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More About This Title The Complete Family Office: A Guide for Affluent Families and the Advisors Who Serve Them
English
Everything you need to know for successful wealth management for families
Although the family office concept is not new, it is a phenomenon that is changing the wealth management landscape. With celebrities and business moguls, investment gurus and family business icons establishing private wealth management advisory firms, more and more individuals are asking what exactly is a family office and how does it operate? Family offices either serve one family exclusively or typically manage the wealth of a number of affluent families. If you’re like most families and advisors, you’re familiar with family offices, but may not know exactly how they work or why the family office is right for you or your clients. Dr. Kirby Rosplock, an expert on the family office concept, provides insights to some of the most common questions and even misperceptions in this handbook.
The Complete Family Office Handbook explains how family offices operate, who should consider forming or joining one, and how to craft and set up a structure, purpose and vision for the office that fully serves a family’s particular needs and investment goals. Whether you’re a wealth creator, a member of a wealthy family considering forming or joining a family office, or a professional contemplating a career in this growing segment of the wealth management industry, this comprehensive guide provides insights to some of the most common questions and misperceptions.
English
Kirby Rosplock, PhD, is a recognized researcher, innovator, advisor, author, and speaker in the family office space. She understands firsthand the opportunities and challenges of family wealth as a fourth generation family business owner, board member, and co-trustee of her family's foundation. For nearly a decade, Dr. Rosplock was director of research & development at GenSpring Family Offices, one of the most prominent multi-family offices in the U.S. This book shares the insights and best practices she has gained through engaging more than 60 family office experts, professionals and families with family offices around the globe into this comprehensive handbook. For additional information, visit www.Rosplock.net.
English
Foreword xvii
Preface xix
Acknowledgments xxiii
Chapter 1 Introduction to the Family Office 1
Kirby Rosplock, PhD
A Macro View of Global Wealth 2
Billionaire Update 6
How Much Do I Really Need to Fund a Family Office? 8
Purpose and Definition of the Family Office 9
Historical Background of the Family Office 11
Family Wealth and the Family Office from the Industrial Age 11
Three Key Roles of the Family Office 14
The Keeper and Executor 15
The Guardian and Confidant 16
The Brain Trust 18
Types of Family Office Services 19
Conclusion and Final Thoughts 22
Notes 22
Chapter 2 Inception of the Family Office: Pathways to a Family Office 25
Kirby Rosplock, PhD
Inception of a Family Office 25
Impact of the Family Business on the Family Office 27
Attractions and Challenges with Embedded Family Offices in the Family Business 27
Separating the Family Office from the Family Business 29
Sudden Wealth 30
The Investment Office 31
Family Offices through the Back Door 32
Family Business Exit and Liquidity Event 33
Case–The Kessler Family 34
Conclusion and Final Thoughts 39
Notes 40
Chapter 3 Family Wealth Needs: Determining Your Family Office Solution and Services 41
Kirby Rosplock, PhD
Trends in the Family Office Landscape 42
Family Office Archetypes 45
The Multi-generational Focused Family Office 45
The Investment Family Office 45
The Founder’s Family Office 46
The Administrative and Compliance Family Office 46
Family Business-Centered Family Office 47
Legacy and Philanthropic Family Office 48
Determining Family Wealth Management Needs 48
Why the Single Family Office Solution? 48
Why the Multi-Family Office Solution? 53
Questions to Ask During the Evaluation Process 56
Request for a Proposal (RFP) 62
Conclusion and Final Thoughts 66
Notes 66
Chapter 4 Family Values, Mission, and Vision and the Family Office 69
Kirby Rosplock, PhD
Introduction to Values 69
The Process of Exploring Values 71
Values Statement 73
Mission Statement 74
Values, Mission, and the Family Office 74
The Importance of Vision 75
Elements for Successful Family Office Visioning 78
Building Your Family Office Vision 80
Pitcairn Family Case Study 81
Creating Your Family Vision 84
Step 1: Education and Clarifying the Process and Expectations 84
Step 2: Preplanning for the Vision Retreat 85
Step 3: Staging the Vision Retreat 86
Step 4: Developing Your Family’s Vision 86
Step 5: Aligning Vision with a Strategic Plan 86
Conclusion and Final Thoughts 87
Notes 88
Chapter 5 Establishing and Structuring of Family Offices 89
Ivan A. Sacks, Esq., Chairman, Withers Worldwide
William J. Kambas, Esq., Associate, Wealth Planning Practice Group, Withers Worldwide
Justin M. Zamparelli, Esq., Partner, Commercial Practice Group, Withers Worldwide
Case in Point 90
Question 1: What Legal Form Should the Family Office Take? 91
Choice of Entity 92
Deciding Between an LLC and a C Corporation 93
Question 2: Who Should Pay for Establishing and Operating the Family Office? 98
Question 3: Who Should Own the Family Office and How? 99
Legal Ownership 100
Beneficial Ownership 100
Models of Ownership 100
Question 4: Who Should Manage the Family Office and How? 102
Structuring the Legal Formalities 103
Structuring the Scope of Services 105
Family Philanthropy, Legacy, and Social Capital 108
Managing Regulatory and Estate Planning Concerns 108
Question 5: How Are Family Offices Structured to Optimize Tax Efficiency? 109
Tax Deductibility of Services Provided by the Family Office 111
State and Local Tax 112
Question 6: Can a Family Office be Structured to Manage Risk? 113
Risk Management Through Architecture 114
People-Oriented Risk Management 115
Balance Sheet, Cash Flow, and Economic Risk Management 115
Question 7: What Is the Process of Establishing and Structuring a Family Office? 116
Conclusion and Final Thoughts 118
Note 118
Chapter 6 Advising Families: Developing a Family Office Baseline 119
Kirby Rosplock, PhD
Introduction to Creating a Family Office Baseline 120
The Family Genogram 121
The Family Background 122
Trusted Advisors 123
The Estate Plan Review 123
Mapping and Summarizing Legal Entities 124
Assessing and Preparing for Major Life Issues 126
The Financial Review 128
Capital Sufficiency Analysis 128
Capital Sufficiency Case Study for the Raymond Family 129
Capital Sufficiency Outcomes Discussion 132
The Insurance Review 136
Conducting An Insurance Review 136
Conclusion and Final Thoughts 139
Notes 140
Chapter 7 Legal and Compliance Standards and Practices for Family Offices 141
David S. Guin, Esq., Partner and U.S. Commercial Practice Group Leader, Withers Worldwide
Mark J. Tice, Esq., Associate, Commercial Practice Group, Withers Worldwide
New Regulations Affecting Family Offices 142
What Has Not Changed 142
Case in Point 143
The Single Family Office Exemption 145
Case in Point 148
Clients of the Family Office May Need to Report Beneficial Ownership of Securities of Publicly Reporting Companies 149
How to Report Beneficial Ownership 149
Clients of the Family Office May Need to Report Beneficial Ownership as Insiders of Publicly Reporting Companies 151
Reporting Insider Status on Form 3, Form 4, or Form 5 152
How Do I Determine Beneficial Ownership in a Multi-Tiered Family Holding Structure? 152
Case in Point 153
Are You an Institutional Investment Manager? (The Answer May Surprise You.) 154
What Is an Institutional Investment Manager? 154
Reporting on Form 13F 155
Determining If the $100 Million Threshold Has Been Met 156
Case in Point 156
Are You a Large Trader? 157
Case in Point 159
The SEC Gets Personal about Insider Trading 159
Compliance Policies 162
What Are the Components of a Good Compliance Policy? 162
Document Retention Policies 163
What Are the Components of a Good Document Retention Policy? 165
The Compliance Function: In-House versus Outsourced 166
Special Issues for Family Offices When Considering Regulatory Requirements 166
Conclusion and Final Thoughts 167
Notes 167
Chapter 8 Investment Management and the Family Office 171
Kirby Rosplock, PhD
Family Office Investment Management 172
Concentration: All Eggs in One Basket 173
Simplifying the Wealth Management Paradigm: A Matter of Lifestyle and Legacy 175
Scale: How Much Is Enough? 177
Time: A Family Office’s Most Precious Advantage 179
What Gets in the Way of Growing Wealth: Variance, Inflation, Taxes, Investment Costs, and Spending 181
Family Office Investing: A Different Type of Animal? 182
A Goals-Based Approach to Asset Allocation 184
The Investment Process in a Family Office 185
Investment Review 186
Investment Philosophy 186
Investment Objectives 188
The Investment Policy 188
Investment Advisory Committee 190
Strategic and Tactical Asset Allocation, Manager Selection, Surveillance, and Ongoing Investment Monitoring 191
The Role of the Chief Investment Officer 193
The Outsourced Chief Investment Officer Model 196
Case in Point: Walford Family Office 198
Conclusion and Final Thoughts 201
Notes 201
Chapter 9 Operations and Information Technology in the Family Office 205
Robert Kaufold, Managing Partner, Carriage Partners LLC
Kirby Rosplock, PhD
Family First: Establishing Family Office Operations and Information Technology 205
Assessing Complexity 207
Case 1: Simple Family Fact Pattern 209
Build the Infrastructure! 210
Comments on Technology for the Simple System 212
Case 2: More Complex Family Fact Pattern 212
Build the Infrastructure! 213
Comments on Technology for the More Complex Infrastructure 214
Case 3: The Most Complex Family Fact Pattern 215
Build the Infrastructure! 216
Financial Reporting 222
Data and Decision Archiving 225
Conclusion and Final Thoughts 229
Notes 230
Chapter 10 Talent Management in the Family Office 233
Kirby Rosplock, PhD
Introduction 233
Family Office Staffing 235
Single Family Office Organizational Chart 235
Finding Family Office Talent 240
People Business 243
Chemistry Fit 243
Background Checks 246
Compensation 246
Managing Talent in Your Family Office 248
Role Clarity and Job Description 248
Performance Management 249
Talent Management Practices Case Study 250
Family at the Helm 251
Conclusion and Final Thoughts 255
Notes 255
Chapter 11 Governance Issues for the Family Office 257
Barbara Hauser, J.D., Independent Family Advisor
Kirby Rosplock, PhD
Governance Issues for the Family Office Itself 258
Benefits of a Good Board 258
Addition of Independent Directors 259
Interim Stage of Advisory Board 260
Accountability to the Family 260
Pricing Alternatives 260
Participation in Long-Term Strategy 261
Next Generation Issues to Address 261
Succession Planning for the Family Office and Its Executives 262
Case of the Winchester Family 266
Governance Issues for the Family Itself 269
Analysis of Existing Decision-Making Process 269
Hallmarks of Good Governance: Transparency, Accountability, and Participation 271
Benefits of the Family Creating Its own Governance Process/Structure 271
How to Create the Family Governance 272
Family Councils 273
Family Constitutions 274
Conclusion and Final Thoughts 276
Notes 277
Chapter 12 Preparing Succeeding Generations: Family Education in the Family Office 279
Kirby Rosplock, PhD
Developing the Next Generation 280
Elsa’s Story 282
To Tell or Not to Tell: Overcoming Communication Challenges 285
Case Study: Aragon Trust Company 287
Clear Expectations and the Power of Inherited Wealth 288
Case Study: The Lyle Family 292
Inspiring Entrepreneurship and the Next Generation 293
Mentoring: The Power, Influence, and Inspiration of Mentors 294
Building a Foundation for Financial Independence: The Role of the Family Office 297
Conclusion and Final Thoughts 301
Notes 302
Chapter 13 Family Entrepreneurship and the Family Bank 305
Warner King Babcock, AM Private Enterprises, Inc.
Kirby Rosplock, PhD
Key Entrepreneur Characteristics, Traits, and Questions 306
Mini-Case Study: Family Bank Supports and Promotes Family Entrepreneurship 309
Takeaways 310
What Is a Family Bank and Its Overall Purpose? 310
Mini-Case Study: Informal Intra-Family Financing for the Acquisition of a Business 312
Takeaways 312
Conceiving Your Family Bank 312
Who Funds Family Banks and What Do They Typically Fund? 313
Four Principles for Family Banks 315
Democratize 315
Harmonize 315
Customize 316
Professionalize 316
Mini-Case Study: Intra-Family Financing of Various New Family Businesses 317
Takeaways 317
Governance, Structure, and Organization 318
Mini-Case Study: Family Bank Without Good Governance 319
Takeaways 320
Evolution of Family Banks: From Simple to Complex 320
Family Bank Boards, Committees, and Trustees 323
Structures and Organization of Entities 324
Limitations of Trusts 325
The Role of the Family Office 326
The Role of Outside Experts 327
Tax and Legal Considerations of Family Banks 328
The Anderson Family Case Study 328
Conclusion and Final Thoughts 331
Notes 331
Chapter 14 Legacy and Philanthropy in the Family Office 333
Kirby Rosplock, PhD
Introduction to Legacy 334
Legacy to the Senior Generation 334
Legacy to the Next Generation 336
Gender and Legacy: How Important Is Leaving a Legacy from Women’s and Men’s Perspectives? 337
Defining Legacy 339
Financial Legacy 339
Social Legacy 340
Philanthropic Legacy 343
Legacy and Its Connection to Philanthropy 345
Case Study: The Root Family and the Origins of the Coca-Cola Bottle 347
The Role of the Family Office Supporting a Family’s Legacy and Philanthropy 349
Foundations 350
Family Offices Supporting Philanthropy: Opportunities and Challenges 351
Mentoring the Next Generation 352
Family Council 353
Conclusion and Final Thoughts 353
Notes 354
Chapter 15 Globalization of the Family Office: International Families and Family Offices 357
Kirby Rosplock, PhD
Introduction to the Global Family Office 358
Asia 358
North America 362
Latin America 364
Europe 366
Middle East and Africa 370
Oceania 378
Conclusion and Final Thoughts 381
Notes 385
About the Author 387
About the Contributors 389
Index 393
