We encourage all of our employees at SumIt, regardless of their function, to stay close to what's happening in the family office world. In working in such a regulated space, of course, this implies thinking further than technology and into a regulatory and structural perspective, too.
The challenges our clients face rarely exist in a vacuum, so staying informed means we can build tools that actually reflect how family offices cross-functionally operate in practice.
Last week, I had the opportunity to attend the New York Society of CPAs (NYSSCPA) Family Office Committee's March meeting, where a team of partners from Proskauer Rose LLP — Christiana Lazo, Nathan Schuur, and Robert Sutton — led a substantive discussion covering three interconnected topics: when a family office becomes an investment adviser under the law, how to think about third-party capital and co-investments, and the governance and succession questions that every multi-generational family office eventually has to confront.
From this, I wanted to share the takeaways I found most useful and thought-provoking as a technologist in the family office space. Note that this is not legal advice, so if any of this raises questions for your organization, please consult qualified legal counsel and the folks at Proskauer. Nonetheless, I hope it's a useful lens on conversations happening at the highest levels of the family office space right now.
1. The line between ‘family office’ and ‘investment adviser’ is easier to cross than you think
The session of the meeting opened with a question that a surprising number of family offices haven't fully stress-tested: Are you actually exempt from SEC registration as an investment adviser?
For context, under the Investment Advisers Act, anyone providing advice about securities as a business, for compensation, generally has to register. The exemption for family offices — codified in Advisers Act Rule 275.202(a)(11)(G)-1 — has three conditions:
You serve only "family clients”
You are wholly owned by family clients and exclusively controlled by family members
You don't hold yourself out to the public as an investment adviser
Each of those conditions has more nuance than it appears. The definition of "family client" is broad (up to 10 generations back, former spouses due to divorce, trusts and entities of family members, foundations funded exclusively by the family, and key employees), but "key employees" is a defined term.
The phrase “key employee” specifically covers people in leadership roles or anyone providing investment advice, and it excludes purely clerical staff. Former key employees can remain family clients under certain conditions, but it requires careful tracking.
The control prong is often where family offices run into trouble. Issuing equity to employees who don't qualify as key employees, bringing on outside investors in entity clients, or having non-family members exercise any meaningful control can all put the exemption at risk.
And on the "holding out" prong: your website, bios, marketing, PR, and pitch materials can inadvertently cross the line if they describe the family office in terms that sound like an investment management business.
Though this makes it sound like the exemption is very fragile, it’s actually fairly workable if you maintain it deliberately. With that said, the key takeaway here is that many family offices don't revisit their compliance posture as the organization evolves.
2. Co-investments with outside capital require structural discipline, too
The second major topic was one of the most practically relevant for growing family offices: how do you bring in outside capital for co-investments without inadvertently triggering investment adviser obligations?
Good question. From a business perspective, it’s fairly straightforward. A family office identifies an attractive deal that's larger than they want to fund alone. So, they invite outside investors, like friends, former colleagues, other family offices, etc., to participate. The deal is done, and everyone’s happy.
The legal question is also simple, though the answer is a little more complicated. In that transaction, who is the family office actually acting as adviser for?
If family office personnel are pitching the deal, answering diligence questions, handling allocations, or negotiating terms on behalf of outside investors, then the family office may have crossed into acting as an investment adviser to those outside investors, even if no one intended for that to be the case.
The same risk arises, and in some ways is even more nuanced, when the family office uses its name, brand, website, or team as the face of the fundraise or syndication. Public posture matters, as do economics like receiving fees, carried interest, reimbursements, and more — all meaningful factors that regulators look at.
The cleaner structural approach is separation: the family office advises only family capital, and outside capital comes in through a separate fund or SPV with its own manager or decision-maker. Investor communications, economics, and decisions stay with the appropriate entity. Governance rights for outside investors can often be addressed contractually at the deal or SPV level without pulling the family office into an advisory role.
For CFOs and COOs managing these structures, the checklist from the presentation was very useful: decide in advance who speaks to outside investors and from which entity. Document who has discretion and who signs what, and establish expense allocation, broken-deal cost, and reimbursement mechanics before the deal closes.
3. Seeding a spin-out is structurally achievable, but practical separateness is what regulators actually evaluate
One of the more sophisticated topics in the session was how family offices approach spinning out an investment team. More specifically, the family office wants to turn the investment team into its own standalone firm, but still keep family money invested with that team and share its success financially. As you can imagine, this raises some regulatory concerns.
The business goal and the regulatory goal pull in different directions. On the business side, the family office wants close alignment. On the regulatory side, the new manager must genuinely operate as a separate advisory business.
If the family office and the new manager share an investment committee, the same source of recommendations, the same research process, or the same investor-facing function, the separation isn't real in practice, regardless of what the org chart says.
For exempt family offices, the failure to maintain real separateness can jeopardize the family office exemption entirely. For registered family offices, it can make it harder to argue that the family office shouldn't bear compliance responsibility for the new manager's conduct.
The key indicators of genuine separateness included:
Majority-independent management at the new entity
Separate capitalization
No overlap in investment decision-makers
Independent research
Information barriers around live investment decisions.
Separate systems and communications like email domains, data rooms, CRM access, and calendars
All of these act as evidence of whether the separation is real from a day-to-day operations standpoint.
The recommended structural model separates ownership and governance (which can sit in a HoldCo above the new manager with family office economic interest and owner rights) from advisory authority (which sits within the new manager itself, staffed and led by the spin-out team). Advisory contracts and investor communications belong to the new manager, and the family office acts as owner and client.
4. Succession is both a governance question and a regulatory one
The final segment, led by Christiana Lazo, addressed something that doesn't always get discussed alongside the investment and compliance questions: what happens to the family office itself when the founding generation passes away?
If the first generation (G1) owns the family office individually, its disposition at death is a governance question, an economic question, and a regulatory question all at the same time. Who owns it after G1? Does that new ownership structure still satisfy the family office exemption? Who funds the family office if there's a shortfall in operating costs?
Without explicit provisions in G1's estate planning documents, the family office interest could pass as part of the residue of the estate, which may or may not land where anyone intended, and may or may not preserve regulatory compliance.
Several planning tools came up in this section of the presentation. Existing irrevocable trust structures can work, but their terms have to be evaluated carefully. Voting and non-voting interests can be a useful structural tool to separate economic succession from control succession. One option worth understanding is the non-charitable purpose trust — a "perpetual" owner structure that differentiates ownership of the family office from the investor base, which can have tax positioning benefits but comes with administrative complexity and doesn't resolve the funding question independently.
One practical point: the common ancestor designation, which defines the family tree for purposes of the family office exemption, can be reassigned in some cases as well. This can be a helpful tool as the family expands across generations.
Why this matters for how family offices think about their back office
I learned so much sitting in this session, but what stood out to me most was how much of what was discussed comes back to a structural reality that SumIt encounters constantly: family offices are inherently multi-entity organizations, and that complexity has purpose. If things could be simpler, we’d choose them to be, but the complexity reflects all the deliberate legal, regulatory, and governance decisions.
The entity structures that family offices build to separate advisory authority from ownership, keep family capital distinct from co-investment vehicles, manage succession across generations, etc., all have to be maintained operationally. As the Proskauer team put it, this means the operating record has to match the org chart, so to speak. That's just as much a systems and workflow challenge as it is a legal one.
When a family office is running dozens (or even hundreds) of entities across investment vehicles, trusts, and operating companies, your structure needs to be real in practice. You need to track intercompany transactions, produce entity-level reporting, maintain permissions for different users, maintain clear audit trails, and so much more. These are all part of how you demonstrate real structure versus one that’s just there for optics.
We're not in the business of giving legal advice (that's what firms like Proskauer are for). But we are dedicated to helping family offices manage that operational layer. And events like this one reinforce why getting the infrastructure right matters so much to us at SumIt.
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