Simple Steps for Setting Up a Family Office

Outlining your goals, setting a budget, and choosing the best technology are keys to establishing and running an effective family office.

A family office is an organization that’s created to serve a variety of administration and management needs in a structured way for families. These responsibilities vary because each family’s situation and needs are unique, but most family offices tend to have one of the following broad categories as a central focus:

Another decision the family will need to consider is how involved they want to be in the office’s daily operations. Some principals may wish to be active managers, while others may prefer a hands-off role as they devote more attention to philanthropic or personal pursuits. Other questions: How many generations will be involved in the office? What is their background? How can they best contribute to the success of the family?

These factors may help dictate the types of professionals or outsourced services required to support the family office effectively.

After you’ve outlined the family office’s structure and responsibilities, it’s important to create a budget for staffing and services. A bottom-up approach to budgeting, for instance, will involve totaling the cost for your desired staff. These team members can include a bookkeeper, an administrative assistant, an office manager, a controller, and other professionals.

An alternative approach is deciding how much you want to spend annually and identifying the people or services you can afford within that budget. Most likely, a bottom-up and top-down process will be used to generate a reasonable annual cost.

The next step in setting up a family office will be deciding where your staff will work. Some family offices are completely virtual. Others operate out of dedicated office space or within the principal’s business, separate family office, or home. In a recent article published by TheStreet, it was noted that companies can save up to $11,000 per employee in terms of overhead costs if they switch to remote work. This decision can influence hiring, overhead costs, and the family’s sense of privacy, so it’s important to consider this factor carefully.

Another important consideration is choosing the right family office software to support your financial management and administrative needs. An investment-oriented family office will need a more sophisticated system to integrate data from several custodians and generate performance reports. In contrast, an office focused on paying bills will need a fairly basic accounting platform.

Regardless of your approach, it’s vital to outline job qualifications carefully to reduce the risk of placing staff in the wrong roles. A common mistake, for instance, is hiring a bookkeeper and expecting that individual to perform the role of a controller or a chief financial officer. Or, similarly, paying for a CFO when you need someone to perform basic bookkeeping and accounting.

For some roles, hiring someone on an outsourced basis may make more sense for your family office than retaining a professional whose services you may not need full-time. In creating a new family office, using consulting services that help you determine the most effective approach for your family situation and preferences may be a good investment.

If you would like assistance reviewing your situation and implementing a roadmap to meet your family office’s goals, schedule an introductory call with our team.