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The Complete Family Office Handbook. A Guide for Affluent Families and the Advisors Who Serve Them. Bloomberg Financial

  • ID: 2488747
  • Book
  • March 2014
  • 432 Pages
  • John Wiley and Sons Ltd

Praise for The Complete Family Office Handbook

"The Complete Family Office Handbook captures the essence of today′s family office and paves the way to best practice for every family and advisor entrusted with sustaining generational wealth. Kirby has written what is sure to be an industry classic."
—Sara Hamilton, Founder and CEO, Family Office Exchange

"The Complete Family Office Handbook is an important resource on the opaque world of the single family office. Comprehensive and easy to read, the book incorporates the views of many thought leaders on diverse topics from the importance of a family office vision to the current legal and compliance standards for the single family office. Those who are new to family offices and those of us who have worked in the field for decades will use it as a valuable reference for issues and ideas."
—Kathryn M. McCarthy, Director, The Rockefeller Trust Company, N.A. and an independent advisor to families and family offices

"Kirby Rosplock dedicated a year of her life to writing this book and it shows. This is the must–have book for anyone dealing with high levels of wealth—it will support wealth holders as well as wealth advisors and service providers in creating the most efficient structure possible for handling and preserving a high net worth person or family′s financial and human assets. Rosplock and her collaborators clearly demonstrate their command of the subject and why they are globally known to be at the top of this industry."
—Steffi Claiden, Founder/CEO, Family Office Review/Family Office Capital Network

"Kirby blends leading industry research, real world case examples and best practices to architect the first book to comprehensively outline the infrastructure, costs and considerations for building and sustaining a world class family office. My hat is off to her."
—John Benevides, President, CTC Consulting - Harris myCFO

"Kirby Rosplock expertly captures the complexities of the practical and emotional choices that affluent families and their advisors face."
—Susan Remmer Ryzewic, President and CEO, EHR Investments, Inc.

"Most wealth books are written for managers and contain lots of details but no sense of the daily life and concerns of the people who are to be served. This Handbook is one of a kind—written for real concerned and want–to–know people. The book starts not with concepts but with concerns and offers clear ideas about what to do, laced with details about real families managing the dilemmas of great wealth and an expanding family. There are few such families, but this handbook is for every family member of such families.
—Dennis T. Jaffe, PhD, Professor of Organizational Systems and Psychology, Saybrook University

Note: Product cover images may vary from those shown

Foreword xvii

Preface xix

Acknowledgments xxiii

Chapter 1

Introduction to the Family Office 1
Kirby Rosplock, PhD

A Macro View of Global Wealth 2

Billionaire Update 6

How Much Do I Really Need to Fund a Family Office? 8

Purpose and Definition of the Family Office 9

Historical Background of the Family Office 11

Family Wealth and the Family Office from the Industrial Age 11

Three Key Roles of the Family Office 14

The Keeper and Executor 15

The Guardian and Confidant 16

The Brain Trust 18

Types of Family Office Services 19

Conclusion and Final Thoughts 22

Notes 22

Chapter 2

Inception of the Family Office: Pathways to a Family Office 25
Kirby Rosplock, PhD

Inception of a Family Office 25

Impact of the Family Business on the Family Office 27

Attractions and Challenges with Embedded Family

Offices in the Family Business 27

Separating the Family Office from the Family Business 29

Sudden Wealth 30

The Investment Office 31

Family Offices through the Back Door 32

Family Business Exit and Liquidity Event 33

Case–The Kessler Family 34

Conclusion and Final Thoughts 39

Notes 40

Chapter 3

Family Wealth Needs: Determining Your Family Office Solution and Services 41
Kirby Rosplock, PhD

Trends in the Family Office Landscape 42

Family Office Archetypes 45

The Multi–generational Focused Family Office 45

The Investment Family Office 45

The Founder’s Family Office 46

The Administrative and Compliance Family Office 46

Family Business–Centered Family Office 47

Legacy and Philanthropic Family Office 48

Determining Family Wealth Management Needs 48

Why the Single Family Office Solution? 48

Why the Multi–Family Office Solution? 53

Questions to Ask During the Evaluation Process 56

Request for a Proposal (RFP) 62

Conclusion and Final Thoughts 66

Notes 66

Chapter 4

Family Values, Mission, and Vision and the Family Office 69
Kirby Rosplock, PhD

Introduction to Values 69

The Process of Exploring Values 71

Values Statement 73

Mission Statement 74

Values, Mission, and the Family Office 74

The Importance of Vision 75

Elements for Successful Family Office Visioning 78

Building Your Family Office Vision 80

Pitcairn Family Case Study 81

Creating Your Family Vision 84

Step 1: Education and Clarifying the Process and Expectations 84

Step 2: Preplanning for the Vision Retreat 85

Step 3: Staging the Vision Retreat 86

Step 4: Developing Your Family’s Vision 86

Step 5: Aligning Vision with a Strategic Plan 86

Conclusion and Final Thoughts 87

Notes 88

Chapter 5

Establishing and Structuring of Family Offices 89
Ivan A. Sacks, Esq., Chairman, Withers Worldwide
William J. Kambas, Esq., Associate, Wealth Planning Practice Group, Withers Worldwide
Justin M. Zamparelli, Esq., Partner, Commercial Practice Group, Withers Worldwide

Case in Point 90

Question 1: What Legal Form Should the Family Office Take? 91

Choice of Entity 92

Deciding Between an LLC and a C Corporation 93

Question 2: Who Should Pay for Establishing and Operating the Family Office? 98

Question 3: Who Should Own the Family Office and How? 99

Legal Ownership 100

Beneficial Ownership 100

Models of Ownership 100

Question 4: Who Should Manage the Family

Office and How? 102

Structuring the Legal Formalities 103

Structuring the Scope of Services 105

Family Philanthropy, Legacy, and Social Capital 108

Managing Regulatory and Estate Planning Concerns 108

Question 5: How Are Family Offices Structured to

Optimize Tax Efficiency? 109

Tax Deductibility of Services Provided by the Family Office 111

State and Local Tax 112

Question 6: Can a Family Office be Structured to Manage Risk? 113

Risk Management Through Architecture 114

People–Oriented Risk Management 115

Balance Sheet, Cash Flow, and Economic Risk Management 115

Question 7: What Is the Process of Establishing and Structuring a Family Office? 116

Conclusion and Final Thoughts 118

Note 118

Chapter 6

Advising Families: Developing a Family Office Baseline 119
Kirby Rosplock, PhD

Introduction to Creating a Family Office Baseline 120

The Family Genogram 121

The Family Background 122

Trusted Advisors 123

The Estate Plan Review 123

Mapping and Summarizing Legal Entities 124

Assessing and Preparing for Major Life Issues 126

The Financial Review 128

Capital Sufficiency Analysis 128

Capital Sufficiency Case Study for the Raymond Family 129

Capital Sufficiency Outcomes Discussion 132

The Insurance Review 136

Conducting An Insurance Review 136

Conclusion and Final Thoughts 139

Notes 140

Chapter 7

Legal and Compliance Standards and Practices for Family Offices 141
David S. Guin, Esq., Partner and U.S. Commercial Practice Group Leader, Withers Worldwide
Mark J. Tice, Esq., Associate, Commercial Practice Group, Withers Worldwide

New Regulations Affecting Family Offices 142

What Has Not Changed 142

Case in Point 143

The Single Family Office Exemption 145

Case in Point 148

Clients of the Family Office May Need to Report Beneficial

Ownership of Securities of Publicly Reporting Companies 149

How to Report Beneficial Ownership 149

Clients of the Family Office May Need to Report Beneficial

Ownership as Insiders of Publicly Reporting Companies 151

Reporting Insider Status on Form 3, Form 4, or Form 5 152

How Do I Determine Beneficial Ownership in a

Multi–Tiered Family Holding Structure? 152

Case in Point 153

Are You an Institutional Investment Manager? (The Answer May Surprise You.) 154

What Is an Institutional Investment Manager? 154

Reporting on Form 13F 155

Determining If the $100 Million Threshold Has Been Met 156

Case in Point 156

Are You a Large Trader? 157

Case in Point 159

The SEC Gets Personal about Insider Trading 159

Compliance Policies 162

What Are the Components of a Good Compliance Policy? 162

Document Retention Policies 163

What Are the Components of a Good Document Retention Policy? 165

The Compliance Function: In–House versus Outsourced 166

Special Issues for Family Offices When Considering Regulatory Requirements 166

Conclusion and Final Thoughts 167

Notes 167

Chapter 8

Investment Management and the Family Office 171
Kirby Rosplock, PhD

Family Office Investment Management 172

Concentration: All Eggs in One Basket 173

Simplifying the Wealth Management Paradigm: A Matter of Lifestyle and Legacy 175

Scale: How Much Is Enough? 177

Time: A Family Office’s Most Precious Advantage 179

What Gets in the Way of Growing Wealth: Variance, Inflation, Taxes, Investment Costs, and Spending 181

Family Office Investing: A Different Type of Animal? 182

A Goals–Based Approach to Asset Allocation 184

The Investment Process in a Family Office 185

Investment Review 186

Investment Philosophy 186

Investment Objectives 188

The Investment Policy 188

Investment Advisory Committee 190

Strategic and Tactical Asset Allocation, Manager Selection, Surveillance, and Ongoing Investment Monitoring 191

The Role of the Chief Investment Officer 193

The Outsourced Chief Investment Officer Model 196

Case in Point: Walford Family Office 198

Conclusion and Final Thoughts 201

Notes 201

Chapter 9

Operations and Information Technology in the Family Office 205
Robert Kaufold, Managing Partner, Carriage Partners LLC
Kirby Rosplock, PhD

Family First: Establishing Family Office Operations and Information Technology 205

Assessing Complexity 207

Case 1: Simple Family Fact Pattern 209

Build the Infrastructure! 210

Comments on Technology for the Simple System 212

Case 2: More Complex Family Fact Pattern 212

Build the Infrastructure! 213

Comments on Technology for the More Complex

Infrastructure 214

Case 3: The Most Complex Family Fact Pattern 215

Build the Infrastructure! 216

Financial Reporting 222

Data and Decision Archiving 225

Conclusion and Final Thoughts 229

Notes 230

Chapter 10

Talent Management in the Family Office 233
Kirby Rosplock, PhD

Introduction 233

Family Office Staffing 235

Single Family Office Organizational Chart 235

Finding Family Office Talent 240

People Business 243

Chemistry Fit 243

Background Checks 246

Compensation 246

Managing Talent in Your Family Office 248

Role Clarity and Job Description 248

Performance Management 249

Talent Management Practices Case Study 250

Family at the Helm 251

Conclusion and Final Thoughts 255

Notes 255

Chapter 11

Governance Issues for the Family Office 257
Barbara Hauser, J.D., Independent Family Advisor
Kirby Rosplock, PhD

Governance Issues for the Family Office Itself 258

Benefits of a Good Board 258

Addition of Independent Directors 259

Interim Stage of Advisory Board 260

Accountability to the Family 260

Pricing Alternatives 260

Participation in Long–Term Strategy 261

Next Generation Issues to Address 261

Succession Planning for the Family Office and Its Executives 262

Case of the Winchester Family 266

Governance Issues for the Family Itself 269

Analysis of Existing Decision–Making Process 269

Hallmarks of Good Governance: Transparency, Accountability, and Participation 271

Benefits of the Family Creating Its own Governance Process/Structure 271

How to Create the Family Governance 272

Family Councils 273

Family Constitutions 274

Conclusion and Final Thoughts 276

Notes 277

Chapter 12

Preparing Succeeding Generations: Family Education in the Family Office 279
Kirby Rosplock, PhD

Developing the Next Generation 280

Elsa’s Story 282

To Tell or Not to Tell: Overcoming Communication Challenges 285

Case Study: Aragon Trust Company 287

Clear Expectations and the Power of Inherited Wealth 288

Case Study: The Lyle Family 292

Inspiring Entrepreneurship and the Next Generation 293

Mentoring: The Power, Influence, and Inspiration of Mentors 294

Building a Foundation for Financial Independence: The Role of the Family Office 297

Conclusion and Final Thoughts 301

Notes 302

Chapter 13

Family Entrepreneurship and the Family Bank 305
Warner King Babcock, AM Private Enterprises, Inc.
Kirby Rosplock, PhD

Key Entrepreneur Characteristics, Traits, and Questions 306

Mini–Case Study: Family Bank Supports and Promotes

Family Entrepreneurship 309

Takeaways 310

What Is a Family Bank and Its Overall Purpose? 310

Mini–Case Study: Informal Intra–Family Financing for the Acquisition of a Business 312

Takeaways 312

Conceiving Your Family Bank 312

Who Funds Family Banks and What Do They Typically Fund? 313

Four Principles for Family Banks 315

Democratize 315

Harmonize 315

Customize 316

Professionalize 316

Mini–Case Study: Intra–Family Financing of Various New Family Businesses 317

Takeaways 317

Governance, Structure, and Organization 318

Mini–Case Study: Family Bank Without Good Governance 319

Takeaways 320

Evolution of Family Banks: From Simple to Complex 320

Family Bank Boards, Committees, and Trustees 323

Structures and Organization of Entities 324

Limitations of Trusts 325

The Role of the Family Office 326

The Role of Outside Experts 327

Tax and Legal Considerations of Family Banks 328

The Anderson Family Case Study 328

Conclusion and Final Thoughts 331

Notes 331

Chapter 14

Legacy and Philanthropy in the Family Office 333
Kirby Rosplock, PhD

Introduction to Legacy 334

Legacy to the Senior Generation 334

Legacy to the Next Generation 336

Gender and Legacy: How Important Is Leaving a Legacy from Women’s and Men’s Perspectives? 337

Defining Legacy 339

Financial Legacy 339

Social Legacy 340

Philanthropic Legacy 343

Legacy and Its Connection to Philanthropy 345

Case Study: The Root Family and the Origins of the Coca–Cola Bottle 347

The Role of the Family Office Supporting a Family’s Legacy and Philanthropy 349

Foundations 350

Family Offices Supporting Philanthropy: Opportunities and Challenges 351

Mentoring the Next Generation 352

Family Council 353

Conclusion and Final Thoughts 353

Notes 354

Chapter 15

Globalization of the Family Office: International Families and Family Offices 357
Kirby Rosplock, PhD

Introduction to the Global Family Office 358

Asia 358

North America 362

Latin America 364

Europe 366

Middle East and Africa 370

Oceania 378

Conclusion and Final Thoughts 381

Notes 385

About the Author 387

About the Contributors 389

Index 393

Note: Product cover images may vary from those shown
Kirby Rosplock
Note: Product cover images may vary from those shown