My somewhat complicated answer is “you already have one”. Here is why I answer this way and what I think are better questions for the next generation members of the family to ask.
The reasoning behind the common question
Catholic Interests in Family Offices And the related organizations have increased exponentially. A Recent study by Deloitte Private estimates that the total number of family offices in the world will increase by 75 % between 2020 and 2030. The combined wealth of individuals and high -value families is in the meantime close to $ 20 trillion. This is more than just the gross domestic product of each country except the United States. It also represents almost 20 % of world GDP. Private and family wealth is a big deal, so it makes sense that families will think a lot about how to manage this wealth and ask questions.
Part of the confusion about the subject of family offices, in addition, is the huge variety of forms they can take. There are built -in family offices, virtual family offices, house offices and apartment building offices. The newer definitions eliminate the term “family office” overall in favor of the concepts of private investment agencies and wealth management companies. Indeed, the diversity of labels for family offices reflects the diversity of purposes.
Addressing the question about family offices
The common question “do we need a family office?” It is not surprising. However, it is not the right question. When I deal with the question with “you already have one”, it is not to be impossible, but to point out what I see as a reality and to hit their curiosity.
When they inevitably wonder what I mean, I can ask extra questions such as:
- How are your tuition fees paid?
- How are repairs in the family home, boat or cabin planned?
- Who makes decisions on family real estate, family financial assets and family funding of members’ business ideas and how are these decisions taken?
Of course, the answers vary widely depending on the family. For some, these duties are performed by an employee of the Operating Company. For others, it is the responsibility of a family member or group.
Regardless of this, the family already has some structure, policies and procedures for managing family resources and supporting members in multiple dimensions. This is the main work performed by family offices.
The questions you need to ask about the family office
Since the family is already performing much of the work of the family offices, the binary yes – there is no question about whether it will have a largely irrelevant degree. Instead, families would better serve to wonder questions about the need, purpose, complexity and readiness associated with a family office, including these five critical questions below.
1. What raised the question in the first place?
Sometimes the family office question emerges because families hear about others who have one, such as neighbors or friends or customers. However, their needs may be different. In other cases, the question may arise due to changing family conditions, such as a fact of death, marriage or liquidity. It is possible that current structures and procedures to tackle family resources or family needs are underlying. Asking what highlights the original question can help families find out if a change is needed.
2. What do you hope for a family office?
Instead of creating an additional structure for her sake, families should carefully consider what they hope to complete with a family office. For example, the purpose is more focused on meeting family needs or adding strategy or complexity to resource management? A clear understanding of the intention will help families avoid the unintentional placement of a family office as a “solution in searching for a problem”.
3. How much is the family willing and capable of committing?
One of the primary thoughts about creating a formal family office is the cost is cost. Families should consider which resources are available and, more specifically, how will they are willing to commit to family office services. A family’s office, for example, is estimated to be required $ 1 million to $ 10 million per year. For many families, this will be beyond their resources or it may mean that the costs will not justify the benefits that come.
4. What is the appropriate structure to meet family needs?
By understanding the purpose and resources available, families can address the issue of structure. There are so many possible structures for family work, as there are families looking for such services. Thus, in order to effectively deal with the issue of structure, families will probably benefit from external support. The key is to match the structure with family wishes and resources available.
5. Your family is in line and prepared?
This final question is lost or more often ignored. This is about aligning the family around the above questions about the purpose, structure and cost of a family office. A family office must serve the whole family, not a person.
The effort will be much more successful if the family is aligned around basic questions before proceeding. This requires education (formal or informal) to ensure a common understanding between the family about the overall purpose of the family office as well as the advantages and weaknesses of its various incarnations.
In the end, “do we need a family office?” It’s an important question for families to ask, but it’s not a simple yes – no question. In addition, many families already perform many of the functions of a typical family office in some way.
Instead, ask better questions to understand the purpose, costs, structures and the degree to which your family is aligned. The answers will inform you about the type of office that works best for your family now and in the future.
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This article first appeared in Inc.
