Family Offices play an important role in both the daily operations, and in the future sustainability plans, of many individuals and business families.
Traditional Family Office
For hundreds of years traditional Family Offices have been used by ultra-wealthy family dynasties ($100M+) to help build, manage and preserve their wealth, and to protect the family’s reputation. Whether operated by the private client branch of a bank, by a commercial multi-family office, or by an in-house family team, they are invariably secretive, discreet and very expensive to run.
Modern Family Office
Better education, evolved attitudes and modern technologies make it possible for a modern (internal) Family Office to be run by a suitably skilled family member, on a full or part-time basis, with support from trusted advisers.
Alternatively, an external Family Office service provider can be engaged to provide a broad range of professional services to the family. External (or “Agile”) Family Offices are operated by specially trained professional advisers, typically lawyers, accountants and wealth/financial advisers. Using modern, collaborative work processes they can provide a broad range of services to a wide range of clients, very cost-effectively.
Either type of modern Family Office may be appropriate for families of more “normal” means, say: $5M – $80M net worth.
Family Office Concept
When a family holds, works and invests together over the long term, they can achieve far greater individual and collective success than a dispersed family – where family branches choose separate commercial paths.
All types of Family Office assume a stewardship philosophy towards the management of shared family wealth. This is a fundamental requirement for building a family legacy.
Family Office Functions
Modern Family Offices support the family’s short, medium and long term goals by helping to satisfy the collectively-approved living and financial needs of family members. In addition to administering trust accounts and paying expenses, they work to build individual and collective success. Essentially, their job is to satisfy the family’s desire for everyone to live happy and admirable lives, based on the family’s declared and shared values and objectives.
The Family Office operate as the family’s “undertaker”. Working under the Family Council, they undertake to develop and implement the agreed Family Plan – as a CEO and Management Team would do with Strategy and Business Plans, in a business.
Family Office Structures
Depending on the size and complexity of the family, and the available budget, a Family Office may have one, or several full or part-time personnel, acting in paid, or honorary roles. In both structures, specialist family business advisers are engaged as required:
- An appropriately skilled family member is made Executive Director of the Family Office, on a full or part time basis, and is supported by the family’s network of trusted advisers for most or all technical work (legal, financial etc).
Ideally, the Executive Director will have a high level of emotional intelligence; be an inclusive and effective leader; and be well-trained in general business and family business best practices.
This arrangement can work well for suitably qualified parents taking a career “break” to care for children, as their responsibilities can usually be worked around family commitments, and the individual can be paid for providing valuable services to the family. This is also a role that can suit “retirees” who want to remain active and useful.
- The Family Council outsources responsibility for operating its Family Office to a trusted professional “Lead Adviser” (usually an accountant, lawyer, financial planner or business coach / adviser), who has access to a network of skilled advisers from complementary disciplines. Being a virtual team, costs are only incurred when services are used.
This is an Agile Family Office. Using collaborative networks of professional advisers, Agile Family Offices can address almost any family issue, including lifestyle and relationship needs and challenges, family alignment and conflict resolution, in addition to providing traditional wealth management and asset protection services.
Key Responsibilities
The Family Office is responsible for making and/or implementing Family Council decisions in areas including:
- Wealth management and asset protection.
- Mutual Obligations – family members doing the right things by each other, in respect of: financial plans and retirement funding; tax plans and legal compliance; asset protection; binding financial agreements; insurances; careers; wills and estate plans etc.
- Interactions between members of the family and the family business.
- Support for current and next generation family members though life and business education, career development and business activities.
- Help for family members in crisis (emotional, financial, commercial, matrimonial, depressive etc) – advice, coaching, counselling, mediation etc.
- Developing and maintaining the family’s legacy: ethics, values, objectives, mutual obligations, lifestyle, family cohesion etc.
Summary
Every business family has its own unique needs, which are usually best addressed through sensitively tailored responses. A dedicated Family Office helps to identify and maintain focus on those needs, and ensure that they are wisely addressed.
Their support for family business best practice can greatly increase the family’s prospects for long term sustainability.
To discuss developing a Family Office, please call, or contact: The Solutionist Group.