9781118367308

The Complete Family Office Handbook A Guide for Affluent Families and the Advisors Who Serve Them

by
  • ISBN13:

    9781118367308

  • ISBN10:

    1118367308

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2014-01-28
  • Publisher: Bloomberg Press

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Supplemental Materials

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Summary

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.

Table of Contents

Preface

Acknowledgments

Chapter 1: Introduction to the Family Office (Kirby Rosplock, PhD)

A Macro View of Global Wealth

How Much Do I Really Need to Fund a Family Office?

Purpose & Definition of the Family Office

Historical Background of the Family Office

Case in Point

Three Key Roles of the Family Office

The Keeper & Executor

Guardian and Confidant

Brain Trust

Types of Family Office Services

Conclusion and Final Thoughts

Notes

Chapter 2:  Inception of the Family Office: Pathways to a Family Office (Kirby Rosplock, PhD)

Inception of a Family Office

Impact of the Family Business on the Family Office

Attractions and Challenges with Embedded Family Offices in the Family Business

Separating the Family Office from the Family Business

Sudden Wealth

Family Offices through the Back Door

Family Business Exit and Liquidity Event

Case—The Kessler Family

The Investment Office

Conclusion and Final Thoughts

Notes

Chapter 3: Family Wealth Needs: Determining your Family Office Solution & Services (Kirby Rosplock, PhD)

Trends in the Family Office Landscape

Family Office Archetypes

The Multigenerational Focused Family Office

The Investment Family Office

The Founder’s Family Office

The Administrative and Compliance Family Office

Family Business Centered Family Office

Legacy and Philanthropic Family Office

Determining Family Wealth Management Needs

Why the Single Family Office Solution

Why the Multi-Family Office Solution

Questions to Ask During the Evaluation Process

Response for a Proposal (RFP)

Conclusion and Final Thoughts

Notes

Chapter 4: Family Values, Mission, and Vision and the Family Office (Kirby Rosplock, PhD)

Introduction to Values

The Process of Exploring Values

Values Statement

Values, Mission, and the Family Office

The Importance of Vision

Elements for Successful Family Office Visioning

Building Your Family Office Vision

Pitcairn Family Case Study

Creating your Family Vision

Step 1: Education and Clarifying the Process and Expectations

Step 2: Pre-planning for the Vision Retreat

Step 3: Staging the Vision Retreat

Step 4: Developing your Family’s Vision

Step 5: Aligning Vision with Strategic Plan

Conclusion and Final Thoughts

Notes

Chapter 5: Establishing and Structuring of Family Offices (Ivan A. Sacks, Esq., Chairman, Withers Worldwide William J. Kambas, Esq., Associate, Wealth Planning Practice Group, Withers Bergman LLP, Justin M. Zamparelli, Esq., Partner, Commercial Practice Group, Withers Bergman LLP)

Case in Point

Question #1: What legal form should the family office take?

Choice of Entity

Deciding Between an LLC and a C Corporation

Formation of a C Corporation

Formation of an LLC

The Governing Instrument

Multi-Entity Structures

Simple Family Office (Investment and portfolio management)

The Angel or Venture Capitalist Family Office

Complex Family Office (Corporate conglomerate style)

The Value of Overall Structure Management

Case in Point

Question #2: Who should pay for establishing and operating the family office?

Question #3: Who should own the family office and how?

Legal Ownership

Beneficial Ownership

Models of Ownership

Case in Point

Question #4: Who should manage the family office and how?

Structuring the Legal Formalities

The Board of Directors (or the “Board”)

The Officers

Structuring the Scope of Services

Internal Operations

External Operations

Family Philanthropy, Legacy, and Social Capital

Managing Regulatory and Estate Planning Concerns

Question #5: How are family offices structured to optimize tax efficiency?

Tax deductibility of Services provided by the Family Office

State and Local Tax

Question #6: Can a family office be structure to manage risk?

Case in Point

Risk Management Through Architecture

People Oriented Risk Management

Balance Sheet, Cash Flow, and Economic Risk Management

Question #7: What is the process of establishing and structuring a family office?

Conclusion and Final Thoughts

Notes

Chapter 6: Advising Families: Developing a Family Office Baseline (Kirby Rosplock, PhD)

Introduction to Creating a Family Office Baseline

The Family Genogram

The Family Background

Trusted Advisors

The Estate Plan Review

Mapping and Summarizing Legal Entities

Assessing & Preparing for Major Life Issues

A Financial Review

Capital Sufficiency Analysis

Capital Sufficiency Case Study for the Raymond Family

Raymond Family Base Case

Analysis

Capital Sufficiency Outcomes Discussion

Insurance Review

Engaging in the Insurance Review Process

Conclusion and Final Thoughts

Notes

Chapter 7: Legal and Compliance Standards and Practices for Family Offices (David S. Guin, Esq., Partner and US Commercial Practice Group Leader, Withers Worldwide, Mark J. Tice, Esq., Associate, Commercial Practice Group, Withers Worldwide)

New Regulations Affecting Family Offices

What Has Not Changed

The Single Family Office Exemption

Clients of the Family Office May Need to Report Beneficial Ownership of Securities of Publicly Reporting Companies

Clients of the Family Office May Need to Report Beneficial Ownership as “Insiders” of Publicly Reporting Companies

Reporting Insider Status on Form 3, Form 4 or Form 5

How do I determine beneficial ownership in a multi-tiered family holding structure?

Are you an Institutional Investment Manager? (The answer may surprise you.)

What is an institutional investment manager?

Reporting on Form 13F

Determining if the $100 Million Threshold Has Been Met

Are You a Large Trader?

The SEC Gets Personal About Insider Trading

Compliance Policies

What are the components of a good compliance policy?

Document Retention Policies

What are the components of a good document retention policy?

The Compliance Function: In-house vs. Outsourced

Special Issues for Family Offices When Considering Regulatory Requirements

Conclusion and Final Thoughts

Notes

Chapter 8: Investment Management and the Family Office1 (Kirby Rosplock, PhD)

Family Office Investment Management

Concentration: All Eggs in One Basket

Simplifying the Wealth Management Paradigm:  A Matter of Lifestyle and Legacy

Scale: How Much is Enough?

Time: A Family Office’s Most Precious Advantage

What Gets in the Way of Growing Wealth: Variance, Inflation, Taxes, Investment Costs, and Spending

Family Office Investing: A Different Type of Animal?

A Goals-Based Approach to Asset Allocation

The Investment Process in a Family Office

Investment Review

Investment Philosophy

Investment Objectives

The Investment Policy

Investment Advisory Committee

Strategic and Tactical Asset Allocation, Manager Selection, Surveillance andOngoing Investment Monitoring

The Role of the Chief Investment Officer

The Outsourced CIO Model

Case in Point: Walford Family Office36

Conclusion and Final Thoughts

Notes

Chapter 9: Operations and Information Technology in the Family Office (Robert Kaufold, Managing Partner, Carriage Partners Inc. and Kirby Rosplock, PhD)

Assessing Complexity

Case #1: Simple Family Fact Pattern

Build the Infrastructure!

Comments on Technology for the Simple System

Case #2: More Complex Family Fact Pattern

Build the Infrastructure!

Comments on Technology for the More Complex Infrastructure

Case #3:  The Most Complex Family Fact Pattern

Build the Infrastructure!

Financial Reporting

Data and Decision Archiving

Conclusion and Final Thoughts

Notes

Chapter 10:  Talent Management in the Family Office (Kirby Rosplock, PhD)

Introduction

Family Office Staffing

Single Family Office Organizational Charts

President/CEO

Chief Investment Officer (CIO)

Chief Financial Officer (CFO)

Chief Administrative Officer (CAO)

Chief Operations Officer (COO)

Investment Advisor

Tax Accountant and Bookkeeper

Wealth Advisor

Finding Family Office Talent

People Business

Chemistry Fit

Background Checks

Compensation

Managing Talent in your Family Office

Role Clarity and Job Description

Performance Management

Family at the Helm

Conclusion and Final Thoughts

Notes

Chapter 11: Governance Issues for the Family Office (Barbara Hauser, J.D. Independent Family Advisor and Kirby Rosplock, PhD)

Governance Issues for the Family Office Itself

Benefits of a Good Board

Addition of Independent Directors

Interim Stage of Advisory Board

Accountability to the Family

Pricing Alternatives

Participation in Long-term Strategy

Next Generation Issues to Address

Succession Planning for the Family Office and its Executives

Case of the Winchester Family

Governance Issues for the Family Itself

Analysis of Existing Decision-making Process

Hallmarks of Good Governance: Transparency, Accountability, and Participation

Benefits of the Family Creating its own Governance Process/Structure

How to Create the Family Governance

Family Councils

Family Constitutions

Conclusion and Final Thoughts

Notes

Chapter 12: Preparing Succeeding Generations: Family Education in the Family Office (Kirby Rosplock, PhD)

Developing the Next Generation

Case Study: Elsa’s Story4

To Tell or Not to Tell: Overcoming Communication Challenges

Case Study: Aragon Trust Company15

Clear Expectations and the Power of Inherited Wealth

Case Study: The Lyle Family

Mentoring: The Power, Influence and Inspiration from Mentors

Building a Foundation for Financial Independence: The Role of the Family Office

Conclusion and Final Thoughts

Notes

Chapter 13:  Family Entrepreneurship and the Family Bank (Warner Babcock, AM Private Enterprises, Inc. and Kirby Rosplock, PhD)

Key Entrepreneur Characteristics, Traits and Questions

What are a Family Bank and its Overall Purpose?

Conceiving your Family Bank

Who Funds Family Banks and What do they Typically Fund?

Four Principles for Family Banks

Democratize

Harmonize

Customize

Professionalize

Governance, Structure, and Organization

Evolution of Family Banks: From Simple to Complex

Family Bank Boards, Committees and Trustees

Structures and Organization of Entities

Limitations of Trusts

The Role of the Family Office

The Role of Outside Experts

Tax and Legal Considerations of Family Banks

Conclusion and Final Thoughts

Notes

Chapter 14:Legacy and Philanthropy in the Family Office (Kirby Rosplock, PhD)

Introduction to Legacy

Legacy to the Senior Generation

Legacy to the Next Generation

Gender and Legacy: How Important is Leaving a Legacy from Women’s and Men’s Perspectives?

Defining Legacy

Financial Legacy

Social Legacy

Philanthropic Legacy

Legacy and its Connection to Philanthropy

The Role of the Family Office Supporting a Family’s Legacy & Philanthropy

Foundations

Opportunities

Challenges

Mentoring the Next Generation

Family Council

Conclusion and Final Thoughts

Notes

Chapter 15: Globalization of the Family Office: International Families and Family Offices (Kirby Rosplock, PhD)

Introduction to the Global Family Office

Asia

North America

Latin America

Europe

Middle East and Africa

Oceania

Conclusion and Final Thoughts

Notes

About the Author

About the Contributors

Index

Rewards Program

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