set up in Luxembourg:
- Credit institutions
- Investment advisors
- Wealth managers
- Specialised Financial Sector Professionals (PSF) approved as domiciliation agents
- Specialised PSF’s approved to carry out services such as the incorporation or management of companies
- Specialised PSFs approved as a Family Office
All other service providers who exercise the activity of Family Office as defined in the law have to obtain special approval from the supervisory authority of the financial sector (Commission de Surveillance du Secteur Financier – CSSF) with a Family Office specialisation.