The most common use of the family office is to ensure a smooth intergenerational transfer of wealth with the added benefit of reducing intra-family disputes. As the complexity of managing the family’s wealth grows, it is a natural progression for the family to use vehicles and structures that can assist in meeting their objectives.
A family office is usually a new focal point for family members where it is used to manage the financial investments and real estate properties, or the family’s philanthropic activities. As the focal point vehicle, the family office is then well placed to coordinate the multiple professional services pertaining to ESG, sustainability, and impact investing, as well as philanthropy, tax and estate planning, family governance, communications, and education; thus helping achieve the objectives of the family office.
Lets examine some of the many services that a family office can provide to a family upon setting up.
Investment management services
Investment management is the primary reason to set up a family office. Such investment management services can include:
- Determining the investment objectives and philosophy of the family
- Managing liquidity for the family
- Providing due diligence on investments
Estate and wealth transfer to the next generation
Family offices are often involved in business succession and legacy planning to enable the transfer of wealth to the next generation. Services can include:
- Wealth protection, transfer analysis, and planning related to the management of all assets and sources of income
- Customized services for estate settlement and administration
- Professional guidance regarding wealth transfer to future generations
Succession planning
This is one of the most important services. Family offices can help the family prepare for the transfer not only of family wealth, but also of family values to the next generation, who will lead the family and the family business (if any) in the coming decades. Services can include:
- Setting up criteria for successor selection
- Providing training for successor candidates
- Supporting the transfer of wealth, ownership, knowledge, and responsibility between the incumbents and successors
- Adjusting the role of retired members in the family and defining the role of the next generation
- Mediating the relationships between successors and non-successors
Environmental, social, and governance
An increasingly important role of the family office is to support the sustainability goals of the family. These would include the family’s efforts to address ESG issues, make positive societal impact, and engage in philanthropic activities. Services can include:
- Evaluating ESG risks that may undermine family wealth
- Incorporating ESG considerations in investment decisions
- Investing in targets with direct and measurable societal impact
- Philanthropic planning
- Assisting in the establishment and administration of charitable entities (e.g. foundations and trusts)
- Providing guidance on donation strategy
- Organizing ESG, sustainable, and impact investing, as well as charitable activities (including due diligence)
Life management and budgeting
While some of these are typical concierge services, they tend to be broader in scope and can also include financial planning services, such as:
- Organizing club memberships (e.g. golf, private)
- Management of vacation properties, private jets, and yachts
- Budget services, including wealth reviews, analysis of short- and medium-term liquidity requirements, and long-term objectives
Family governance
Family offices often need to take on the role of mediating family relationships and ensuring cohesion across different family branches. Services can include:
- Continuity planning for unanticipated disruptions in family leadership
- Evaluation of the strengths, weaknesses, opportunities, and threats (SWOT analysis) related to key decision-makers, both inside and outside the family
- Coordination of the family council and meetings
- Adoption of a family charter or constitution to:
- Formalize the agreed decision-making
- structure and mission of the family
- Define roles and responsibilities
- Develop policies and procedures in line with
- family values and goals
- Determine processes to resolve potential
- conflicts between family members
Tax and legal advisory
This is one of the major functions of a family office. Typically, these services involve a general counsel and/or chartered accountant, or several accountants and tax experts. Services can include:
- Constructing a tax plan that best suits the family
- Planning investment and estate strategies that consider both investment and non-investment income sources, and their tax implications
- Ensuring that all parts of the family office are tax-compliant
To find out more about setting up a family office or if a family office can help your family achieve your needs, please do reach out to me.