Family Office, Aggregator Services
- Successful governance of the family office is often obtained through selective delegation, with the day-to-day management and execution left to capable family office personnel supported by outside advisers.
- A succession plan can be built by employing younger family members and having them assume management responsibilities and ownership of the family office over time. A review of the transition plan for the family office is a worthwhile exercise.
- A family office needs to define its client base (consistent with the new SEC regulations) before it determines what services to provide. Services may include in-house as well as outsourced services provided by outside professionals.
- The larger the client base and the more services provided, the greater the capital outlay. Providing below-market services to family members creates practical, financial, and tax-related issues, so it is important for the family office to develop the right “menu” for its client base.
- Although a family office is typically funded initially through capital contributions and loans, it should design a funding methodology to become self-sustaining. Additional thought should be given to whether to structure any arrangement as a break-even proposition or with a profit motive.
- Flowthrough entity structures, such as limited partnerships, limited liability companies, and S corporations, are the most popular forms for family offices.
What Is a Family Office?
Broadly defined, a family office is an organization established to oversee (directly or indirectly) the financial matters of a family. This can include investment oversight and financial reporting as well as legal, regulatory, and reporting compliance. A family office may also provide other, more personal, services for family members (coordinating travel plans, overseeing household staffing needs, etc.—so-called concierge services).
Many of the earliest family offices served the wealthiest families in Europe. These offices oversaw multigenerational business holdings and served as the blueprint for many of the early U.S.-based family offices that were established as families in this country amassed great levels of wealth starting in the late 19th and early 20th centuries.