Protect Family Assets by Shifting to a Family Enterprise Mindset

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A common mistake many high-net-worth individuals and families make is failing to treat their family’s financial affairs as a business entity in their own right. Managing the business of the family’s assets is a critical practice that demands the same rigor applied to their underlying business activities.

Benefits of Setting Up a Family Office

An effective family office will provide several benefits, including:

  • Helping to manage and grow investment assets
  • Improving financial reporting and communications
  • Enhancing risk management (both from the perspective of investment risk and preventing the potential misuse of assets)
  • Strengthening estate and transition planning

Setting up and maintaining an effective family office requires a mindset based on understanding the family’s assets beyond investment returns, including maintaining a healthy balance sheet, installing the appropriate controls, and providing effective software tools — exactly as you would in your business.

For more information on setting one up, read our article “Simple Steps for Setting Up a Family Office

Family Asset Management

Whether you create a single-family office or work with a provider that serves several families, it’s important to understand that a family office can play a pivotal role in effectively protecting your family assets.

Your family office should go beyond bookkeeping and paying bills. It should help you understand and improve your entire financial picture and risk management strategies to ensure family assets are preserved, and you can have peace of mind.

For example, you want a professional (or a team) with experience in day-to-day operations such as paying bills, bank and credit card reconciliations, cash flow management, and financial reporting and forecasting. Also, it’s good to have support with medium and long-term planning, risk management, insurance, tax planning and compliance, and other considerations.

Protecting Your Family Assets from Fraud

Another important aspect to think about is creating an internal controls framework that, just as in your business, separates duties and responsibilities. You may reduce the risk of fraud and malfeasance that occurs if a staff member creates and pays vendors that are not serving the family.

Fraud and malfeasance in your family office is something no one wants to believe happens because, over time, staff may feel like they are family. However, it’s important to recognize that family offices commonly experience some form of dishonesty, so it is prudent to develop appropriate measures to mitigate such possibilities.

Selecting the Right Family Office Software

It’s also helpful to ensure your family office uses appropriate software tools to manage your affairs effectively. Spreadsheets and basic accounting packages won’t offer the appropriate degree of sophistication and internal controls required by the family office team. The right software will enhance efficiency, strengthen key internal control processes, and provide relevant reporting and risk management.

For more guidance on picking software, read our article “Choose the Right Family Office Accounting Software to Eliminate Financial Complexity

Using Sage Intacct

For instance, accounting platforms such as Sage Intacct can streamline financial reporting and provide real-time access to performance data, as well as insights to help you and your advisers manage the family’s assets more effectively.

It can also support complex accounting requirements and the institution of internal controls, as well as the ability to aggregate information from various investment portfolio custodians and identify anomalies in your financial transactions that may indicate fraud or other problems.

Shifting to an Enterprise Mindset

When protecting your family assets, the first step is recognizing that you need an independent enterprise mindset. It’s important to have all the appropriate operational, financial, and technological infrastructures to meet your needs today and to help you plan for the next generation.

For more information about our Family Office Services, contact our team.