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Family Office

Family Office
What is it and is it right for you?

The modern concept and understanding of family office emerged at the beginning of the 19th century when the J.P.Morgans and Rockefellers started their family offices in 1838 and 1882 respectively.

The specific reasons why families establishes offices varies and are as numerous as families.

The most common reason why family offices are established is to take advantage of the following benefits:
• One central source for information about or overseeing of all the family financial matters.
• Pooling of investment funds across a family group, resulting in lower fees and better service.
• A dedicated team of professionals who are focused on the family goals.
• Continuity from generation to generation on issues of family governance trusts and values.
• Access to professional advisors, who can help educate family members about their responsibilities.
• “Concierge” Services, such as bill payment, making travel arrangements, property management, oversight of aircraft operation, and so on.

There are two types of Family Offices; Single Family Office and Multi Family Office.
The Single Family Office:
• This is set-up and owned by an individual family.

The Multi Family Office:
• Serves the needs of more than one family, with more-or-less the same values and philosophy.
• Combines resources for efficiency.
• Creates a single point contact for planning and implementation.
• Shares family office functions.

Multi Family Offices:
While asset size is not the only factor in the decision to establish a single family office, in most cases, it makes financial sense for it to be formed for a family, with liquid wealth in excess of US$ 75 million.
Because of the high financial threshold required to create a single family office, many high net worth families are opting for services of Multi Family Offices.
Furthermore, the consolidation which we have seen in the banking industry diminished the role of the bank trust departments that traditionally served the wealthy families. In the last couple of years we have seen a drastic increase in the number of families applying for the services of Multi Family Offices.

Apart from the issue of costs, also other benefits have been identified as a result of using the services of a Multi Family Office. Some of these advantages may include:
• Independence, no conflict of interest resulting from compensation received for the products utilized by the clients.
• Breadth & Integration of Services, full information about the family investments, tax situation, estate plan and dynamics, so best equipped to structure the family financial universe.
• Professionals with diverse skills, specialty knowledge on topics such as income taxation, insurance, estate planning and investments.
• Multi Generational planning works with entire family, from the patriarch to the grandchildren, so the planning typically includes the transfer of wealth to the lower generation in a tax efficient manner.

The motives to consider a family office differs, from family to family, with the constant being, the establishment of the family goals (children, business) and deciding on the best way to successfully accomplishment of these goals.

The establishment of a family office could be one of the most important and satisfying activities a family can undertake.

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