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A proficient family office can offer its clients a comprehensive range of different services.  The wide variety of services can also be overwhelming. However, one of the first choices that families need to decide on is wealth management, whether they will invest together or not.  It begins when the family starts to consider the family’s wealth as a business.  The family should be able to conceptualize, similar to a workshop, for the family enterprise to have a framework in answering the basic questions such as, who are they as family, the coverage of their wealth and how they acquired their wealth.  Providing the answers of the preceding questions can jumpstart the family in choosing the right family office according to their needs.

It is important that the family has a complete understanding of the current financial situation of the wealth enterprise in terms of income and spending.  The items mentioned are vital in developing a strategic action plan for the financial assets.  It is likewise important to know the financial health of the family by having the needed financial statements to show the changes in various equity components in a given period.  In a nutshell, understanding the current financial condition of the family will provide a direction for the next steps.

There are three identified main components in designing the family office.  First, is to identify the pool of providers.  The experts behind the planning are important to know the services they are providing and the reason for availing of such.  It is important to not only include the investment providers but also the accountants, asset managers, brokers, legal counsel, consultants, custodians and the likes or anyone who extended their services in managing wealth growth.

Second and a useful component in making sure that the family office works is by having a list of wealth management activities.  For instance, the family should be able to have financial statements to be able to conduct activities for financial administration.  It should include general ledger, expense management, balance sheet, tax compliance forms and aggregated reporting.  For financial planning, it should have capital sufficiency, cash flow or lifestyle budgeting and management, other quantitative goals and objectives such as charitable acts and the non-financial assets.  Estate structure or tax minimization and income tax planning comprise the activities for the estate and tax planning.  As to the investment advisory, it should incorporate asset allocation, portfolio construction, manager selection, performance management and dynamic rebalancing.  Lastly, risk management activities should also be considered which will take into account of the asset protection or the insurance, hedging, personal security and reputational.

Third, and is considered the decision-making part is the strategy, structure and governance.  With careful planning, an efficient family office will be able to communicate the objectives and goals of the family.  For one, it should be able to come up with a mission and strategy statement which will serve for the family to touch base when important decisions are needed.  This will also serve as a guide both to the family and its providers in making sure that they are able to meet their objectives.  It should be able to answer basic questions of the family’s short and long term goals.  What’s more, there might be qualitative and quantitative goals that the family would like to consider and it should be included on the list.  Generally, the mission statement should cover what the family view as the purpose of their wealth.

As mentioned earlier, the pool of providers play an important role in coming up with the financial action plan in order to realize the financial structure.  It is essential to identify the key players such as the decision makers and stakeholders with their corresponding roles in managing the family enterprise especially those who will be given the authority to decide on important matters.  It should be able to provide answers for the person who leads and other roles involving it.  To add, the key roles of non-family members should be properly identified, if applicable.

A decision making framework should be clearly emphasized and identified in order to set the governance practices for the family.  It should help the family decided if a board of directors is needed.  If so, there should be certain schedule of meeting and updates.  The number of members should also be identified and as to who will be designated with their function.  It should be included also if there is somebody to look after the implementation of the enterprise’s procedures or processes.  And if there is no need to have a board of directors, it should provide the alternative on how to go about the decision making on the family’s wealth.

Moreover, succession planning and preparation should be included.  It should take in education and empowerment for family members which were chosen to have potentials in accepting the roles for the family’s legacy.  Having plot out and consider every point of discussion, the family office should be able to provide the family a comprehensible strategy to face any roadblocks in gearing up the family’s wealth.  The level of uniqueness in any family office basically depends per family attitude and goals.  But despite the uniqueness, the family office should be able to recognize what areas are to be enhanced by the family office and the reason behind it.