There is some understandable confusion about what constitutes a “Family Office” and how it differs from other similar institutions such as private banks and investment firms. The key to any Family Office definition is the central theme of working for the benefit of the family, with a focus on addressing issues related to their goals and needs.
Here at Moore Australia, we define a Family Office as the overarching structure dedicated to preserving the wealth of a successful family and helping family members to achieve both financial and non-financial goals.
More Than Traditional Advice
Many traditional advisors and accountants focus on issues relating to wealth invested in a family business or an asset portfolio. They manage the accounting, plan for business succession, consider debt structuring, and report on the success of the investments.
A Family Office goes well beyond these parameters and considers the broader family enterprise perspective. A family enterprise is defined as the wider collection of activities that families of wealth undertake together. These include taxation and other compliance-related responsibilities, the family's investment, entrepreneurial and philanthropic endeavours, wills and estate planning, governance, next-generation development, and succession planning.
Understanding and managing the complete picture of family wealth means a Family Office is uniquely positioned to create success not only for financial assets, but also for the family members and the future legacy of generations to come.
Wealth Beyond the Balance Sheet
Family Office specialists recognise that wealth includes not only the family’s financial fortune, but also its shared culture, values, reputation, and human capital.
Creating a strategy for only one facet of wealth without consideration of the wider family enterprise can create misalignment between individuals, family branches, and different generations. In most cases, a considered group structure and strategy will provide greater opportunities for families who are willing to undertake activities as a collective.
These may include:
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Investment and tax planning
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Charitable giving
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Establishing a family bank to facilitate housing, education, or entrepreneurship
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Providing employment within the enterprise
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Maintaining shared lifestyle assets
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Activities to build wellbeing
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Creation of a lasting family legacy
Balancing Preservation and Purpose
A key consideration in managing the strategy of the family is the delicate balance required to ensure that wealth is both preserved and utilised.
Employing the assets to meet the needs and aspirations of current beneficiaries is important for engagement, continued commitment to working together, and tempering the burden of wealth with the enjoyment of the opportunities it provides. Equally, ensuring that the core assets are not eroded is essential for sustaining wealth across future generations.
Historically, it has been said that as many as seventy percent of families lose their wealth by the third generation, often due to family issues. Differing interests of family members can bring about significant risk of disagreements or even competition for resources.
Navigating Complexity – Together
So how does a Family Office manage these complex financial and personal challenges?
Essentially, a Family Office is a comprehensive team of dedicated professionals with expertise in tax, accounting, family relationships, estate planning, education, investment, business advisory, philanthropy, and mentoring for high-net-worth families.
The Family Office team helps to establish and implement the strategy, processes, and structure required to build the success of the family enterprise. This is a deliberately broad remit – because every family is unique.
Some require deep expertise in business management and succession, whilst others may prioritise managing life admin or delivering financial education to the next generation. A Family Office has the flexibility to manage both the financial and non-financial priorities of each individual family.
When Should You Consider a Family Office?
A family will benefit from Family Office services once they have evolved from a single wealth source to a broader family enterprise.
As an example, wealth often originates with a successful operating business, but over time the business – and the family – grows. Eventually, there is a need to diversify in order to support the growing number of beneficiaries.
A common inflection point is the change in core ownership of the business. This can happen through a sale to a third party, or a restructure that concentrates family ownership within a particular individual or family branch.
These liquidity events typically lead to an expansion of the financial wealth into new asset types – including investments, private ancillary funds, trusts, property, or new entrepreneurial ventures. This transformation of wealth from a family business to a family enterprise is a natural time to consider establishing a Family Office.
It Starts with a Conversation
Of course, most successful families would benefit from having a dedicated team of professionals – providing everything from concierge services to bill paying, to tax and accounting, to project management, and multi-generational financial education.
But sometimes, it starts with a conversation about what keeps you up at night.
We know that globally, the Family Office is the most effective way to manage different types of assets – such as a family foundation, investment portfolios, real estate, and businesses – as well as non-financial assets such as human capital, family reputation, security, shared values, and traditions.
A specialised Family Office team can balance the myriad objectives of the different individuals, generations, and branches of the family enterprise – and create an amazing legacy to be proud of.
But only you will know when your family is ready to discuss that next step.