+353-1-416-8900REST OF WORLD
+44-20-3973-8888REST OF WORLD
1-917-300-0470EAST COAST U.S
1-800-526-8630U.S. (TOLL FREE)

The Complete Family Office Handbook. A Guide for Affluent Families and the Advisors Who Serve Them. Edition No. 2

  • Book

  • 480 Pages
  • January 2021
  • John Wiley and Sons Ltd
  • ID: 5179019

Discover new insights on how to setup, manage, and advise wealthy families and their family offices

The Complete Family Office: A Guide for Affluent Families and the Advisors Who Serve Them, 2nd Edition represents the newest update to an essential series. This book prepares the members of wealthy families to collectively manage, sustain, and grow their wealth across multiple generations. It also assists professionals who advise families to better serve their needs.

This book teaches those who advise family offices and wealthy families on:

· How to setup, structure, and advise a family office

· Current compliance, fiduciary and risk management practices for a family office

· Forward-thinking investment management, estate planning, and private trust company considerations

· Fresh insights on philanthropy, legacy, and impact investing

· Best practices to managing family wealth education and preparing next generation owners

· New insights on family governance, strategic planning, and succession

· Methods to create a family constitution, mission, and vision for families and their family offices.

The Complete Family Office Handbook provides the most comprehensive, current research, practical guidance, and approaches from leading family offices from around the globe and illustrates, by way of practical case studies and examples, how families can effectively manage their wealth for the long term.

Table of Contents

Foreword xix

Preface xxi

Acknowledgments xxv

Chapter 1 Introduction to the Family Office 1

Kirby Rosplock, PhD

A Macro View of Global Wealth 2

Billionaire Update 7

How Much Do I Really Need to Fund a Family Office? 10

Purpose and Definition of the Family Office 11

Historical Background of the Family Office 12

Family Office from the Industrial Age to Current 13

Key Roles of the Family Office 16

The Executor and Trusted Advisor 16

The Guardian and Watchman 17

The Librarian and Guru 19

Family Office Orientation to Family, Strategy, and Operations 19

Conclusion and Final Thoughts 24

Notes 24

Chapter 2 Family Office Evolution: Inceptions and Archetypes 27

Kirby Rosplock, PhD

Inception of a Family Office 27

Scale: How Much Is Enough? 28

Impact of the Family Business on the Family Office 30

Attractions and Challenges with Embedded Family Offices 30

Separating the Family Office from the Family Business 32

Sudden Wealth 33

The Investment-Focused Family Office 34

Family Offices Through the Back Door 35

Family Business Exit and Liquidity Event 36

Family Office Archetypes 37

The Founder’s Family Office 37

The Virtual, Administrative, and Compliance Family Office 38

The Philanthropic Family Office 39

The Direct Investment and Investment Offices 39

The Family Business-Focused Family Office 40

The Multigenerational-Focused Family Office 41

Mathile Case Study 42

Background: Inception 42

Evolution of the Family Office: Strategic Planning Cycles 43

A Multigenerational Perspective 44

Alignment, Urgency, and Action 45

Discovery and Steps 47

Involving Outside Experts 48

Conclusion and Final Thoughts 49

Notes 50

Chapter 3 Comparing Family Office Solutions: Multi- and Single-Family Offices 53

Kirby Rosplock, PhD

Trends in the Family Office Landscape 54

Determining Family Wealth Management Needs 58

Why the Single-Family Office Solution? 59

Why the Multi-Family Office Solution? 65

Questions to Ask During the Evaluation Process 68

Pathways to Selecting a Multi-Family Office 74

Godspeed Case Study 75

Introduction 75

Background of the Family and Family Office 75

A Trigger and Decision for a New Direction 76

Journey to Find What Is Next 76

Decision-Making Process 77

Final Cut 78

Key Insights and Outcomes 80

Conclusion and Final Thoughts 81

Notes 82

Chapter 4 Family Values, Mission, and Vision and the Family Office 83

Kirby Rosplock, PhD

Introduction to Values 83

The Process of Exploring Values 85

Values Statement 86

Mission Statement 87

Values, Mission, and the Family Office 88

The Importance of Vision 89

Elements for Successful Family Office Visioning 92

Building Your Family Office Vision 94

Pitcairn Family Case Study 95

Five Steps to Creating a Family Vision 98

Step 1: Clarifying the Process and Expectations 99

Step 2: Vision Retreat Pre-Planning 99

Step 3: Staging a Vision Retreat 100

Step 4: Timing for a Vision Retreat 100

Step 5: Aligning Vision and the Strategic Plan 100

Conclusion and Final Thoughts 101

Notes 102

Chapter 5 Establishing and Structuring of Family Offices 103

Ivan A. Sacks, Esq., Partner, Withers Bergman LLP

William J. Kambas, Esq., Partner, Withers Bergman LLP

Question 1: What Legal Form Should the Family Office Take? 105

Choice of Entity 107

Deciding Between an LLC and a C Corporation 107

Case in Point 113

Question 2: Who Should Pay for Establishing and Operating the Family Office? 114

Question 3: Who Should Own the Family Office and How? 116

Legal Ownership 117

Beneficial Ownership 117

Models of Ownership 117

Question 4: Who Should Manage the Family Office and How? 119

Structuring the Legal Formalities 120

Structuring the Scope of Services 122

Family Philanthropy, Legacy, and Social Capital 125

Managing Regulatory and Estate Planning Concerns 125

Question 5: How Are Family Offices Structured to Optimize Tax Efficiency? 126

Tax Deductibility of Services Provided by the Family Office 129

State and Local Tax 131

Question 6: Can a Family Office Be Structured to Manage Risk? 132

Case in Point 132

Risk Management Through Architecture 133

People-Oriented Risk Management 133

Balance Sheet, Cash Flow, and Economic Risk Management 133

Question 7: What Is the Process of Establishing and Structuring a Family Office? 134

Conclusion and Final Thoughts 136

Notes 137

Chapter 6 Strategic Planning for the Family Office 139

Kirby Rosplock, PhD

Creating a Family Office Strategic Plan 140

Discovery 141

The Family Capital Review 142

The Family Background 143

The Advisor Network Review 145

The Estate Plan Review 145

Mapping and Summarizing Legal Entities 146

Family Office Stress Tests 147

Risk and Insurance Management Considerations 150

Family Office Risk Assessment and Insurance Planning 151

Family Member Risk and Insurance Planning 154

Overview of Capital Sufficiency Analysis 155

Simple vs. Sophisticated Approach 156

Using Capital Sufficiency in the Family Office 156

Case in Point: Doryman Family 157

Key Takeaways 164

Conclusion and Final Thoughts 165

Notes 166

Chapter 7 Legal and Compliance Standards and Practices for Family Offices 167

David S. Guin, Esq., Partner and US Commercial Practice Group Leader, Withers Bergman LLP

Regulations Affecting Family Offices: Dodd-Frank Act 167

Case in Point 169

The Single-Family Office Exemption 170

Case in Point 174

Clients of the Family Office May Need to Report Beneficial Ownership of Securities of Publicly Reporting Companies 175

How to Report Beneficial Ownership 176

Ownership of Securities in the Ordinary Course of Business 176

Passive Ownership of Less than 20 Percent of a Class of Securities 176

Other Acquisitions 177

Clients of the Family Office May Need to Report Beneficial Ownership as Insiders of Publicly Reporting Companies 177

Reporting Insider Status on Form 3, Form 4, or Form 5 178

How Do I Determine Beneficial Ownership in a Multi-Tiered Family Holding Structure? 179

Are You an Institutional Investment Manager? (The Answer May Surprise You.) 180

What Is an Institutional Investment Manager? 181

Reporting on Form 13F 181

Determining If the $100 Million Threshold Has Been Met 183

Confidential Treatment 184

Are You a Large Trader? 184

The SEC Gets Personal About Insider Trading 186

Compliance Policies 188

What Are the Components of a Good Compliance Policy? 189

Document Retention Policies 190

What Are the Components of a Good Document Retention Policy? 192

The Compliance Function: In-House Versus Outsourced 192

Special Issues for Family Offices When Considering Regulatory Requirements 193

Conclusion and Final Thoughts 194

Notes 194

Chapter 8 Investment Management and the Family Office 197

Kirby Rosplock, PhD

Family Office Investment Management 198

Concentration 199

Measuring Success 200

Lifestyle and Legacy 201

Time Horizon 203

Hurdles to Growing Wealth 205

Family Office Investing: Paradigm Shift 206

Passive Versus Active Asset Management 208

A Practical Approach to Asset Allocation 209

The Investment Process in a Family Office 210

Investment Review 210

Investment Governance 211

Investment Objectives 214

The Investment Policy Statement 214

Investment Committee 217

Why Would a Family Establish an Investment Committee (IC)? 218

How Does a Family Establish an Investment Committee? 218

How Does an Investment Committee Usually Operate? 218

Strategic and Tactical Asset Allocation, Manager Selection, and Investment Monitoring 221

CIO Function: In-House Versus Outsourced 223

Conclusion and Final Thoughts 227

Notes 228

Chapter 9 Family Office Operations and Information Technology 231

John Rosplock, COO and CFO, Tamarind Partners, Inc.

Robert Kaufold, President and Chief Risk Officer, Cauldera LLC

Family Needs Drive Family Office Systems 232

Family Office Operations 233

Accounting 233

Reporting 233

Financial Reporting 235

Data and Decision Archiving 236

Family Office Management 238

Security 239

Other Technology 239

Assessing Operational Complexity 240

Simple to Complex Systems 242

Complex System Technology 244

Operations Lens to Insourcing Versus Outsourcing 247

Technology Considerations: Buy or Build 249

New Technology Due Diligence and Onboarding 250

Keys to Success 254

Conclusion and Final Thoughts 255

Notes 256

Chapter 10 Family Office Talent, Compensation, and Recruitment 257

Kirby Rosplock, PhD

Introduction 258

Family Office Staffing 259

Single-Family Office Organizational Chart 261

Gender and Family Office Executives 267

Recruiting Family Office Talent 268

Finding a Good Chemistry and Culture Fit 269

Background Checks 271

Compensation 272

Methods for Determining Annual Incentives 274

Managing Family Office Talent 276

Role Clarity and Job Description 276

Reporting Hierarchy and Authority 276

Performance Management 277

Communication and Trust 278

Recruiting Internationally 278

Case Study: Setting Up the Office 279

Family or Non-Family at the Helm 280

Family Member Compensation 281

Conclusion and Final Thoughts 282

Notes 282

Chapter 11 Governance Issues for the Family Office 285

Barbara Hauser, JD, Independent Family Advisor

Kirby Rosplock, PhD

Governance Issues for the Family Office Itself 286

Benefits of a Good Board 286

Importance of Independent Directors 288

Interim Stage of Advisory Board 289

Accountability to the Family 289

Participation in Long-Term Strategy 289

Next Generation Issues to Address 290

Succession Planning for the Family Office and Its Executives 290

Governance for the Family Itself 293

Analysis of Existing Decision-Making Process 295

Hallmarks of Good Governance: Transparency, Accountability, and Participation 296

Benefits of the Family Creating Its Own Governance Process and Structure 297

How to Create the Family Governance 298

Family Councils 299

Family Constitutions 300

Kettering Family Governance Case Study 302

Conclusion and Final Thoughts 308

Notes 309

Chapter 12 Family Education and the Family Office 311

Kirby Rosplock, PhD

Stewardship of Wealth 313

Psychology of Wealth and Child Development 314

Elsa’s Story 316

Overcoming Communication Challenges 317

Case Study: Waithram Family 319

Clear Expectations and the Power of Inherited Wealth 322

Inspiring Entrepreneurship and the Next Generation 325

Case Study: Jennifer’s Story 326

The Power, Influence, and Inspiration of Mentors 327

Creating a Family Education Plan 329

Conclusion and Final Thoughts 332

Notes 333

Chapter 13 Family Entrepreneurship and the Family Bank 335

Warner King Babcock

Kirby Rosplock, PhD

What Is a Family Bank? 335

Two Mindsets to Your Family Bank 338

Establishing and Funding a Family Bank? 339

Five Principles for Family Banks 340

Democratize 340

Harmonize 340

Customize 341

Flexibilize 342

Professionalize 342

Mini-Case Study: Intra-Family Financing of New Family Businesses 343

Organizing a Family Bank 344

Entity Choice 345

Evolution of Family Banks: From Simple to Complex 346

Mini-Case Study: A Family Bank Designed to Develop the Next Generation 349

Good Governance: Family Bank Boards, Committees, and Trustees 350

Mini-Case Study: Family Bank Without Good Governance 351

Limitations of Trusts 352

The Role of the Family Office 353

The Role of Outside Experts 354

Tax and Legal Considerations of Family Banks 355

The Anderson Family Case Study 355

Conclusion and Final Thoughts 358

Notes 359

Chapter 14 Legacy, Philanthropy, and Impact Investing 361

Kirby Rosplock, PhD

Introduction to Legacy 362

A Generational Lens to Legacy 362

Defining Legacy 364

Financial Legacy 365

Social Legacy 366

Philanthropic Legacy 367

Philanthropy, Impact, and Sustainable Investing 368

Opportunities and Challenges of Philanthropy, Impact, and Sustainable Investing 371

Family Philanthropy and Foundations 373

The Root Family Legacy and Evolving Their Philanthropy 374

The Family Office Supporting Family Philanthropy 377

Cordes Family Case Study 378

Conclusion and Final Thoughts 385

Notes 386

Chapter 15 Private Trust Companies: Creating the Ideal Trustee 389

Miles Padgett, Partner, Kozusko Harris Duncan

Don Kozusko, Partner, Kozusko Harris Duncan

The Broader View 389

What Is a Private Trust Company? 389

What Are the Differences Between a Private Trust Company and a Commercial Trust Company? 390

Why Do Families Consider Creating a PTC? 392

What Are the Key Considerations to Be Addressed Prior to Pursuing a PTC? 392

Steps to Creating a PTC 398

Choice of Regulatory Regime 398

Geographical Convenience 400

Substantive Trust Laws 401

Trust Company Laws 402

Public Policy Environment 404

Trust and Trust Company Taxes 405

Achieving Success in a PTC: Setting Priorities 405

Fostering Beneficiary Development Should Be the Primary Objective of the PTC 406

Principles and Practices for a Successful Private Trust Company 408

The Parable Family 409

Conclusion and Final Thoughts 415

Notes 416

Appendix A: Family Office Complexity Assessment 419

Appendix B: Family Office Technology Segments 423

About the Author 425

About the Contributors 427

Index 431


Kirby Rosplock