How To Start A Family Office From Scratch in 2026

Boom, people, welcome back to the show. Today we're going to talk about how to actually start a family office. So in today's episode, we're going to go through what a family office is, what is a multifamily office, how traditionally a lot of them use trusts, but there's this new technique of using limited partnerships or funds to manage a family office as well. We're going to talk about how to actually pitch a family office, how to approach them if you want to raise money from them, how a family office is run internally, and finally, how the Rockefellers used a strategy to maintain their wealth over the last 150 years. Boom. 50, 200 years, while the Vanderbilts and other big families lost their fortunes by the second or even third generation. This is a crucial video for all of us that are going to be uber, uber wealthy one day and starting running family offices. But more importantly for today, it's good for you to understand how family offices work and how they are run. Hi everyone, my name is Bridger Pennington. We talk all things funds online, and as you guys know, we give away $100 to people who drop the best comment in our chat or something that I like, and I want want to pick up on. Today we're highlighting Ray Shine. Ray Shine has been diligent commenting on a lot of our videos, and he said this: can you please make a video on how to start a quant hedge fund? As you guys know, we have other videos on starting hedge funds or private equity funds or venture capital funds, how to build them, how to put them together. I've launched 2 funds in my 20s, looking to launch a 3rd fund right now. So Ray Shine, with your comment, ah, we can look into it. I think a quant hedge fund video would be pretty cool, how those are put together and how they are run. With that being said though, Ray Shine, you got $100 coming your way. Now, as some of you guys know my story, my dad is the co-founder of a deca-billion-dollar family of funds. And if you guys followed my story, I didn't know this growing up. We grew up in a very average household. I learned in college he was doing very well. And to this date, my dad has never invested in any deal, project, business, anything I bring him. I actually pitch him all the time and he never seems to want to invest. However, what he's given me is advice and mentorship, and I had a fantastic mentor to learn directly from. Additionally, my brother is a securities attorney, former chief compliance officer at an $800 million real estate fund, and right now has actually launched his own fund and doing very well. And none of us worked on Wall Street. None of us did the Ivy League route. We are just entrepreneurs that have figured out this beautiful game of funds, and we decided to start a YouTube channel and programs to help bring funds to the masses. So with that introduction, we've had actually quite a bit of exposure to family offices, how they run and how they work. So let's dive into it. So let's start off basic. What actually is a family office? A family office, all it is, is a wealthy family, and it's all of their assets and money and insurance policies all in one place. Now again, we can talk— that could be done through a trust, it can be done through a fund model, and actually other verticals as well. But again, In general, it's just a wealthy family. So let's say this family has $50 million. Now, as some of you know, once you make money, it's actually kind of a job to deploy that capital into good investments. Now, I know some of you watching like, hey, I would love that job to have a bunch of money and have the job of deploying my money into good things. And here's a little secret. If that's what you like, funds is the game. That's what funds are. And you can do this every day as a part of your job. So back to the whiteboard, $50 million family office. Usually, let's say they had a founder of some company, husband and wife. They made a lot of money. They dumped the money here and they want to live out their However, they want this money to continue to grow. As we all know, inflation is rampant right now, and so they don't want that to fall over time. So they want it to grow, but yet they don't want to spend all the time and effort to manage and watch all their investments. So what they do is they create an office for just their investments. Ta-da! Family office. They will usually hire a chief investment officer or a CFO and maybe another few other people to help manage. The finances of the family. They'll set up a philanthropic arm and a real estate arm and a stock arm and an alternative investment arm and gold and silver and it goes on and on and how much they're going to pass down to the next generation, all that kind of stuff they plan out and they hire people to run that for them. Typically, it's about 1% to 1.5% of assets goes towards the actual management of the family office. So, in this case, it would be anywhere from $500K to about $750K a year they would spend on hiring people to manage the family office. Now there's 2 different common types of family offices. You have your single-family office, SFO, or multifamily office. And I know you guys in the comments are going to make fun of different acronyms, but that's the acronym. All right. SFO, multifamily office. You guys can fly in the comments if you like, whatever. The difference between these 2, a single-family office runs by itself. They actually hire their own people. And those people manage the office internally. A multifamily office works with other families. So there's a group, maybe a family that has $30 million, another family has $100 million, another family has $10 million. They all group together and they hire one team to help mitigate the overall expenses of running that entire family office. And there are some groups that only do that for philanthropic work, just for education work, just for next generation. There's a lot of different ways this can get split out in the multifamily office universe. Now, one of the main concerns of family offices is to pass down wealth between generations. So you have generation 1, G2 and then G3, where it gets bigger and you hopefully want to pay for your kids' college tuition or whatever it is that you want to do. And you see some sad examples of this in history. Prince actually just recently passed away with over a $200 million fortune. However, he had no will or estate planning or family office to manage his finances. And when he died, they literally didn't know what to do with the money. So, the courts had to decide who to give the money to. They had over 40 people show up. And say that they were potential beneficiaries of the prince's fortune. The court finally ruled they split the money up between his 6 real siblings and 6 half-siblings because they honestly had no clue what to do with the money. Another example is the Vanderbilt family. Vanderbilt family was one of the wealthiest families on the planet. They did a relatively poor job of setting up family office and estate planning, and by the 3rd generation, all the money was lost and actually, there was a lot of very rotten kids that they had used as trust fund babies that were benefiting from this. So the question begs itself, number one, how do you set this up and then how do you set it up in a way that your generation 2, your kids or grandkids don't turn into trust fund babies and go in and out of rehab and just have terrible lives? We've seen this in Hollywood, we've seen this in a lot of places. People that are given money, lottery winners as well. Most lottery winners that win over $10 million are bankrupt. Within 5 years. And around 30% of them say they wish they had never won the lottery. That tells you something about the psychology of people and how money is managed. However, there is one shining example of a very great strategy, and it's from John D. Rockefeller and the Rockefeller family. John D. Rockefeller was the oil tycoon of Standard Oil and still one of the wealthiest people to ever walk the face of the planet. And to this day, his family still has a significant amount of wealth. When other families at the time, like the Vanderbilts and other families like that, lost all their money by the 3rd generation. So, let's walk through actually what the Rockefellers did and how you could potentially do that inside of your family office. Now, when most people think of family offices or passing on wealth, they think of a trust. A trust has assets. They have a trustee that manages those assets. They have a grantor, which is usually the wealthy individual. They grant the assets into a pool. They manage those assets. And then there's beneficiaries. Usually the second generation, the kids. That's where the term trust fund baby comes from, where the trust fund sends checks to these kids and it ruins their lives. And they get made fun of online and there's just all terrible things that happen and they usually turn out to be really rotten individuals. So I want to show you another way to set up this same structure, but hopefully won't produce rotten kids. And you can follow some of the principles the Rockefellers used to pass on their generational wealth. And guess what? It's through a fund. Bridger, why is everything in your world through funds? Because funds run the world. And I scream this from my channel, but funds run the world and you need to learn about funds and how they work. All right, I'm off my soapbox, but you get the point. Now I'm going to pull from what the Rockefellers did and other successful families that I've seen use these strategies. So instead of just sending your next generation just checks of $100,000 a month and saying, good luck, go have fun, they figured out it's not money that stops people. It's usually access to capital. We've quickly found out that doesn't work. But what these successful families said was, We want the next generation to have access to capital. If they want to go do entrepreneurship, if they want to go start a business, if they want to go to college, we want them to have access to capital inside of what's called a family bank. Now, the family bank or fund is run just like a regular private equity or venture capital or hedge fund. It has a general partner over here with an investment committee of maybe 4 or 5 or 6 individuals that decide on what investments to make. So if this is Bridger over here and I say, hey family, I want to go to college. I want to get some money to go to university. Can I just have some free money? They say, well, we're going to run that by our investment committee of 6 of maybe your aunts and uncles or grandpa, whoever, and they can decide if they're going to allocate that money to you. Now again, it's access to cheap capital is what we want to have happen. So instead of being gifted a few hundred thousand dollars to go to an Ivy League university, I number one can decide what university to go to and then I can get access to a student loan At a very cheap interest rate from the family bank. So the family, let's say the family gives me a loan of $200,000 at 0.05% interest rate. This is still a loan. It's not free money. I am given this loan to go to university and I have a note to pay back that money. Again, it's access to cheap capital. So if I want to go to a more expensive school, I'm going to have to pay a little bit more of the price to do so. Let's say a similar situation. I have a cousin over here that wants to buy a 10-unit apartment complex. And thinks it would be really fun. Instead of most family offices say, well, it's our cousin. He's a really nice kid. Let's just give him the money. Let's see how he does. You can come to the family bank. You pitch the investment committee of 8, again, of 8 of your aunts and uncles or cousins, whoever's on the investment committee, and they can decide again to lend you money based on your decision. It gives you skin in the game. So let's say I needed $3 million for this 10-unit apartment complex. The investment committee can approve that. They'll give the cousin $3 million. He can go buy those 10 units of apartment complexes and is still on the hook to pay them back. Yes, could he run away and would we go after him? Probably not. But if he ever wants to come back to the family bank, he's going to want to pay back that loan because if he takes the $3 million and runs, well, we're going to know, Joey, cousin Joey is a terrible guy. We're never going to lend to him again. And he's cut off. From the family bank. So, what this does, it incentivizes your next generation 2 and generation 3 and generation 4 to be entrepreneurial. It rewards those who take initiative, who bring great investments to the family bank or bring great ideas to the family bank, and they still have to pitch and close 6 individuals or 7 individuals on the investment committee To get anything allocated to them. You guys following along? Is this making sense? Is this kind of cool? So additionally, when someone knows you're in a wealthy family, that you always are going to get hit up by people, oh, can you donate to my charity? I've got a friend. I've got a buddy. I've got all this stuff. People are always got their hand open asking for money. And it's hard from your second or third generation to say no to those friends who want to go do whatever they want to do. It helps that second or third generation say, yes, we're open to working with you. However, I don't have any money. You have to come to the family bank and you've got to pitch the investment committee. If you can convince them, yeah, they'll donate to your charity or philanthropy. And what it does is it saves your relationship with friends and other people in your life that are asking for money. Because again, you don't control the money. The family bank or the family fund controls the money. Now, there's a few more parts that are so cool about this. So, Bridger, what if I die? What if it's my family office and I die? Well, great. Nothing happens. You're one of the investment committee chairs over here. You're one of the 6. That's you. You die. Everyone's very sad. They have a funeral and then they get over it very quickly. All the assets are in the family bank, the family limited partnership. And again, I should specify this is not a bank usually because a bank you'll have to get a charter from. This is a family limited partnership, just like a fund. All of our other videos talk about a general partner limited partnership relationship. This is a family limited partnership. If you die, all of the assets stay in the family limited partnership. And then they will elect a new member, maybe a cousin or an uncle or somebody that's shown promise to the investment committee. Additionally, this is such an amazing part. So if you've got grandkids and you want them to learn about finance and life and entrepreneurship, what can happen is let's say once a month, this investment committee meets of the 6 individuals. Well, you'll say, hey, you know, our grandkids, once you reach the age Of 13 years old, you can come listen in on the committee meetings. You have no voting rights, but you're allowed to listen in on how we're managing the family money. So at 13 years old, your granddaughter can sit in and listen on investing decisions on a 200-unit apartment complex. They can see how we think about things, how we vote on things, how we don't vote on things. They can start to learn. About entrepreneurship, about business, about real estate, about investing in small startups, about things we like to invest in, things that we don't like to invest in. It gives them access to this but doesn't give them the reward like a trust fund, and you're not creating trust fund babies. Boom! Isn't that kind of cool, right? So, your grandkids, your great-grandkids can start learning from the family. You have a committee, a group of people deciding on that with the family together, and no one has complete access to the money. Now, yes, can there be conflicts that happen? 100%. And that can happen in a trust and actually probably will more likely happen in trusts than other places. This is a great way to spread out the control of the family, not the money, but the control of the money between a lot of individuals and the vote determines what happens. So if you keep coming to the family and you're this drug addict and you're just lazy and you don't want to work, well, the family most likely is not going to vote to give you capital to go buy a new house or apartment complex or whatever it is. Additionally, if you show a lot of promise, If you actually do very well, you go to school, you do well, you might be able to get— be on the investment committee one day. And actually, sometimes the general partner will make a fee for running the investment committee. So maybe it's, you know, 0.5% or 1% a year these 6 members take for managing or running the family office. So they get paid a little bit of money. It keeps the lights on and the bills running for the people that showed promise. And again, it incentivizes This big family you have now that— because after the 3rd or 4th generation, your family gets pretty big. It incentivizes those members of the family to be smart, to be wise, to be good investors, to be prudent with money, to spur on entrepreneurship for them to get to have access to money, but not have the money themselves given to them. They still have to work for it in some degree. And that's where satisfaction in life comes from. Satisfaction in life does not come from getting a check from the government or getting a check from a family. Satisfaction comes from earning it. And what this does is give your family access to earn their way in. Now, this is a great time to remind you to like and subscribe this video or comment for $100 below. And it really does help this YouTube thing. It pushes out to more people. Now, Bridger, how much does it cost to set this thing up? It depends on how complex you want to go, but this can be as low as $3,000 or $4,000 or $5,000, somewhere in that range. Now, it can go as expensive as you want. It could be a couple hundred thousand dollars if you'd like to set this up legally. But at a very basic, simple level, I mean, you're looking at maybe $5,000 to get something like this, a general partner, a limited partnership set up. You'll set up an operating agreement here and a few other documents to manage your limited partnership. Again, I'm the Fund Guy online, and this is how funds are used in family offices. And this is where you can do philanthropic work and help other people throughout your family office. Thank you guys so much. I'm Bridger Pennington. Please subscribe and like this video below, and I'd love to see you on our other videos.