4 Critical Areas to Explore Before Setting Up a Family Office

As families and their professional advisors begin discussing the potential benefits of creating a family office to manage their affairs, a number of challenges need to be considered to ensure the office meets the family’s goals.

1. Identifying What You Hope the Family Office Will Accomplish

Are you looking primarily for administrative support to conduct activities such as paying bills and personal asset management? Are you hoping to coordinate professional investment management? Are you looking to maximize investment performance? To safeguard assets? To coordinate insurance and legal protection? Do you want to create a spending budget? Are you looking to set up a structure to provide a smooth transition to a younger generation?

Asking questions like this and identifying your goals will provide important guideposts in staffing and structuring an effective family office.

2. Determining How Involved Principals Want To Be in the Operations

Some individuals want the same degree of control over the administrative aspects of running a family office as they do in their business and insist on approving every transaction. At the other end of the spectrum, some people prefer a hands-off approach with most of the day-to-day functions being left in the hands of professional advisors.

Either approach can work if the expectations of the principals, the family, and the staff are aligned as the family office begins operating.

3. Staffing the Family Office

Are you looking to hire an outsourced staff to provide the family office’s functions as a service? Do you plan to outsource specific elements, such as investment management or financial reporting? How much direct oversight do you want?

4. Measuring the Success of the Family

Once you’ve identified your goals, you need to work with the office’s staff and advisors to establish an appropriate governance and reporting framework. How detailed do you want your financial reports to be? Who will monitor the spending plan? How often do you want updates? Do you want consolidated reporting dashboards? What internal controls do we need to reduce the risk of fraud and malfeasance? Which technologies will support the family office operations? Who will provide that technology?

Having careful conversations with family members and advisers about the functions the family office will provide can help you create an operating and governance framework to help ensure the office meets your goals and serves your family effectively. For more information and guidance on structuring your family office, reach out to arrange an introduction with our team.