The fam­ily of­fice for your firm A full slate of ser­vices

Are you ready to step up to this level of ser­vice? The com­mon tasks that a fam­ily of­fice may over­see in­clude:

Accounting Today - - Financialplanning - By John P. Napolitano See OF­FICE on 21

The pur­pose of a fam­ily of­fice is to or­ga­nize and cen­tral­ize the man­age­ment of a fam­ily’s per­sonal and busi­ness fi­nan­cial af­fairs, and to main­tain the fi­nan­cial house in as good an or­der as that of a well-run pub­lic com­pany.

The ori­gin of the fam­ily of­fice con­cept came from ex­tremely wealthy fam­i­lies, with net worth in to­day’s dol­lars well in ex­cess of $100 mil­lion. It was fre­quently a sep­a­rate en­tity, with em­ploy­ees rang­ing from a CEO or CFO along with a staff of book­keep­ers and per­sonal as­sis­tants who could do ev­ery­thing from monthly fi­nan­cial state­ments through book­ing fam­ily mem­bers’ travel and per­sonal care ap­point­ments.

In a tra­di­tional fam­ily of­fice, no ser­vice or call­ing is be­yond the scope of the of­fice’s ser­vices. Em­ploy­ees may be called upon to pick up the car from the auto deal­er­ship or bail a trou­bled fam­ily mem­ber out of jail. In other words, the CEO of the fam­ily of­fice is the CEO of the fam­ily, sans the par­ent­ing (al­though, if you speak to those at the helm of some fam­ily of­fices, you’ll hear sto­ries of the pseudo-par­ent­ing and men­tor­ing that is fre­quently part of the job as the re­la­tion­ships build).

Many of these wealthy fam­i­lies have made their money from suc­cess in busi­ness. Typ­i­cally, the fam­ily of­fice staff will not be in­volved in the op­er­a­tions or even the ac­count­ing for the busi­ness. They will, how­ever, be ex­tremely fa­mil­iar with the busi­ness as it re­lates to the fam­ily. The fam­ily of­fice will stay on top of loan guar­an­tees, timely re­port­ing to share­hold­ers and the fam­ily of­fice, deal­ing with tax plan­ning or other ben­e­fit plan­ning as it re­lates to fam­ily mem­bers, ob­tain­ing cur­rent val­u­a­tions of the com­pany and mak­ing sure that the value of the busi­ness is en­hanced by smart fam­ily and suc­ces­sion plan­ning.

The fam­ily of­fice will also as­sist with ac­qui­si­tions and sales of var­i­ous busi­ness en­ti­ties through the lens of the fam­ily in­vest­ment ob­jec­tives and best use of talent and re­sources.

Fre­quently, it is the fam­ily lawyer or ac­coun­tant who sits in the chair of the ex­ec­u­tive of the fam­ily of­fice. Clearly it is a role for an ed­u­cated, well-versed fi­nan­cial ex­ec­u­tive, and not a sales­per­son. This per­son should be knowl­edge­able in many ar­eas, in­clud­ing ac­count­ing and record-keep­ing sys­tems, law, fi­nance, mar­kets, taxes and risk man­age­ment.

In ad­di­tion to their own per­sonal ex­pe­ri­ence and knowl­edge, this per­son should be able to build a team of sub­ject mat­ter ex­perts in any area to sup­port the fam­ily’s needs. For ex­am­ple, some fam­ily of­fices own prop­erty, busi­nesses or in­vest­ment ac­counts over­seas. Un­less this rep­re­sents a ma­jor­ity of the fam­ily’s in­ter­ests, the CEO of the fam­ily of­fice would not nec­es­sar­ily need to be an in­ter­na­tional ex­pert, but should pos­i­tively have ex­perts on the fam­ily of­fice team who are heav­ily ex­pe­ri­enced in such mat­ters.

The tra­di­tional fam­ily of­fice may or may not ac­tu­ally man­age the fi­nan­cial as­sets. It’s worth not­ing that as­set over­sight is dif­fer­ent from as­set man­age­ment. Over­sight typ­i­cally in­volves co­or­di­nat­ing and work­ing with in­vest­ment ad­vi­sors and money man­agers, and not ac­tu­ally se­lect­ing the in­di­vid­ual in­vest­ments. The fam­ily of­fice may per­form due dili­gence on in­vest­ment man­agers and con­sul­tants, but not over­see the ac­tual day-to­day man­age­ment of the as­sets. Those who do get in­volved with day-to-day as­set man­age­ment are typ­i­cally those whose for­tunes were built by skill­fully man­ag­ing in­vest­ments and also those that are so large that they built or ac­quired their own in­vest­ment man­age­ment staff.

Each fam­ily has its own set of unique is­sues, and each fam­ily wants to del­e­gate some or all of these mat­ters. But in the tra­di­tional fam­ily of­fice, where the en­tity is owned and con­trolled by the fam­ily, there are typ­i­cally no con­flicts of in­ter­ests or other profit-mak­ing ac­tiv­i­ties. The en­tity’s sole pur­pose is ser­vice to the fam­ily.

Also com­mon is what is known as the multi-fam­ily of­fice. The MFO is ba­si­cally a pro­fes­sional ser­vices firm that de­liv­ers fam­ily of­fice ser­vices for more than one fam­ily.

The ori­gin of the multi-fam­ily of­fice comes from tra­di­tional fam­ily of­fices where the fam­ily de­cided to use their team to help oth­ers for a fee. But be­yond a tra­di­tional fam­ily of­fice that de­cides to serve oth­ers, many for-profit en­ter­prises have flour­ished in the multi-fam­ily of­fice model, in­clud­ing progressive law and CPA firms.

The multi-fam­ily of­fice fre­quently serves fam­i­lies less wealthy than the tra­di­tional fam­ily of­fice, but es­sen­tially per­forms many of the same crit­i­cal func­tions with re­spect to the fi­nan­cial side of the fam­ily life. For the CPA firm with clients whose net worth ex­ceeds $25-50 mil­lion or so, this model of­fers lots of po­ten­tial. The firm is prob­a­bly deeply in­volved in many fam­ily fi­nan­cial mat­ters and of­ten has a strong per­sonal re­la­tion­ship with the found­ing or se­nior mem­bers of the fam­ily who may have cre­ated the wealth.

Of course, the ac­count­ing firms that serve these types of clients are fre­quently larger firms with old-school part­ners who want noth­ing to do with mat­ters be­yond ac­count­ing and tax. This is an­other mat­ter that re­ally falls into the cat­e­gory of prac­tice man­age­ment. But for­tu­nately, as ag­ing part­ners re­tire, the younger gen­er­a­tion sees the ben­e­fit of de­liv­er­ing el­e­vated lev­els of ser­vice to the firm’s bet­ter clients.

A multi-fam­ily of­fice is usu­ally a for-profit en­tity. And as such, be­fore you as an in­di­vid­ual or CPA firm de­cide to of­fer these ser­vices, you must de­ter­mine your ser­vices and com­pen­sa­tion meth­ods, and ac­quire the re­quired li­censes.

Struc­tur­ing the of­fice

Many CPA firms will of­ten want to track their time and sim­ply send bills each month based on the time spent. While this can work, it’s not the most com­mon method of com­pen­sa­tion.

More com­mon than hourly would be flat fees for a list

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