The purpose of a Family Office is to manage and oversee the wealth management affairs of highly affluent individuals and their families in regard to such issues as tax, wealth transfer, investment management, governance, estate planning, risk management, compliance, education, communication, financial education, and so on.
The Family Office can also collaborate with the family's professional team members - lawyers, accountants, tax advisors, family business advisors, among others - to derive the family's strategic plan and decide when to move forward and execute on certain goals. Another critical function of the Family Office is to discern a multitude of risks that are often interconnected and interrelated among individuals, their assets, and their entities.
3 KEY ROLES OF THE FAMILY OFFICE
THE KEEPER & THE EXECUTER
The Family Office for many families is the primary keeper and executer of transactions and legal documents. Thus the family office may have to manage and oversee a variety of different tasks and transactions such as:
Liquidity of family units and various entities.
Process of transaction approval.
Impact a transaction may have on legal structures.
Impact a transaction may have on tax expense or savings.
Administrative tasks to be completed once the transaction is complete.
Housing and archiving relevant legal, compliance, estate planning, business planning, and/or tax documents.
THE GUARDIAN & CONFIDANT
Perhaps the Family Office's most important role is to protect the family it serve and as such recasting the role of the Family Office as Risk Manager. It is therefore important that a Family Office is proactive and forward thinking to foresee potential dangers prior to having them occur. The most critical risks include:
LACK OF SHARED VISION FOR THE FUTURE
When a family does not have a shared vision of the future it becomes increasingly more challenging to keep the family together particularly under the confines of a family office structure.
LACK OF EFFECTIVE DECISION MAKING PROCESS
When a family lacks a governance process, building continuity, buy-in, and commitment can fractionalise the family group.
LACK OF TRANSPARENT FAMILY COMMUNICATIONS
Communication is perhaps the most important component to continuity planning of wealth for multi-generational families. Whether a family member is intentionally or inadvertently isolated from receiving communication or does not receive the depth of necessary information to make an informed decision, both scenarios put the family at tremendous risk.
IMPROPER OWNERSHIP STRUCTURE
How assets are structured, titled, and held are foundational to how a family's wealth management objectives are achieved. If improperly structured, a series of problems such as tax, legal, and compliance issues can arise.
LACK OF APPROPRIATE DIVERSIFICATION OF ASSETS
Concentration of a particular asset, such as a family business, or a type of investment, such as real estate, is often cited as the source of great wealth. However, concentration or lack of diversification can have even more severe downside risks associated with them, and diversification is often cited as a means to preserve wealth.
Thus, members of the Family Office may also act as sounding boards and trusted confidants of the family as they navigate a whole host of issues. As confidant, they provide objective, unbiased advise that helps develop and empower the family members enhancing their oversight of the family's legacy.
The role of confidant or consigliore is perhaps one of the most critical functions of the Family Office. In many respects it is akin to have a second set of eyes that can always see what you are seeing and help to validate or clarify the course at hand.
THE BRAIN TEST
Lastly, a Family Office can be a repository and a thinking partner to foster ideas and help launch family members into new careers, passions, and interests. Inspiring and fostering a collaborative dialogue between the family and the Family Office on "what could be".
FAMILY OFFICE SERVICES
Family Legacies offers our family business and high net worth clients the following Family Office services:
Strategic Wealth Management
Identify Financial Resources and Objectives
Develop Intergenerational Wealth Transfer Plans
Coordinate with Professional Advisors
Facilitate Information Flow
Provide Personal Attention
Monitor Investment Performance
Provide Comprehensive Performance Reporting
Participate in Investment Manager Selection
Trusts and Estate Service
Provide Estate Planning Recommendations
Develop Family Wealth Plans
Support Trustees in Fiduciary Duties
Family Legacy and Leadership
Support Strategic Long-Term Family Vision
Actively Guide, Promote, and Support Governance
Support Family Philanthropic Mission
Develop Personal Gifting Programs
Administer Family Foundations