(Dow Jones) A government move to make U.S. single-family offices register as investment advisors shows how the interests of the super-wealthy are cast aside when they run up against populist measures.

This is especially true when these interests run counter to those of far cannier players in the commercial wealth-management space-namely big banks. For entities that can report assets under management without having to say which of their clients owns how much of the total, forcing single-family offices to become registered investment advisors, or RIAs, could be a significant advantage. This is a lucky outcome given the damage done to the big firms' reputations in recent years.

The proposal to have single-family offices register with either the Securities and Exchange Commission or with states in which they do business indicates that-popular talk of clandestine cabals aside-the super-wealthy are clumsy lobbyists.

Though viewed as an unintended consequence of legislative efforts to protect post-Madoff investors in hedge funds and the like, the proposal could make most single family offices-privately owned investment-advice, financial-management and, in many cases, concierge-service providers to families with typically at least $100 million to manage-more expensive and less private.

More expensive, because as RIAs, single-family offices would have to undergo periodic examinations (that take between two and three weeks a crack), provide demonstrably effective disaster-recovery plans, and appoint chief compliance officers with responsibility for providing exhaustive paper trails of compliance procedures.

Less private, because RIAs have to make assets under management a matter of public record, easily accessible through the SEC or comparable state-level agencies. And a main reason ultra-wealthy families establish family offices is to keep the value of their holdings from prying eyes.

Estimates vary, but there are thought to be around 3,000 single-family offices in the U.S., many of them tucked away in family-owned businesses. According to several observers and wealth-industry practitioners, making U.S. single-family offices register as investment advisers could spell the entity's demise, or trigger wholesale expatriation to friendlier jurisdictions.

A proposal passed by the House of Representatives late last year lumps single-family offices in with private funds for RIA treatment. The House apparently isn't amenable to excepting single-family offices for fear of opening the doors to additional amendments. Though still in the works, a Senate proposal seems likely to include an exemption for single-family offices. But it's uncertain what its fate would be after conference with the House.

Short of there being no final exemption at all, it could either entail the possibility of exemption based on an exhaustive definition of the single-family office, or it could be left to the SEC to decide, case by case, based on definitions set down in its regulation.

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