Market data:

Family Office New Trends

I recently earned a Certificate in Financial Management for the Family Office and during the seminar we had many interesting discussions on the state of the industry and its future path. The following blog is an attempt at channeling some of the information discussed.

The Family Office space represents a niche of the wealth management industry; Family Offices have been around since the first great fortunes were made in the roaring years of capitalism in America but they did not become a commercial reality until the 1990s.  Since then the industry has changed in many ways and today we see a multitude of trends developing.

For one, the industry is much more structured and organized and more information and networking seem to be available to industry professionals. Such increase in resources is also occurring at the educational level for all family members.

The Industry is growing fast, keeping pace with an increasing number of families looking for family office platforms even at levels of wealth that may not justify the set-up of a dedicated operation. Such dynamic is creating the conditions for rapid growth in the Multi Family Office (MFO) segment.

Genspring, which presented at the seminar, produced this comprehensive chart listing, by categories, all the services potentially related to a Family Office platform:

Lifestyle

Expense Mgmt

Taxes

Document Mgmt

Fiduciary

Goals   based financial planning

Account   payables

Comprehensive   tax planning

Document   Inventory

Trust   administration and management

Capital   Sufficiency Analysis

Establish   internal controls

Charitable   tax planning

 

Fiduciary   accounting and beneficiary communications

Liquidity   mgmt. and reporting

Categorize   and code expense transactions, including tracking transfers between entities

Tax   planning for trusts and estates

 

Provide   infrastructure and liability support and advice for all Trustees

Risk   assessment, insurance review

Maintain/Manage   cash balances

Tax   compliance services and tax return preparation

   

Assistance   with acquisition and financing of lifestyle assets

       

Customized   financial reporting

       
         

Investments

Education

Estate

Philanthropy

Governance

Investment   Policy Statement

Family   learning programs

Review   and illustration of Estate planning  

Education

Family   meeting facilitation

Strategic   asset allocation and implementation

Next   generation education

Creation   and communication of wealth transfer objectives

Next   generation Involvement

Family   mission statement development and implementation

Investment   due diligence, selection and monitoring

Trustee   and beneficiary mentoring

Annual   estate plan review

Shared   Values and giving interest identification

Family   governance system development

Consolidated   investment reporting

Learning   events

 

Foundation   governance

Succession   planning

     

Charitable   structure evaluation

 
         
         

Not all services will necessarily be offered by every FO or MFO and not all services may be required by each family; in this light a “a la carte” system is becoming popular were the family chooses a tailored menu comprising specific building blocks that fit the present needs.

Another major topic at the seminar was the effort the industry is making in highlighting the core difference in the business model between a FO or MFO versus similar platforms provided by traditional broker/dealers.  Broker/Dealers are held to a “Suitability” standard which means the investment manager is legally required to put the client in products that are suitable for his/her objectives, means and age.  Conversely, a Family Office (often registered as a RIA) is held to a “Fiduciary” standard. This means the manager is legally required to act in the exclusive interest of the client, provide transparency for all expenses and conflicts and can potentially be sued for breach or responsibility.

In other words, the bar for a Family Office manager is much higher and it should be as the relationship with the client is clearly based on trust and care and not economies of scale.