Families and individuals with the good fortune of having great wealth are well aware of the extraordinary opportunities that such wealth can bring: multiple homes, extensive travel, recreation, and social activities. Along with the increased opportunities are the increased complexities and day-to-day responsibilities of managing one’s own assets and financial affairs. There is a vital need for professional management of individuals’ and families’ financial affairs in order to achieve a wealthy individual’s desired objectives.
Many wealthy individuals do not have the time to properly manage their broad range of resources because of their substantial business, philanthropic, and family commitments. Even individuals who successfully manage their own financial affairs may have concerns about continuity of financial management in the event of their own illness or death, since others in the family may not possess the specific skills to effectively take over the spectrum of management responsibilities.
As a long-term venture, the family office must develop appropriate risk management processes to help steward the office through changing conditions. These procedures need to encompass both operational level risk as well as strategic risk. Risks evolve over time, particularly when personnel change, in the light of changing market conditions, and changing family priorities, and the family office must adapt to that change while maintaining the overall focus on stewardship.
Family offices are entrusted with financial assets as well as the safety, privacy and reputation of the family, and a robust internal control structure is essential to safeguard those riches. Internal controls evolve over time due to personnel changes, technological changes, and the relative size of the family office. Our experts understand the nuts and bolts of financial processes, and the control points to be met to help ensure positive outcomes. We can rapidly assess the state of controls, and make recommendations to improve the efficiency and effectiveness of operations. Strong internal control structures provide confidence to the family members that operations are efficient, and management have the best information to make important decisions.
An exciting trend is the creation of the multi-client family office, also known as the “multi-family” office. This variant of the family office concept is the solution to the prohibitive cost and time consuming administrative issues present in a single-family office. Sometimes multi-family offices are created through the merger of two independently managed family offices to achieve cost efficiencies.
Example Engagement: Port-Mortem Family Office Management
A high-net worth individual passed away and the long standing family attorney resigned. We were able to immediately step in and assist with estate management. The surviving family also asked us to take over all accounting services previously provided by the existing family office personnel. We worked with the estate beneficiaries to engage new estate and probate counsel, develop an updated balance sheet for the estate, and to coordinate with new counsel for asset pour overs into the decedent’s trust. The loss of the long-standing family counsel precipitated an exigency for the surviving family to administer the estate. Our expertise in crisis management coupled with our experience in: estate and family office administration; and estate tax and income tax compliance and consulting allowed us to facilitate a smooth transition at the time that the family members were grieving the loss of a loved one.