A Quick Guide to Building Your Family Office Structure & Organizing Accounting

A family office office is essentially a private team dedicated to managing the finances of a wealthier family and high net-worth individuals. These wealth management entities help steer a family’s investments in the right direction and, in the United States, they are rapidly growing in popularity. But what does it take to open a family office? What practices should you employ and what tactics should you avoid?

Holbrook & Manter is here to help guide you along the way with some of the top tips for setting up a family office.

Establish What Your Family Office Offers

Family offices are typically classified into three different class depending on which services they offer.

• Class A: Comprehensive financial oversight, estate management and objective fiscal consulting for a flat monthly fee.
• Class B: Investment advice and consulting for an as-needed fee, but does not directly manage illiquid assets.
• Class C: Basic estate and administrative (bookkeeping, mail sorting, etc.) and is run directly by the family.

Most family offices provide the following services:

• Investment management
• Wealth transfer management
• Business advising & consulting
• Estate planning
• Education planning
• Philanthropy & charity management
• Bookkeeping, record keeping, reporting & communications
• Legal, compliance & tax advising
• Investment risk management

Create a Proper Funding Structure

The initial family office capital investment will be a large sum, however a structure must be set in place to cover costs over the course of time. Are different individuals investing more money than others or will you rely on a flat fee for all participating parties? These funds will go to further investments and additional outsourced financial services as needed.

What You Should Avoid When Direct Investing on Behalf of the Family

• Making any contractual moves and major decisions without a lawyer’s review
• Rushing into investments without performing in-depth research and leaning too heavily on third parties outside of the family for guidance
• Investing your money into ventures that have stalled or shown signs of failure
• Not balancing the objective best interests of the family, as a whole, with the voices of a few key influencers’ passions within the family
• Not having a clear exit strategy for both well-performing assets and poorly-producing investments

Decide If It’s Worth It

This is a simple step for a complicated undertaking. While family offices can be effective in the long-term, they can be costly if not managed properly. Ask yourself the following:

• Do I have enough professional connections to help navigate through the tough spots and make the best moves for the family?
• Will I be able to dedicate myself fully to the needs of the family and solidify confidence throughout the entire process?
• Is there enough up-front capital for this venture?

If yes to all, get in contact with an expert family office service provider, consult the family and start making moves!

These are just some of the best practices to follow when setting up a family office. For more information regarding our family office services and additional professional advising, contact Holbrook & Manter today!