Advanced Guide for Family Offices ©

This is a work in progress for a book/definitive guide being authored on the subject by Gordon “Grant” Curtis. Feedback for clarifications and detail is appreciated.

Chapter 1
What is a Family Office and Why?

The concept of a family office long predates the formal structure that most have evolved into today. Many family offices have morphed from a simple or complex series of trusts previously managed by banks or lawyers, to business entities whereby family members participate in management or governance or both.

Included as part of the top functions for family offices tends to be the wealth management aspects, but there is much more. It is estimated that there are over 3,000 such family offices world wide ranging in formal business structure to include: Limited Partnerships, Limited Liability Companies, Master Limited Partnerships, Corporations, Sole Proprietorships or General Partnerships, and informal organizations with few or many divisions and responsibilities.

One might recognize the traditional large family of European dissent as the genesis of the family office. In such an example, regular meetings were held, often during family gatherings, and brothers would discuss and report on facets of the combined holdings. Frequently, this etiology came from large real estate, farm or mineral holdings passed down through generations and included complex inheritance schemes that often became controversial.

Much of this hierarchy takes lead from biblical times and before where kingdoms were supported by various sharecrop or taxation schemes and the cast system was in full force. This was truly the simplest version that does provide some insight as to how to best provide an organizational structure that can be creative, yet based on organized leadership.

For the purposes of modern day applications, including a layer of financial security and reporting, the 21st century has opened the door for transition for high net worth families ($50 million and more) wanting to have more control over their financial and personal lives, yet delegate certain tasks and responsibilities to hired staff.

Much of the original wealth building for most family offices finds its roots from a previous family business enterprise or through a primary family member of current or past generation. Subsequently, there is a need to support the beneficiaries of such wealth and manage these assets according to the wishes of those that currently benefit and from those who created it. Thus, the need for a method to perform such duties along with other considerations transforms into a family office.

As opposed to fragmenting wealth across many future generations and potentially losing the benefits of a more organized pool of capital, family offices can support charitable components, manage common holdings such as: an original family home or multiple homes, arrange travel, handle health and insurance issues, aggregate tax considerations and provide personal security considerations. The list can be much more extensive than this.

The initial formation of a family office should include a basic mandate. The mandate should outline the wishes of the creators, perhaps the patriarch and matriarch of the family, and include general provisions for future support of family members as well as social considerations.

Specifically, wealth management guidelines including any socially responsible provisions; charitable set asides or activities including specific organizations that may or may not be owned by the family; methods for electing and changing management of such affairs should be at the top of the list.

By having and setting up an organized approach, a family office will best support the required functions and survive into unknown times and events. For offices that have not been structured properly, it is not too late to restructure. The organizational aspects will be discussed in future chapters of the book.

In addition to the business aspects of a family office, the social continuity is of paramount importance as well. Having intimate knowledge of all family members and supporting their needs and desires as well as rendering collective advice can be very beneficial. Many families coordinate outings, at least annually if not more frequently to meet under both a social setting as well as an informal business setting.

Supporting the listed above physical outings where family office matters are discussed in person are often regular written reports and in other cases, daily interaction between certain family members in management or directorship positions.

Clearly, the more formalized the family office structure coupled with a touch of family personalism gives the uniqueness for both managing expectations as well as avoiding conflict. Ultimately this provides for harmonious relationships that survive the change of tides in business environments. In most cases, the outcome is much more constructive and positive by comparison to trusts run by third party trustees and executors.