Family Office Services - FAQs

Family Office is a private wealth management advisory service offered to ultra-high net worth investors to centralize focus and control over family finances, legal, tax and administration issues. It is an outsourced solution to manage the financial and investment affairs of affluent individuals or families. It works to provide the best solution for building, preserving and transferring family wealth.

Evidence suggests that the first Family Offices appeared in Europe. At the beginning of the 19th century, wealthy merchants along the eastern seaboard of the United States created the first North American Family Office. The merchants found that as both their businesses and families grew, so did the needs of both, demanding more and more time to manage, and ultimately diverting resources from their successful businesses. As a remedy, individual families began hiring outside advisors for administrative, legal, accounting and investment purposes to work out of a single office location exclusively for the benefit of the hiring family. In essence, managing their wealth had become an increasingly involved process, to which the merchants (and their families) had neither the time nor the expertise to offer.

Family Office is most commonly utilized because assets have grown in size and complexity, demanding full-time professional management. The goal of the world's ultra-rich families in establishing a Family Office is to ensure that their wealth is well preserved for the future generations of that family.

Family Office could also be a strategic decision by family members to create a formal distinction between family wealth and the assets of the family business. Financial risk diversification may be a primary motivation. Also, separation can be done in the spirit of improving transparency and corporate governance of the family business.

• One central source for information on, advice about or oversight of all of the family's financial matters i.e. integrated financial services
• Pooled purchasing power across a family group, resulting in better service for a better price than individual family members could attain on their own
• A dedicated team of professionals who are focused on client goals in a completely confidential manner
• Continuity from generation to generation
• Access to professional advisors who can educate family members about their responsibilities of ownership and participative governance
• Managing substantial liquid assets generated through the sale of a business
• Obtaining customized credit
• Managing multi-generational needs, especially educating children and grandchildren to be responsible stewards of wealth
• Serving beneficiaries with diverse requirements and interests
• Gaining access to alternative investments, such as private equity, hedge funds and real estate
• Providing tax, estate and financial planning, bill-paying and other concierge services

Family Office is a vehicle for wealthy entrepreneurs to manage their wealth independently and professionally from their businesses. What Family Office seeks to achieve is peace of mind and concentration of efforts for managing wealth. Instead of different advisors managing different portfolios a Family Office consolidates all the personal and family wealth solutions in one place.

One of the largest aspects of wealth management is managing investments; but that is only the beginning. A Family Office encompasses value-creation and support across various other important functions.

• Understand Family Context
  • Financial planning for the family
  • Documenting current legal position
  • Understanding family governance/objectives
  • Evaluating and consolidating current service providers
• Financial Risk-Return Management
  • Risk management
  • Return management
• Co-ordinated Tax, Trust and Estate Planning
  • Offering tax-optimization strategies
  • Routine activities
  • Estate planning
• Legal Services
  • International transfers
  • Creation of structure
• Family Governance/Legal Planning
  • Education of younger generations
  • Management of a closely held business
  • Legacy planning/Philanthropy
• Administrative Convenience
  • Document management
  • Performance monitoring and analytics
  • Accounting and reporting
  • Concierge services

The scope of the Family Office is significantly broader than a pure investment advisory company. The objective is not only return maximization but also preserving the wealth management legacy.

Up until the 1980s, the Single Family Office model remained the most popular choice for wealthy families in search of expert financial planning advice in the most private of environments. However, Single Family Offices were very expensive to setup and maintain (with the paying of salaries to multiple full-time staff) and always struggled to retain top-quality advisors. Over the last 25 years, there has been a marked shift away from the Single Family Office towards the Multi Family Office, which looks to provide the same highly-personal, highly-customized services to multiple families, allowing the costs of providing those services to be spread over a larger asset base.

Single Family Office
Single Family Office is one which is set up to provide services exclusive to one family and their generations. As it is a dedicated office of people the benefit of complete privacy of information is flipped by the near total dependency on the employees. In Single Family Offices, the benefit is derived from depth of scope as opposed to savings in costs when purchasing is pooled across families. Single Family Office often has overarching influence over the family and acts as an important efficient administration. The challenges for a Single Family Office are in attracting and retaining talent given the limited career opportunities. It also needs to be able to consolidate and leverage various streams of services under one roof.

Multi Family Office
As opposed to a Single Family Office, a Multi Family Office has the ability to leverage cross company skill sets and is by definition more stable in nature. It has a large network of experts with up-to-date knowledge and attractive training prospects. However a Multi Family Office does not enjoy the benefit of exclusivity since there are multiple families considered. It has the advantage of using economies of scale and thereby increases the purchasing power of the family. Multi Family Offices are intimately familiar with the demands of the taxable client (due to breadth of clientele) and have been shown to provide skills and capabilities, instead of products and services, to creatively respond to the needs of the Family Office clients.

Due diligence and caution must be exercised while evaluating a Family Office proposition. There are a few facets of the relationship that must be analyzed before one finally decides to take the plunge.

Trust
Finance is a matter of trust. The most important element in your relationship with your financial advisors is the trust that they can build with you. Trust is built either through a long association or with confidence in the ability of the office to service your needs. One of the elements that create and foster trust is the ability to listen and understand your unique situation and to offer solutions and insights designed specially for you.

The sophistication of their advisory tools
Discuss with the office professional about your needs and observe whether they have or can develop a process for solving issues nearest to your heart.

The quality of research
Quality of research distinguishes a world class office from their peers. Check if the firm is ready to dedicate manpower to Family Office research. Increasingly world over, the Family Office industry is moving towards an ‘open architecture’ platform where the office is only advisory in nature and not a product seller. This ensures independent advice and you are protected from owning products which are not in line with your asset allocation goals.

Company expertise leverage
A Multi Family Office must be able to leverage the experience and the expertise that is inbuilt in the institution. For example, the ability to co-invest or get exclusive access to deals.

Your existing advisors will become valued contributors to your Family Office. Rather than trying to replace your existing advisors, the Family Office must focus its energy on complimenting the advice they provide by ensuring it fits in the ‘big picture’ of your family's long-term financial goals.

Your Family Office works when you receive highly personal service from highly qualified professionals. In order for this to take place the Family Office must at the very least:

1. Meet with your family to understand your goals and aspirations
2. Do a thorough analysis of your financial situation
3. Provide in depth projections for future requirements
4. Establish a comprehensive plan to get your family from b to c
5. Highlight action items required to implement your plan
6. Implementation
7. Review and update on a regular pre-determined basis moving forward

• Culture of caring and serving with high touch, professional service
• Highly discreet office professionals and personnel that maintain client confidentially from family to family, and within families
• A full service Family Office that fulfills all of the needs of the family, not just those that have the highest profit margins
• Fees should be based on assets under management, taking into account the time, volume of work and attention that a client needs before establishing that fee