Are Family Offices Trading Freedom for Structure?

A theme that comes up regularly is the shift from what were once loose, family-orientated setups to the structured professional outfits we see today. As the capital managed by family offices has grown, so has the sophistication of the industry around them.

Banks and consultants now publish surveys highlighting improvements in governance, asset allocation, and institutional-grade risk management. But this evolution is not universally seen as progress. Some longtime practitioners say they were in the business before the term “family office” even existed — and question whether this shift ultimately benefits families.

Last week I spoke with Gilles Erulin, one such veteran. He spent just over twenty-six years as a senior executive at Groupe Artémis, the family office of François Pinault, where he worked on major acquisitions through Kering, including Gucci and Yves Saint Laurent.

“At the time nobody called it a family office. In 1993, that word didn't even exist, he just needed someone to handle whatever was reaching his desk every morning,” he told me. “I've more or less covered every single kind of bizarre situation.”

Erulin now runs Westwick Melrose & Cromwell, a firm he founded in 2013 to help families navigate extraordinarily complex challenges. The firm’s slogan is, “we get things done,” and it is typically brought in when others have failed. Over the past two years, it has expanded to meet rising demand, which Erulin attributes in part to the growing professionalization of the family office world. While he calls it an “amazing phenomenon,” he also urges caution.

“I am not sure it is a benefit for the family, I would say it is endangering the freedom of families and family offices,” he said. “The market is evolving, and who's making that noise about evolution? It's the usual suspects, the big financial market advisors that worked out the private equity world was saturated, and that families are actually the new golden geese of the investment world.”

Erulin points to the growing number of financial firms — from banks to actuaries to pension consultants — that have built dedicated family office teams. Each is competing for mandates and encouraging families to adopt more institutional practices.

“What makes families strong is their absolute freedom to deploy their money as they see fit, when they see fit, and under the terms and standards they want,” he said. Erulin argues that lawyers, accountants, advisors and others are encouraging them to institutionalize.

For Erulin, family offices are not institutions. They should have no obligations to any third parties and serve only themselves.

Institutionalization, he argues, has become a process that is difficult to resist. Executives recruited from private equity firms, major law firms, and other established organizations may also import those organizations’ frameworks and constraints.

“Why does a family need totally independent third-party advisors to make decisions on their own investments, nobody knows. But that's the way they're thinking.”