Family office in Luxembourg, administration, reporting and coordination.

Single family office or multi-family office: which model for which estate?

A single family office serves one family and brings the functions in house: administration, consolidation, manager selection, tax and legal coordination. A multi-family office shares those functions across several families. Between the two sits a hybrid model, often the most efficient one, in which the family keeps the decision and outsources administrative and accounting execution.

The choice is settled on a cost structure. Custody, management and brokerage fees are expressed in basis points and grow with assets. Family office costs are mostly fixed: staff, systems, vehicle administration, accounting, governance. The total cost ratio therefore falls mechanically with size, and the internalise-or-outsource question reduces to a break-even calculation on the fixed block.

In practice, a fully staffed office only makes sense above a substantial estate, commonly cited by the market at several tens of millions of euros at minimum, and considerably more where the family wants an in-house investment team. Below that, outsourcing administration produces the same operational result for a fraction of the fixed cost.

That is the model we operate on: FSL handles administration, accounting and consolidated reporting of the vehicles; investment decisions, investment advice and discretionary management stay with the parties holding the relevant licence. That separation of functions protects the family against conflicts of interest: whoever administers and consolidates the reporting has no stake in the choice of investment vehicles.

Which structure for a Luxembourg family office: SPF, SOPARFI or services company?

The question comes up every time, and the answer depends on the nature of the assets, not on the size of the estate.

The private wealth management company, governed by the law of 11 May 2007, is reserved for eligible investors: individuals acting in the management of their private wealth, wealth entities acting for such individuals, and intermediaries acting on their behalf. Its object is strictly limited to acquiring, holding, managing and realising financial assets. It cannot carry on a commercial activity, cannot hold real estate directly, and cannot interfere in the management of companies in which it holds a participation.

On the tax side, the SPF is exempt from corporate income tax, municipal business tax and net wealth tax, and in return bears a subscription tax of 0.25% on paid-up capital plus share premium plus debt exceeding eight times that capital, with an annual cap of 125,000 euros and a minimum amount revised periodically.

The decisive point lies elsewhere, and it is almost always underestimated: the SPF is excluded from tax treaties and from the parent-subsidiary directive. In practice, withholding tax levied abroad on incoming dividends becomes a final cost. On an international securities portfolio, that gap frequently exceeds the Luxembourg tax saving. An anti-abuse rule also penalises holdings in non-resident companies that are not subject to a comparable tax.

Where the family holds active participations, real estate, or assets generating treaty-covered dividends, the SOPARFI or an ordinary holding company becomes the relevant tool again, despite being taxable, precisely because it accesses the treaties. Many family estates combine the two, each on the perimeter where it is efficient. We produce that comparative costing as part of private wealth structuring.

What reporting can you expect from a Luxembourg private bank for a family office?

A Luxembourg private bank provides a standard base: portfolio and custody statement, transaction statement, performance report, and cost information. MiFID II further requires cost information before and after investment, an annual aggregated statement of costs and charges, periodic reporting for discretionary management, and an alert when the value of the managed portfolio falls by a set threshold.

That base is useful but it does not amount to family office reporting, for a structural reason: the bank reports per account, in its own format, on its own perimeter. A family with three banks and four vehicles therefore receives a dozen heterogeneous, unreconciled documents, none of which answers the only question that matters: what is the consolidated exposure of the estate, by asset class, by currency, by entity and after tax.

Two items should be negotiated at onboarding rather than afterwards. The first is the tax reporting pack matching the countries of residence of the family members: it is not systematically included, some banks produce it and others do not, and asking for it after the fact often means changing bank. The second is access to a usable data feed, a structured statement or an interface, which determines whether consolidation can be automated. Obtained at onboarding it costs a clause in the agreement; requested two years later it becomes a project.

On top of that sits a legal obligation many families discover late, the automatic exchange of information: the bank reports the relevant accounts to the tax authorities of the countries of residence. That point deserves to be anticipated when the structure is designed, not discovered when a letter arrives.

Multi-bank, multi-entity consolidation is no bank's job. It is precisely the function we perform, upstream of the private bank's work and without substituting for it.

How to choose a family office's bank: the criteria that actually decide

Public rankings of private banks are a poor instrument for a given family, and it is better to say so plainly. The constraint that determines the outcome is almost never the quality of the institution, it is acceptance. Nationality and residence of the beneficial owners, a member connected to a sensitive jurisdiction, the type of holding vehicle, the nature of the assets: those parameters lead an excellent bank to decline a file that another will handle without reservation. A generic ranking therefore carries no usable information about a specific case.

Seven criteria decide in practice. The entry threshold actually applied, often higher than the published one. Acceptance of the holding vehicle, some institutions declining to onboard an SPF or a structure controlled outside the European Union. The capacity to hold unlisted assets, private equity, directly held real estate, alternative assets. The availability of lombard credit against the portfolio and its real terms. The tax reporting packs available by country. The quality of the data feed for consolidation. Finally the total cost of ownership, not the custody tariff alone.

On that last point, one line is systematically under-negotiated: the foreign exchange spread. On an active multi-currency portfolio it frequently exceeds annual custody fees, while remaining invisible in the fee schedule handed to the client. It is negotiable, like everything else, but only if the question is asked.

Our role is to prepare the file, frame these criteria with the family and introduce them to the institutions whose profile genuinely matches. Entering into the relationship, opening the account and providing banking services are the bank's decision and responsibility. We do not publish a named list of institutions: it would be worthless out of context and would give a false impression of recommendation.

AML checks when opening a family office account in Luxembourg: what is actually required

The Luxembourg anti-money-laundering framework rests on the amended law of 12 November 2004 and on the prudential regulation implementing it. For a family office file it produces a higher level of scrutiny than an ordinary private account, because the structure is by nature complex and multi-jurisdictional.

The bank will identify the account-holding entity and the entire ownership chain up to the beneficial owners, verify registration with the register of beneficial owners, screen the persons concerned against sanctions lists and politically exposed person status, and document the purpose and intended nature of the business relationship. Enhanced due diligence applies as soon as a risk factor is present: a politically exposed person, a link to a high-risk third country, a structure with multiple ownership layers.

The point that blocks most files, though, is none of those. It is the distinction between source of funds and source of wealth. Source of funds refers to the immediate provenance of the amounts deposited, and families supply it without difficulty. Source of wealth refers to the complete history of how the fortune was built: a business sale, an inheritance, a career, accumulated investment proceeds, with the supporting evidence. It is that second demonstration, often old and scattered, that stretches the timeline.

The operational consequence: reconstructing the source-of-wealth file should start before the banking introduction, not during the review. A prepared file is processed in a few weeks; a file reconstructed as requests arrive drags on for months, with a real risk of the institution abandoning it. We build that file, structure it and keep it current, including for the periodic reviews the bank then conducts throughout the relationship.

What a Luxembourg family office costs, and how to read the invoice

Total cost breaks into two blocks that do not follow the same logic. The variable block, expressed in basis points on assets, covers custody fees, discretionary management or advice, brokerage and foreign exchange. The fixed block covers vehicle administration, accounting and annual accounts, governance and directorship mandates, the statutory audit where required, and occasional legal and notarial fees.

Reading the invoice as a single overall percentage tells you nothing. The useful reading isolates the two blocks, because they are driven by opposite levers. The variable block is negotiated and put out to competition, line by line, foreign exchange included. The fixed block is controlled by simplifying the architecture: every additional vehicle adds a set of accounts, a filing, mandates and a coordination burden, regardless of the assets it holds.

The commonest architecture error is stacking vehicles transaction by transaction without ever consolidating. A family holding six entities where three would suffice pays twice for the same infrastructure and complicates every bank review, every audit and every succession operation.

Our approach is therefore to cost the architecture before executing it: the number of vehicles genuinely required, the associated annual administrative burden, and the consequences at the point of succession. The corresponding governance mandates fall under our directorship services, and the annual accounts of each vehicle are integrated into the same arrangement.