Family Office
At its simplest a “family office” is the structure used by a family to manage the business of the family. From this perspective it becomes clear how a family office can evolve naturally across generations to suit the needs of an enterprising family.
At first, the “family office” is usually the role of parents who set the family’s attitude and values in relation to wealth and risk, asset allocation, sharing of wealth among the family and sometimes more widely through philanthropy. The senior generation also choose advisers to help with legal structures, planning and compliance issues. The interesting question is what happens when this family office structure inevitably dies out?
The parents may choose to divide the family’s assets into pots of roughly equal value for each of the next generation who then create their individual “family office”, just like their parents. There may however be problems and disadvantages with this approach. For example, the family’s assets may not be readily divisible into pots of roughly equal value that each member of the next generation can own individually. The value of the asset may not be easily realisable or may be diminished if it is broken up. Examples would be land, property, valuable collections and shares in a family business.
Apart from a need to remain connected because of the nature of an asset, a family might also want to remain connected through the shared ownership and enjoyment of certain assets, some of which may have sentimental value such as a family home or holiday home. This may also be acknowledged by a growing family as a strategy for giving them something in common, which will help them to keep in touch as they inevitably grow apart.
Any family who either needs to or wants to remain connected as a family through the shared ownership and enjoyment of “family assets” could use the FBS Consulting Process to help create their family office:
- Why do we want to remain connected as a family through the shared ownership and enjoyment of assets? Economic efficiency and tax mitigation will always matter but there are usually other forces and sentiments that drive the creation and success of a family office.
- What type of family office do we want? What assets will it include and what services should it provide? Where will be the boundary between what is “we” as a family” and “me” as an individual family member.
- How do we get organised? Only after the family has answered the Why and What questions is it possible for technical specialists to translate the family’s wishes into the optimum structure for each type of asset or activity that the family wish to be managed by the family office.
