2 Should You Have a Family Office Separate from Your Business?
3 Agenda What is a family office? Types of family offices What it must provide?Should it be separate from the family business?
4 A separate family office can provide unique advantages Executive SummaryA family office provides all the essential services for building and preserving family wealthIn most buy not all -- instances, it makes sense to have a family office separate from the family businessA separate family office can provide unique advantages
5 I. What is a family office An entity that supports the financial needs of a specific family groupA “chief advisor” to the familyProvides personalized service, technical expertise, creative business leadership and day-to-day management for successSome have likened it to the family’s “quarterback”for all product and service providers and professional advisor
6 II. Types of family office Single Family Office (SFO) – set up by an individual familyMulti-Family Office (MFO)Serves the needs of more than one familyCombines resources for efficiencySingle point of contact for planning and implementationA way of sharing family office functionsCommercial Family Office (CFO)
8 III. What it must provide Advocacy for the family’s best interestsPersonalized focus and control over family financesFormal communication processesCustomized servicesCost control and economies of scaleOpportunities for each generationEnsures privacy and confidentialityStrengthens family mission and legacy
9 Typically…The owners of a family business – particularly the founders -- lean on the infrastructure of their business for personal needsBy default, the Chief Financial Officer of the family business often becomes the CFO for the family
10 In addition, a family office must address the needs of multiple family entities Patriarch FinancialsSpouse FinancialsInherited TrustEquity PartnersNon Business InvestorsBusiness InvestorsCharityAuditing
11 And keep track of scores of investment accounts
12 IV. Should it be separate from the family business Ownership276Family MembersShareholdersCompany EmployeesFamily ShareholdersEmployee ShareholdersEmployed Family MembersEmployed Family Members Who Are Shareholders4153FamilyBusiness
13 In cases where all three intersect Family members who are owners, shareholders and involved with the business (#7)Their needs may be well served by the business infrastructure
14 However…When family members are not necessarily involved in the business (#1, #2, #4)Their needs may be better served by a separate family office especially in cases with inactive shareholders
15 Areas where a separate family office excels As an advocate for the familyPutting family needs firstEducating and mentoring new generationsDeveloping governance structuresPromoting non-financial family goalProviding continuity for larger familiesAs a family spreads its branches, it becomes harder to make group decisionsStrong personalities can clashEducation becomes more important for younger members
16 Philanthropic planning Clarifying family values and visionEvaluating suitable philanthropic targetsInvolving younger family member
17 Family education Determining family values and mission statement Providing a forum for discussion of issues not related to the family businessCreating family education programsDeveloping a multi-generational plan
18 Family forumWhat if there are family members who are not involved in the business but still may be shareholders?Do they have a way to participate in discussions about the wealth of the family and future plans?
19 Investment advisory Investment strategy and asset allocation Evaluating alternative investmentsManager review and selectionTrading, tracking, ongoing monitoring
20 Estate planning Diversification and monetizing concentrated holdings Reducing risk/dependency on the businessWealth transfer to future generation
21 Summary A family office enhances a family’s cycle of wealth creation By identifying family objectives and prioritiesMarshaling family assetsClarifying family dynamics and governanceDocumenting financial plansImplementing family education programsFacilitating better communicationReaffirming family mission and vision
22 Now ask yourself… Is your family’s business infrastructure set up to accomplish all these?