Family Offices

Many successful family businesses have a form of family office embedded in the company. It may start with the CFO helping family members with their taxes, or someone in accounting setting up the books for a family member’s outside business, or perhaps someone advising a family member through the purchase of a house or car.

Over time, this often becomes two or three employees supporting the owners’ outside needs, plus one-off support from staff in IT, legal and other departments. Many families don’t think of this as a family office. As one founder told me, “The business is my family office.”

The pitfalls
This is not necessarily a bad thing. A family office embedded in the business can be the most cost-effective way to manage risks to the family while supporting their wealth and endeavors outside the family firm. However, there are several challenges to an embedded office, which require careful management or may even result in the family deciding to separate the office from the business.

Distraction. Business staff should be focused on growing the business and serving its clients. Supporting family members’ personal acquisitions or handling their separate needs may distract company staff from their primary roles. It is difficult for even a senior staff person to explain to one of the owners that an upcoming tax deadline or new technology release won’t leave them time to support the family member’s personal request.

Privacy. When business staff also support the family, they may not be as diligent about protecting the family’s privacy as dedicated family office staff would be. They might not be discreet when the president of the company asks about her brother’s personal financial matters, and they might be tempted to tell co-workers about the new sports car a family member is buying.

Fairness. Is it fair when family members who work in the business are able to make greater use of business staff for personal needs than family members who do not work in the business? In some situations, large shareholders don’t have the opportunity to take advantage of business staff, while minority shareholders who work in the business leverage staff extensively.

Risk. A family office should reduce or mitigate risk to the family, perhaps by providing advice and support as family members make large acquisitions, ensuring they have adequate property and casualty insurance or providing technology and cybersecurity support. If family members outside the business are not comfortable using the business staff, then the family isn’t mitigating this risk as intended.

Part-time focus. When the family office consists of business staff who support the family on the side, those staffers might not perceive the family office as their full-time job. It is unlikely that anyone is providing strategic planning, being proactive about risk management or even looking at how to most effectively support the family’s needs. For example, someone in accounting may provide paychecks for household staff, but is anyone in the organization performing background checks on those staffers?

Control. An embedded office can fall into a “no man’s land,” where everyone assumes somebody else is providing proper oversight and control. In one case we know of, nobody was reviewing business credit card expenses for the embedded office — accounting considered the task to be the responsibility of “the chairman’s office,” and the family had never thought about doing so.

Cost and value. When the family office is embedded and split between parts of the business, nobody knows how much the office really costs. When we identify the various pieces and assign costs to them, owners are often shocked at how much they are spending on a family office. Family members also may not truly appreciate or value the services they receive when they don’t know how much they really cost, how much time various staff put into those services or the level of expertise they are accessing.

Mitigating the challenges
Embedded family offices can take many forms, and most of the above challenges stem from staff splitting their time between the business and the family. Some offices are embedded within the business legal entity but are actually a separate department or group that is fully dedicated to the family. Such an office can operate as though it were completely separate.

A hybrid version we see involves a small number of staff fully dedicated to the family (perhaps in the CFO’s office), who oversee family requests. These staff in turn may leverage business employees and relevant expertise. This version minimizes the size of the office, provides dedicated staff and still leverages the skills and capabilities of the larger family business. This dedicated team also allows the family to create specific controls, measure costs and focus on key risks involving the family.

In one family office we recently designed, business staff were clear that they enjoyed providing support for family members — it was different from their day-to-day job, and they didn’t want to lose that. Some hybrid solutions, such as the one described above, can accommodate that desire.

Why some businesses choose to separate the family office
Some people perceive embedded family offices as temporary, filling a need until the family or business is large enough to support a separate entity. That may be true, but not necessarily. Many families maintain an embedded family office for generations, and don’t see any reason to change.

However, there are several reasons that a family may choose to separate the family office from the business. Here are a few such reasons:

The family is planning to take the business public. Such families will want to carve out any personal support as quickly as possible, so advisers and analysts are not confused by the functions. It is extremely rare for a public company to house a family office (although we are aware of a few), and it is not something we recommend.

The family is planning to sell the business. While we often see provisions within such transactions providing the family six months or even more to carve out the family office, there may be value to separating the family office before the transaction is in progress.  One such reason is to ensure that staff whom the family wants as part of the family office will not be included in non-solicit arrangements with the new owners. We have seen scenarios where a family wanted the business CFO to run their new family office, but since they didn’t plan it before the sale, they were not able to hire the person.

The family is looking to receive outside funding for the business, perhaps for future growth or liquidity. Depending on the source and amount of such funding, they may be able to maintain an embedded family office, but it is likely that, even if the family maintains control, the new owners will prefer to have personal services separated.

The family decides that its privacy needs are not being met or business staff are being distracted. While there are ways to mitigate these challenges, as described above, the simplest way remains separating the family office from the business. Many families have concluded that these challenges are insurmountable, leading them to a separation.

While there is no definitive research itemizing the number of family offices, embedded or otherwise, we believe there are more embedded offices than separate ones. Carefully considering and balancing the goals and needs of the family and the business enables you to  decide if an embedded office can continue to support the needs of both.         

Charlie Carr, CFP®, leads PwC’s Family Enterprise Advisory Services practice, which advises family businesses and family offices (

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact                                   


Last year, someone asked me a simple question that led to quite a bit of thought and discussion: How do I know if my family office is successful? The most common initial answers (investment returns, tax benefits) feel flippant and incomplete. One former family office president said, “I considered each year a success if I didn’t screw anything up … (long pause) badly.”

What became clear is that very few family members or office leaders had thought about this question. If they measure success at all, their assessment is based on total expenses or investment returns, because these are the easiest factors to quantify.

If you don’t know how to define success, then how can you properly do strategic planning or decide where to focus new resources?

Derailers of success
We believe that most initial responses to this question are derailers of success rather than measures of success. In other words, good performance in these areas does not define success for the office, but poor performance can take the office off the track toward success. Here are a few examples:

Investment returns: Great investment returns generally do not make a family office successful, but messing up investments can make the office a failure. If a large investment flames out, or even if returns significantly trail their benchmarks, the family may place the blame on the office and its leadership.

Taxes: The family office might minimize tax liabilities and provide excellent tax planning, but this may be viewed as just doing its job. Losing an IRS audit or realizing that the family could have saved millions of dollars with better tax planning before selling a business or investment may define failure for the office.

Fraud: Discovering that an employee stole from the family or perhaps uncovering how an outsider successfully committed fraud may make the office appear to be a failure. If there wasn’t any fraud last year, or at least none that you are aware of, the perspective may be that the office did what it was supposed to do. But does that mean it was successful?

Service: Most family office staff will go to extreme lengths to provide any service or support that the family desires. Often, such efforts become expected and don’t constitute success, whereas not doing so may be an irritant or failure in the family’s view.

Total cost: One family member told us he viewed the family office as a bottom-line number: “Do we really need this many people?” We doubt many people consider staying within budget to be their definition of success.

Each of these things may be compared to the starter on your car. When you turn the ignition (or press the button on many cars), you don’t think about whether or not the car will start, unless you recently had problems with it. Being able to start the car doesn’t guarantee that the journey will be successful, but if the car does not start, the journey will likely be a failure.

What is success?
The definition of family office success will vary, depending on the family and the office. What is the purpose for the family office? Most often, even when the family hasn’t defined it explicitly, the purpose is to promote the family’s legacy. How well does the family office support the family’s vision and hopes for the future, in addition to supporting their financial ability to pursue these dreams? This likely has more to do with maintaining family unity and cohesion, maximizing the family’s human capital (rather than financial capital) or seeing an entrepreneurial spirit and passion persist in future generations.

In the earlier analogy of starting your car, the car is a means to support your journey, whether that is to the grocery store or on a vacation. A family office is part of the means for a family to achieve its vision or legacy — the vision or legacy is more important than the office.

One family told us their family office’s purpose was to “remove the burdens of wealth from the talent [next-generation family members], so they can focus their time and attention on the business.” For this family, success can be measured by how much work has been removed from the family members. Another family told us that the founder has very strong values, and they will measure success by whether or not the values remain after the founder passes away. This is harder to measure, but an admirable objective.

It is not an easy exercise, and it requires being intentional in thinking through your purpose and identifying how you will define success.

Measuring success
Once you identify how you will define success, you need a reporting dashboard to track it. This should be a one-page report, measuring not just the primary measures of success, but also the derailers. A good report will track what will make the office a success, as well as factors that could prod the family to say it is a failure. The measures should be both short-term (e.g., How we are doing this year?) as well as long-term (e.g., How we are doing over five years?).

The easy metrics are typically the derailers: total expense, investment returns, tax liability and fraud. How do you report on fraud? If you were a victim of fraud, you obviously report that. If you are not aware of being a fraud victim, perhaps you report results from accounting controls or from your regular ethical phishing tests (because you are doing those, right?).

How do you measure family members’ entrepreneurial spirit and passion? One family decided that a partial answer was to track the percentage of family members whose earned income is at least as much as the distributions they receive. This is not a clean proxy, but it’s moving in the right direction. Another family tracks level of academic degrees earned and ongoing educational efforts.

One might wonder how the family office can impact or influence these results. Once you understand the vision and desired legacy for the family, the office leadership can get creative in helping them move toward that vision. If education is a big part of that, then the family office can help each family member find ways to further their education or participate in relevant conferences or seminars. If entrepreneurship is important, the office might find relevant speakers for the family retreat as well as provide one-on-one coaching.

Supporting a multigenerational family legacy is never easy, but don’t let the challenge deter you from putting in the effort. Start with intentionality, then add creativity from your leadership team and a lot of hard work — and prepare to celebrate the success of your family office.    

Charlie Carr, CFP®, leads PwC’s Family Enterprise Advisory Services practice, which advises family businesses and family offices (

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact                                         


Dramatic change is on the horizon, and multigenerational businesses are facing critical transition issues as ownership in private companies and substantial wealth are transferred between generations. Because few families are ready for these transitions, the family office will play an increasingly important role in supporting the family.

The Family Office Exchange (FOX) has worked closely with families, family office executives and advisers for more than 30 years. According to the 2019 FOX Family Office Benchmarking Report, the rising generation is often unprepared to take on a leadership role.

This FOX proprietary study found that while 41% of families identified “helping the rising generation become productive adults” as one of their top three priorities, 78% of respondents lacked a formal program to educate their rising generation.

FOX has identified three fundamental tips to guide family offices in planning family education programming:

1. Take a more strategic role in helping families prepare future leaders. A key succession challenge is that the rising generation is unprepared to take on a leadership role. Family office executives should become the champion for family learning and design or work with outside experts to institute programs beginning at an early age. Key building blocks for this program may include fostering personal identity and growth, increasing financial acumen, teaching leadership skills, defining the responsibilities of shared ownership and engagement, and providing training in family governance and participation on the board.

Families that do this well form multigenerational committees to develop goals related to family learning. In time, these working groups evolve into a family education committee. Committee members work together to create family learning tracks, set education expectations and plan learning events. With structured assistance from a learning champion or consultant, families reap the rewards of engaged and educated participants. 

2. Focus on family values. All learning programs should be anchored to the family culture, history and values. FOX experience suggests that family learning not only prepares future leaders but also can bind the family more closely together. Common approaches include:

• Exploring and understanding how shared family values can be articulated in the future.

• Openly discussing the family culture and where divergent views may reside.

• Tying family values into core learning programs on topics such as investing, philanthropy and wealth transfer.

Families that focus on shared values and regular communication are more cohesive, better organized and able to work together effectively. Many families begin rising-generation education, or in-law onboarding, by focusing on the family history and values. In some cases, families also focus on finding meaning and purpose in life, in conjunction with these values, before embarking on a specific education curriculum. This “family first” approach provides a foundation for all future learning. It gives learners cultural roots before they begin technical education.

3. Understand that one size doesn’t fit all. Families often span multiple generations, geographies and levels of sophistication. Family learning requires thoughtful planning and customization to meet the needs of the entire family. Programs should also address multiple styles of learning and provide different educational settings, including peer groups, family groups, individualized coaching and online learning.

Families that have thriving and productive rising-generation members allow for autonomy and belonging. It is important to encourage the rising generation to express their personal identity and choose learning opportunities that fit their life paths. It’s equally important that all family members feel a sense of belonging and understand the education and participation that is expected of them. This includes family attendance at industry learning events, in-house programs, education sessions at family gatherings and meetings with consultants. 

A family that is committed to education will also create a pathway for engagement with the family business, including such options as traditional employment, customized learning experiences and an idea lab. The idea lab provides a way to capture the innovative suggestions of all family members who aren’t interested in an onsite experience and provides an appropriate way for them to offer input. It creates engagement and shields company staff from an unexpected call from a family member. Each pathway offers a customized approach for those who want to engage on a different level. Allowing flexibility in how family members engage with the business can work well to accommodate everyone in a diverse family.

The priorities and focus on family education will differ for each family, but the family office can play a key role in making the case for a well-thought-out plan and emphasizing the importance of preparing for transitions.

Mindy Kalinowski Earley is chief learning officer for the Family Learning Center at the Family Office Exchange (

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact


Nearly 100 years ago, Pierre S. du Pont was concerned about the difficulties future du Ponts would face as a result of the fortune being generated by the young chemical giant of the same name.

Du Pont, one of the three cousins who transformed the family’s 100-year-old gunpowder business into the modern DuPont Co. in 1902, wrote to his nephew in 1922 about his concern that “du Ponts born to a position of wealth” would not have to “work for a living” as had previous generations dating back to the 1802 patriarchal founder, according to Pierre S. du Pont and the Making of the Modern Corporation, by Alfred D. Chandler and Stephen Salsbury.

The coming generations could need “greater moral stamina to combat the temptations of wealth and luxury and to carry forward, in a manner becoming the family traditions,” du Pont wrote in the letter. He warned: “If you fail in your example those immediately following you may do likewise.…”

Generations later, these types of concerns continue to trouble owners of successful family businesses and other high-net-worth individuals. At the start of the economic downtown in the last decade, 53% of high-net-worth parents reported that they worried about the possible negative impact wealth with have on their children, according to a U.S. Trust Survey of Affluent Americans in 2007. Those who work with wealthy families say that figure still seems valid today and is likely an age-old fear among those who amass wealth. 

Nearly three-quarters of the affluent parents who responded to the U.S. Trust survey reported that they themselves taught their children to manage wealth. Today, there are professionals who can help provide wealth education for heirs. The most tailored, hands-on education can come through the family office. These entities that serve high-net-worth families can offer a wide range of customized schooling and counseling services, starting with children as young as 2 years old.

With the number of family offices exploding in recent years, these entities have often evolved to include family education.

“There is a growing awareness among sophisticated families about the real danger in doing nothing,” says Donna Trammell, director of family wealth stewardship at Bessemer Trust, a multifamily office.

The demand for such services is likely to grow as an estimated $15.4 trillion in wealth is expected to be transferred by individuals with a net worth of $5 million or more by 2030, according to “A Generational Shift: Family Wealth Transfer Report 2019,” by Wealth-X, a company that provides data analysis of wealthy individuals for-prestige brands in industries such as financial services and higher education.

The education offered by many family offices today usually involves much more than just teaching young people how to read a balance sheet, create a budget, understand a buy-sell stock agreement or perform other basic financial tasks. More important, many family offices work to provide social and emotional support to imbue heirs with the qualities they need for a meaningful life.

Ryan Agre, director of Vermeer Family Office, an entity embedded in the Vermeer Corporation, a family-owned manufacturer of construction, industrial and agricultural equipment based in Pella, Iowa, says his role includes anything that could help prepare future generations, whether it’s financial fluency, college planning or character development. He describes himself as “part coach, part teacher, part cop, part firefighter, part disciplinarian,” to name a few roles he performs.

“It is an investment and it’s a long-term payoff,” says Agre about the work a family office does to educate heirs.

The need
Often a family turns to a family office for generational education after a precipitating event, says Jill Shipley, senior managing director of family culture, impact and governance at Cresset Family Office.

Perhaps a young family member hears in school that his family is wealthy. A college-age heir might be approached by a friend with some investment or business opportunity. Marriage plans might necessitate a discussion around prenuptial agreements.

In addition, more and more information about a family’s financial situation is floating around the internet. Some information can be misleading to the next generation, Trammell says.

“If a number is revealed, the family office can provide important context for it,” she explains. “For example, many NextGen clients need some help understanding the different considerations for a $10 million and $100 million pool of assets.”

But while there are instances where the next generation might request more transparency, in most cases “it’s a top-down issue,” initiated by their elders, says Rhona Vogel, founder and CEO of Vogel Consulting Group, a multifamily office.

“Parents are worried about how this inheritance will impact their children,” Shipley points out. “I see parents initiating out of worry.”

Robert (Bobby) A. Stover Jr., Americas family office leader at EY, agrees. He often hears: “I don’t want money to spoil my children.”

Certainly, there are enough cautionary tales of profligate children and squandered fortunes through the ages to keep any parent up at night.

Thayer Willis, whose family founded Georgia-Pacific Corp., knows the pitfalls firsthand. She recalls she had an “attitude of entitlement” and “taking things for granted.”

“My father was a very kind person, but he couldn’t say ‘no’ to me,” Willis recalls. “My father felt like there was plenty, and why wouldn’t he give it?”

But Willis explains that her father was brought up in modest circumstances and had no experience with raising affluent children.

“The people that make the money don’t know anything about bringing up wealthy kids,” says Willis, the author of Navigating the Dark Side of Wealth: A Life Guide for Inheritors. “Parents raised in much more modest circumstances want to give kids things they didn’t have.”

This is where a partner, such as a family office, can provide sound, dispassionate guidance. Indeed, many family offices now have chief learning officers.

“A family office can be a catalyst to preparing the family on three fronts: act as a sounding board for parents in developing messages to share with future generations, reinforce those messages when interacting with younger generations, and act as a capable teacher/coach who is, sometimes importantly, not a parent,” Trammell explains.
This takes the parent “off the hook that they should know better or they should know how,” explains Amy Hart Clyne, chief knowledge and learning officer at Pitcairn, a multifamily office.

The nuts and bolts
Family office professionals agree that helping heirs achieve financial fluency should begin as early as possible and be continuous. Some say toddlers can pick up valuable lessons.

“They know the wealth is around. The sooner you start educating, the better kids are at absorbing it,” says Stover.
Smaller children can play games that require decision making. Shipley suggests fun activities like a bank tour or a visit to a nonprofit organization. Another method is to coach parents to take advantage of everyday teaching moments, such as explaining what happens when you swipe a credit card, adds Lauren Blatz, director of family education at GenSpring Family Offices. These are opportunities to educate children in navigating the real world, not through abstract concepts or theories.

“We try to take advantage of what’s going on in their lives,” such as getting a first paycheck or first credit card, Blatz explains. “We’re trying to coach our clients into more responsibility.”

The Vermeer family office takes advantage of “pop-up learning opportunities” by presenting lessons in person or by video conference, Agre says. For example, Vermeer held a session on the proper use of social media and the potential fallout from a hasty tweet or post.

Pitcairn has developed an “individualized learning map” for heirs that has many different components, including financial aspects, Clyne says. It’s a dynamic approach that allows for flexibility.

While Bessemer Trust offers strategies and exercises families can practice at home with young children, it typically starts working with the next generation in their teens or early 20s.

This enables the NextGens to “get comfortable with their team of advisers before they reach important financial and personal milestones,” Trammell says.

The responsibilities of ownership
Business families may overlook the necessity to educate the next generation to be responsible owners, particularly if a child is not expected to be employed in the business. But early education by a family office in this area can help circumvent future difficulties.

Shipley, who taught responsible ownership to college students whose families owned a business, says even those not working in the family enterprise needed an understanding of business finance, accounting, family systems and family dynamics.

Shipley’s approach is to understand an individual’s goals, hopes and fears, as well as their current and future roles and responsibilities.

“I help families develop governance systems to ensure owners — especially those not working in the business — are informed, have an appropriate voice and understand the implications of being a stakeholder and shareholder,” Shipley says. “Many heirs benefit from technical education on the financials, budgeting, understanding shareholder agreements, gaining clarity around distribution and implications on one’s financial life, estate planning and passing on shares to future generations, etc.”

At Vermeer, all age groups learn about the “implications, opportunities and challenges of family business ownership,” Agre says. “Our NextGen program is geared toward education on Vermeer ownership, in age-appropriate ways, while also helping them understand themselves better, which creates a more stable ownership group.”

This year, for example, children 16 and younger created a lemonade stand. “They had to pick the spot in Pella for the stand, build the stand from a kit, choose the type of lemonade to serve, choose the sales price based on the input costs, sell the product and then (as a team) deliberate and choose a charity that would receive all of the profit,” Agre says.

“These hands-on activities cement how business works, but also the family’s goals of teamwork and philanthropy.”

Family wealth education do’s and don’ts

Amy Hart Clyne, chief knowledge and learning officer at Pitcairn, offers these recommendations for educating NextGens about business stewardship and family wealth:

Tap your resources. Give the NextGens space to learn outside the family structure and to benefit from experienced professionals who have demonstrated this unique competency.

Set family and individual learning goals. Develop personalized SMART (Specific, Measurable, Attainable, Relevant and Timely) goals. Don’t be afraid to include some stretch goals. For example, a reasonable goal for a 21-year-old family member might be to build a personal budget for 2020. A stretch goal might be to create a personal economic mission statement.

Make it engaging and fun. Provide a variety of flexible formats.  Meet NextGens where they are (which means taking time to understand where they are and what they want to know). If they are old enough and mature enough, enlist them in building their own learning experiences. These experiences should be relevant and current. Don’t just tell them how the world works, show them.

Be intentional about communication and inclusion. Find ways to share experiences in order to build relationships and family cohesion. Parents need to tell their heirs their plans. Find ways to support the individual and ways to support the family. Intentionally bring in-laws into the conversation. Let the younger generations in.

Budget for these experiences. Set aside money to cover the cost of the learning programs — it’s an expense often overlooked. Establish a policy that spells out how the budget will be administered and what qualifies as a family learning expense: grad school tuition, conference fees, one-on-one learning sessions, coaches, etc.

Impose. Don’t be dogmatic or prescriptive. Don’t impose a plan without seeking input from the intended participants.

Assume. Don’t presume your NextGens will learn what they need to know in school. Make sure the advisers you engage have the necessary competency and experience. Don’t presume family members will be able to learn the responsibilities of a role by osmosis. Don’t assume one size fits all.

Vermeer has also instituted family summer camps that focus on relationships. Participants learn about the history of the company as well as the family’s service to the community.

Bessemer Trust takes a holistic approach when working with future owners. The process begins as early as possible, Trammell says.

“If good governance is already in place among the adults, we often suggest forming a junior council when the youngest child is around 7 or 8 years old,” she says. “In that regular forum, often adjacent to or concurrent with the annual stakeholders’ meeting, we can help the junior council understand what it means to be a good steward.”

The content of the forums is age-appropriate and interactive, such as bringing the company’s values statement to life. Other times it might involve interviewing a family director.

“All of this is done in the spirit of preparing them to be the best business owners they can be,” Trammell says. “After each session, we typically encourage the junior council to present what they’ve learned to the broader group, so they start to become confident with their knowledge of the business.”

To help next-generation family members understand what it means to be a partner, Bessemer works with families on their shared vision and on communication and conflict management skills. Having a facilitator present allows everyone to be heard and keeps the discussion moving forward.

“Family members need to trust each other and want to work together, and often that trust is built through regular family meetings that don’t focus only on business decisions,” Trammell adds. “Consistently adding pleasurable shared experiences to the family bank is important so that they will have more to draw from in times of conflict.”
Shipley says she works on styles of communication, including helping young people understand their own way of communicating and the communication preferences of their partners. Also beneficial is training on generational differences in attitudes, values and behaviors.

“This helps increase understanding and reduce judgment,” Shipley explains.

When it comes to educating future company directors and/or trustees, family offices can help with the basics, like understanding a trust document and the duties a director or trustee owes to the organization or trust beneficiaries.

“A clear understanding of the role of a board member and how the board will interact with the ownership group and management is essential to the success of a family business over generations,” Trammell says.

The tricky part
Much harder to impart are the social and emotional qualities that wealthy children will need to lead a worthwhile life, experts say.

Indeed, some, including Willis, believe there can be too much emphasis on financial matters.

Children need opportunities to develop self-worth, confidence and resilience. This can be tough if “the world looks at you as if you don’t have the right to have problems,” Shipley points out. “Growing up in the shadow of success can be paralyzing.”

Willis remembers she was “irresponsible, fickle and spoiled,” into young adulthood.

By contrast, Jeanna French, whose father founded the J.L. French Corporation, an aluminum die casting company, grew up without expectation of great wealth. Indeed, she says, there were periods when it looked as if the business wouldn’t survive. French was in her late 30s when the business was sold and her family experienced a liquidity event.

“I think we were lucky because we were old enough,” says French, whose family is a client of Vogel Consulting’s family office services. “We already knew the value of money. We’d paid bills and been out in the world.”

The way French sees it, family offices can help family members realize each other’s strengths and remain a cohesive unit. A family office can serve as the outside, unbiased adviser and counselor.

“Future generations need to be armed with both a technical understanding of investments and with the softer skill sets: communication, conflict resolution, delayed gratification and gratitude,” Trammell says.

By helping to develop such life skills, family offices can guide the next generation to fulfill its potential.

“Wealth is not there to be on easy street. You want them to self-actualize,” Vogel explains.

Clyne puts it this way: “If Pitcairn could do one thing for every family as they navigate their family’s dynamics, it would be to help them facilitate a dialogue around their values and mission. It’s foundational work that will benefit the family long into the future.”

Agre believes that helping heirs develop a strong sense of themselves is the underpinning of any good educational effort. “Know thyself. That is foundational to everything else.”

One way to achieve that is by nurturing individual talents. For example, Agre coaches Vermeer family members in sports, and there he learns their strengths and weaknesses. “You can give all kinds of advice on technical matters, but you can’t buy intimacy and can’t buy trust,” Agre says.

When children get older, a trusted family office member can be the neutral third party serving in the role of a wise aunt or uncle. “Having an outside voice helps,” Shipley says. “Professionals can say same thing as parents, but it comes across differently.”

While a family office can help launch children into the real world, parents should remember there’s no standard model when it comes to wealth education. Programs can be as unique and varied as families are.

“There’s no ‘every-family-ought-to-do-this’ rule,” Vogel says.                                                                  

Maureen Milford is a frequent contributor to Family Business. She last wrote about the pros and cons of debt.


Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact


When a family experiences a liquidity event, such as the sale of the family business, they may feel as if they’re entering an uncertain phase of life.

The transition results in new wealth, but also a loss of business infrastructure, increased complexity of assets and a desire to maintain privacy. Family members will need to be educated about stewardship of the wealth.

Consider this example: Julie took over from her father as CEO of the family’s successful data analytics business. She and her husband, Steve, grew the business for another 30 years. They received offers for the business but always ignored them, until they received one that was too good to refuse. They closed the deal 120 days later and received a very large amount in cash.

After coming up for air, Julie and Steve realized they had no one to help them. Their estate plan and financial architecture were fairly complicated. Their professional office staff had helped with most of their personal finance and legal activities.

What’s more, Julie carried some guilt about selling the business her father started and the impact on the family legacy. Julie and Steve were private people. They doubted a local wealth manager would be able to provide the attention and depth of expertise they needed. They realized that a family office would be the best avenue for them.

Whether you have sold your business or have accumulated significant wealth outside the family firm, a family office might be the best option for you. Here are some signs that your family may be ready to engage with a family office:

You’ve “lost” key personnel. You have just sold your business and no longer have access to support from key office personnel you’ve relied on for years to help with your personal affairs (CFO, bookkeeper, executive assistant). You realize how dependent you have been on those people. Who’s going to help you keep your new family enterprise running smoothly? You realize it’s more than you and your immediate family can handle; you need an expert team and proper infrastructure. You may need such a team to establish legal entities. More important, you need them to help you develop processes, procedures and a governance structure for making decisions.

Things have gotten really complex. You might have a number of trusts, entities such as LLCs or partnerships, and other complex assets, like real estate and operating businesses.

When a family business undergoes a liquidity event, the family may require new financial strategies that can be extremely confusing. Financial structures often include the use of family investment partnerships with features such as preferred/common classes of interest and separate pools for investment allocation purposes. There also might be an assortment of family trusts, and the family might need to establish strategies and policies for intrafamily transactions such as gifting and family loans. Alternative investments and other entities can add further complexity. Many families find themselves unable to understand all the nuances.

For families who still have an operating company, a family office begins to make sense when they start to accumulate wealth outside their business. At that point, they need a coordinated approach to management of the wealth that is separate from the business. Families with extensive trust and estate structures, significant educational needs for younger generations, personal accounting and bill-paying needs, several properties and household employees or large private foundations should also consider family office options.

Your family office team should include well-rounded professionals from different disciplines with specialized areas of expertise.

You’ve got a big family … and it’s getting bigger. Maybe it used to be just you, or perhaps you and a few other family members, creating and managing the family assets. But today multiple households — and several generations — are acting as business partners, investing together and sharing assets as a family. How do you ensure they are all aligned on a vision for the wealth? Do they all have a voice? What does the governance structure look like?

Particularly for families who are geographically dispersed, a family office can help by coordinating and centralizing information, planning and facilitating family meetings, and providing services to all households.

You are attempting to operate as a family enterprise. Overseeing the family’s assets can be just as complex as running a business. You need to develop and implement an investment strategy, monitor investment performance and generate financial reports.

The skills required to be a successful investor are different from those needed to be a successful entrepreneur. Many families realize they need the infrastructure and expertise a family office can provide.

You value your privacy. With the accumulation of wealth come increased security risks. You are keenly aware of that and highly value privacy and confidentiality. You don’t want to involve too many outside advisers. You desire a “one-stop shop” where all your needs can be met by professionals you know and trust, and who know and trust each other.

The upcoming generations need guidance. Poor family communication and inadequate preparation of heirs can lead to an erosion of family wealth. Education and leadership development for your rising generations can help your family avoid that fate.

Family offices can create a wealth education program that’s tailored to your family’s circumstances. Multifamily offices provide synergies between “softer” services and investing and financial services. For example, it can be beneficial for the financial adviser and CFO to attend and contribute to family education meetings.

Family office professionals can also help facilitate succession conversations and help with planning for transition to the next family leader.

Your family legacy is important to you. In addition to financial capital, you want to pass your family’s social capital to future generations. You plan to develop a philanthropic strategy to support the causes and communities you care about and to ensure your values and legacy are perpetuated. How do you define that vision? Does your next generation consider themselves to be stewards of that legacy? Do they feel like they have a voice in building the legacy? Remember, the younger generations will “own” that legacy going forward and will be responsible for continuing it.

You’re a control freak (in a good way). For ultra-high-net-worth families who require a team of advisers to work exclusively for them, a single-family office could be a better option than contracting with a multifamily office or other wealth manager. Having a single-family office guarantees privacy and offers assurance that your family’s interests are paramount.

You’ve accumulated substantial wealth. As your wealth increases, so do a variety of complications. If you have more than $50 million in assets, you’ve probably experienced the complexities described above. A family office can help manage financial issues and guide the family toward good governance.

The choice of a single-family office or a multifamily office isn’t determined by net worth alone. Other factors, such as degree of control, costs and services offered, are key components in determining the right family office solution.

Running a single-family office isn’t cheap. Costs can vary widely, depending on the services provided, but one Family Office Exchange study (“FOX Guide to the Professional Family Office”) found that the median annual cost of a single-family office is about 1% of the family’s net worth. If that sounds expensive when weighed against the benefits listed above, a multifamily office or other wealth manager may be more appropriate.

You must consider your family’s unique set of needs and circumstances in order to determine the right family office solution for you. It’s important for the option you select to be aligned with your family’s values and goals.

Dan Terlep, CPA, is senior managing director of financial and tax strategy for Cresset Family Office. Investment advisory, family office and other services are provided through Cresset Asset Management LLC, an investment adviser registered with the U.S. Securities and Exchange Commission (

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact                                                        


Five years after her entrepreneur husband died in 2000, Michele Rollins decided her children needed to be brought in on the family’s financial arrangements.

The late John W. Rollins Sr. had built an empire of companies involved in trucking, environmental services and pest control. He also owned racetracks and hospitality complexes.

“The kids needed to know more,” explains Rollins, the chairman of Rollins Jamaica Ltd., the holding company for the island nation’s Rose Hall Developments Ltd.

To accomplish that, Rollins, who holds a law degree and a master’s degree in taxation, created a small family office. When Rollins was chosen by the Delaware GOP to run for the state’s congressional seat in 2010, her family fortune was reported to be as much as $350 million.

For help, Rollins reached out to a separate family office created by the family of her late husband’s brother — the billionaire branch of the Rollins clan in Atlanta that is behind the pest control empire anchored by Orkin. (Michele Rollins’ branch is not part of that family office.)

Rollins describes the creation process as gradual; her family office eventually grew to include investment management, taxes, bill payments and day-to-day administrative matters.

“It wasn’t a conscious decision to have a family office. It just evolved. We kept adding more and more things,” she says.

Family office nuts and bolts
A family office can be an amorphous concept. Even some successful family business owners confess to not knowing what the term means.

Weighing your family office options

•  Begin the process by having a family meeting to determine your family’s goals. This should be memorialized in a mission statement and family constitution. It might be helpful to bring in an outside facilitator to work through the process. The cost for a facilitator could be $1,000 to $10,000, depending on the amount of work done.

•  Decide whether the family wants to contract for professional services with various individuals or prefers to have most of the services coordinated under one umbrella. You may find the services you need don’t require a family office but can be handled by private banking or other methods.

•  Ask other high-net-worth families what they have done.

•  When looking for a multi-family office, do your due diligence about the organization and the professionals with whom you’ll be entrusting your family’s affairs. Check with other families who have used the services.

•  If you’re thinking about joining a multi-family office, be clear about the services you want the organization to perform for you.

“A lot of times you say ‘family office’ and people say, ‘Huh?’” says Judy Lau, founder of Lau Associates, a multi-family office that is an independently operated subsidiary of Bryn Mawr Bank Corporation.

That’s a testament to how little publicity these entities have received. But over the past eight years or so, family offices have been emerging from obscurity.

The concept gained more notice in 2010, when the New York Times reported that Oprah Winfrey was starting a family office. Over the past year or so, the names of family offices — and the families whose assets they manage — have started to appear in the business press, as more of them have begun to invest directly in businesses (often those owned by other families).

Briefly, a family office is a private vehicle to help high-net-worth families manage their money and other family affairs by bundling some functions, such as legal, accounting and financial advisory services, under one umbrella. Some families, however, have family offices that focus only on functions such as family education, charitable donations and shareholder communications but not on investing and tax services (see sidebar).

Family office services can help families navigate diverse holdings and advice from an array of professionals.

“Most of the people that come to us as potential clients already have an investment manager, an attorney and an accountant. They have the basis of a family office there. What they don’t have is connectivity, coordination and communication,” Lau says. “A lot of people, when they come in as potential clients, say: ‘My attorney’s telling me one thing. My accountant’s telling me another thing. What am I supposed to do?’ ”

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The concept of a family office dates back to the 18th century, when “merchants would hire a trusted adviser to manage their wealth,” according to a study by the World Economic Forum and J.P. Morgan. The House of Morgan, created by J.P. Morgan in 1838, and John D. Rockefeller’s family office, formed in 1882, are two examples from the Industrial Revolution. The family office sector today appears to have grown out of the accounting world, as firms expanded services, says Lucinda Peterson, CFO of Lau Associates.

For families with an operating company, a family office removes the responsibilities of managing the family’s assets and other needs from the family business staff, enabling them to concentrate on the needs of the business. For families who have sold their companies, a family office can help the extended family maintain shared assets and family governance.

Family office pros and cons

•  A family office can provide governance and management structures to address the complexities of the family’s assets, promoting family cohesion and preventing family conflicts.

•  Advisers’ interests are better aligned with the family’s interests in a family office setting than they are when multiple advisers work with multiple households.

•  Centralization and professionalization of wealth management services generally leads to higher returns or lower risk and enables family members to aggregate and leverage their wealth for investing and delivery of services such as insurance and technology.

•  A family office can help separate the family business from the family’s other assets.

•  A family that uses a family office controls how services are delivered.

•  A family office ensures discretion and confidentiality regarding the family’s wealth.

•  Families with a family office can make direct investments without going through private equity funds or hedge funds.

•  Family members or family branches must sacrifice autonomy and independence to invest and work together.

•  Structuring and operating a family office can be complicated, time-consuming and expensive.

•  Family members’ expectations for increasing returns and more services may grow over time, resulting in “scope creep.”

•  The greater the number of family members whose affairs are managed by the family office, the higher the potential for conflict.

Sources: PwC / Family Business Magazine webinar, “Is a Family Office Right for You?,” April 25, 2018; Ernst & Young, “EY Family Office Guide.”

Most family offices today are classified as either single-family offices, which handle the affairs of one family, or multi-family offices, which provide services to a number of unrelated families.

Ernst & Young’s “Family Office Guide” notes that most multi-family offices are commercial, meaning they sell their services to client families. Others operate as private multi-family offices, open exclusively to a few families. Most multi-family offices started out as single-family offices that grew to include other families to achieve greater economies of scale.

Among the advantages of a family office are protecting the family’s privacy, reducing administrative burdens stemming from the holdings of multiple family branches, and providing financial advantages (cost savings and investment opportunities) due to the aggregation of wealth from multiple households.

Services handled by a family office can include wealth management, estate planning, tax preparation, insurance, philanthropy, family governance, NextGen education, risk management, bill paying and record keeping. A family office might also handle lifestyle (or “concierge”) services, such as managing family travel arrangements and supervising household services.

Single-family offices can be embedded within the family operating company or organized as a separate entity.
Many families develop their family offices over time, beginning with one employee administering the family’s affairs, says Raphael Amit, the Marie and Joseph Melone Professor and a professor of management at the University of Pennsylvania’s Wharton School.

“Some start in a small room in the company owned by the family,” Amit says.

These small operations can draw from the family business staff for assistance. Eventually, a small family office might grow into a private company — often an LLC — that manages the family’s affairs. Some single-family offices have 20 or more employees, according to Charlie Carr, U.S. family enterprise advisory leader at PwC.

Another option is a virtual family office, which outsources many family office services. At the opposite end of the complexity spectrum is a private trust company, which acts as a permanent trustee for family trusts.
Like family-owned operating companies, family offices vary in management and structure from family to family.

“It’s not one-size-fits all,” says Amit.

How to begin
Generally, the process of creating a family office starts when the family leaders recognize their lives have gotten very complex, says Todd Ganos of Reno, Nev., who started an office for his own family and then developed it into a multi-family office. Ganos’ entrepreneur grandfather owned a hotel, restaurant and supermarket in California.
“You realize you have a lot of things going on and you’re starting to outgrow your CPA,” says Ganos, principal adviser with IWC Family Offices. “You realize your business accountant is not going to have the skill set to do the personal planning.”

Sam Fratoni of Portland, Maine, joined Lau Associates to help build a portfolio about 20 years ago. Over time, he began using more of Lau’s services.

A family office alternative: Clemens’ shareholder services office

John C. Clemens surely would be proud to see how his descendants have carried on the family business he started in 1895. The company, based in Hatfield, Pa., with operations in Pennsylvania and Coldwater, Mich., today has four business units: Hatfield Quality Meats, Clemens Development, Country View Family Farms and PV Transport. The enterprise now generates annual revenues of more than $1 billion.

The Clemens family, now in its sixth generation, has grown to include an eye-popping 740 members. About 337 of these are shareholders in The Clemens Family Corporation. With that many business owners, things can get complicated.

As the shareholder group expanded into the fifth and sixth generations and households began to move outside the family’s Pennsylvania home base, managing their affairs “became more complex than it had in the past,” says Tara Bahn, a fifth-generation Clemens family member and director of shareholder services.

To coordinate professional services and facilitate an understanding of these services, two years ago the company began exploring the creation of a shareholder services function. Bahn, who previously was the family company’s corporate counsel, worked as a corporate lawyer at the Kirkland & Ellis law firm in Washington, D.C., and a trial attorney in the U.S. Department of Justice before joining the family business.

The purpose of Clemens’ shareholder services office is to act as a liaison between the company and the shareholders. The primary goals of the office are the sustainability of the business and having an informed ownership, Bahn says.

“It serves as a clearinghouse” of information and advice from the company to the shareholders as well as information from the shareholders to the company, explains Bahn.

Unlike a family office, Clemens’ shareholder services office doesn’t handle investments or tax preparation. Bahn says this stems from the company’s status as a C corporation, which means the enterprise is a distinct legal organization and tax-paying entity that is separate from the owners.

The shareholder services office works with shareholders’ professional service providers. For example, the office might coordinate with an attorney representing a family member who wants to create a trust for her grandchildren.

Bahn says the office combines and centralizes services and functions so they are performed by one person, thus improving the delivery of these services and facilitating communication. “Our purpose is not to have any surprises,” she says.

The office also handles day-to-day stock ledger functions, which include transfers from one generation to the next, dividends, payments and redemptions.

The shareholder services office currently does not handle education for NextGen members or other shareholders, but that function is “something we’re looking to start,” Bahn says.

Bahn says the transition to a shareholder services office was “very easy.”

One reason is that a third-party accountant who used to handle the day-to-day stock ledger still serves as a trustee on a number of trusts.

“It made the transition easier for shareholders,” Bahn says.

Before setting up the office, Bahn — along with John Reininger, who serves as Clemens’ chief relationship officer, plus the former CFO — interviewed several different family businesses to see how they handled the function.
Bahn notes there’s no one model that’s right for every business.

“We wished we could have found something and said ‘Oh, that’s exactly what we need,’” she says. “But with family business, they’re all different.”

She recalls a conversation with a member of another business family who cautioned against handling a particular function in a certain way. “We would absolutely recommend you never do that,” the person advised.

“I said, ‘Oh, we do that. It’s something that works for our family,’ ” Bahn says.

Bahn points out that Clemens’ shareholder services office is still evolving.

“Everything could change,” she says.

Bahn suggests that business families looking to create a shareholder liaison function talk to other families to learn what they do. The intelligence you gather will help you develop a model that works best for your family, she says.

“And we would always welcome any feedback from others,” she adds.

— Maureen Milford

Fratoni, an angel investor who was an executive in a high-growth biotech company, says it was important to have the family affairs in order “if something should happen to me.”

Advisers suggest that families considering a family office first sit down and develop a mission statement. “I ask people to flash forward 40 years and [envision that] Forbes is doing a story on your family. What do you want the headline to be?” says Ken Ude, director of the Marshall Family Business Program at the University of Southern California.

Amit says what stands out in mission statements he’s seen is the desire to manage assets in a way that fosters family unity, harmony, happiness and health. It’s vital that families decide the best way to manage their investments to accomplish those goals.

Single-family or multi-family?
Families with liquid assets of about $10 million or more might find a multi-family office more practical than the use of investment managers or wealth managers because of the additional services that fall under the multi-family office umbrella (tax compliance services, philanthropic advisory, family governance, etc.). Each multi-family office has its own unique menu of services and pricing, and each client family selects the services they want. The decision boils down to a cost-benefit analysis.

There is varying advice on how great a family’s net worth should be to make a single-family office worthwhile. Some advisers say a family should have at least $200 million to start a single-family office. But there are no hard and fast rules, says Carr.

An advantage of a single-family office is that it can be tailored to your family’s needs. It also offers control, privacy and confidentiality. The downside is that it’s expensive. The annual cost to operate a single-family office has been estimated at $1.5 million or more, depending on the scope of the operation. Advisers also warn that those handling the affairs of a single family may lack the insights that come with working with many families. Another problem could be the loyalty by the office staff to one generation, says Lau Associates’ Peterson.

Other criteria besides wealth should be considered to determine if a single-family office is right for you.

“There’s a big difference between wealth creation and wealth management. Are you interested — and skilled — in managing money, and is that something you want to do?” asks George Isaac, who runs a virtual family office for his family, which owned an industrial-grade metals recycling operation.

Typically, a multi-family office costs half of what it would cost to run your own single-family office, Carr says. Pricing structures vary but can include fees based on assets and additional hourly or fixed charges for other services. The downside, Carr notes, is that your family is just one of many multi-family office clients, so the services offered might be less personal.

Fratoni says families should determine in advance what services they want a family office to handle. “There should be clarity around what you want them to do and not do,” he says.

Whether you choose the single-family or multi-family office option, you must trust the professionals you work with.

“Trust is as valued as talent,” the J.P. Morgan study notes. 

Maureen Milford is a business writer based in Wilmington, Del.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact


Private equity and strategic buyers aren’t the only suitors pursuing family businesses today.

Family offices, those low-key organizations formed to manage the wealth of ultra-high-net-worth families, are discreetly wooing business families who might be interested in selling a stake.

“Families that have built and grown successful businesses are increasingly looking for opportunities to invest in [other] family-owned businesses,” says Irene Mello, director of the Direct Investing Network at Family Office Exchange (FOX), a network for wealthy families and their family offices.

This relatively recent development is part of a growing trend by family investment firms to allocate a portion of their assets to investments in operating businesses. The past 24 months have seen a big uptick in this “direct investment” by the family office sector, notes Russ D’Argento, CEO of Fintrx, which provides data and research on the family office sector to the private capital markets.

In FOX’s 2017 Global Investment Survey, 57% of family offices reported being involved, in some fashion, in direct investing in operating businesses. It’s safe to assume at least some of those investments are in family businesses. Most family offices are looking for deals under $1 billion. Almost all companies bought by family investment firms are private businesses, observers say.

To facilitate direct investing, the family office sector is beefing up its staffing. According to the FOX investment survey, 81% of family offices employ at least one full-time staffer to source and evaluate direct investments.

There are several reasons for the increase in direct investment. To begin with, family investment firms today are very sophisticated and have hired top-tier talent, D’Argento says. As savvy financial investors, they’ve become increasingly dissatisfied with the “2-and-20” fee model used by private equity funds — a 2% management charge and a 20% performance fee — says Angelo Robles, founder and CEO of the Family Office Association, a global membership community of successful families and single-family offices.

Family companies provide great cash flows and growth opportunities, explains Bobby Stover, Ernst & Young’s Americas family office leader. Because public markets are extremely efficient today, it’s harder to find growth opportunities there, he says.

A growing sector
Finally, there are just more family investment firms seeking opportunities nowadays. In 2016, there were at least 10,000 single-family offices worldwide, with at least half started within the previous 15 years, according to Ernst & Young’s “Family Office Guide.”

“Family offices are arguably the fastest-growing investment vehicles in the world today.… The increasing concentration of wealth held by very wealthy families and rising globalization are fueling their growth,” the EY guide states.

This appears to be an opportune time for family business owners to consider family investment firms as a way to raise capital.

Special Section: The quest for liquidity

The ABCs of PE

Private equity pros and cons

Creating shareholder liquidity: A checklist before going public

Succession plans must incorporate liquidity planning for the family

“It is becoming well known that families are looking to invest in private companies at the same time many family-owned companies are looking for capital from private investors to help solve their own transition issues,” says Sara Hamilton, FOX's founder and CEO.

In the past, family businesses generally had two choices — selling to a strategic acquirer (often a competitor) or to a private equity fund, says Paul Carbone, managing partner of Pritzker Group Private Capital, a family investment firm.

Family office represents a third option, Carbone says.

For family business owners, a family investment group could provide flexible capital with an investment tailored to their individual situation, Carbone says. He says Pritzker likes to think of it as pulling on the oars together.
For example, many wealthy families have run businesses themselves.

“These families have real-life operating experience and therefore special insight into what it’s like to run a family business and what’s needed to drive strong performance,” Mello says. “This perspective gives them a real edge as investors, as they understand the needs of family businesses, relate to the challenges they face and can provide advice and support that’s value-add and action-oriented,” Mello says.

Family offices sometimes want a controlling stake to influence the direction of the company, but many are open to minority investments where “they can back a strong management team with a proven track record and provide growth capital to accelerate a strategic plan,” Mello says.

Since family investment groups place a lot of importance on evaluating management teams, they’re showing greater flexibility around deal structures and a higher interest in growth capital, Mello notes.

Aligned interests
In addition, family offices tend to understand the culture of the families they do business with, Stover says. For a family office, the term “long term” means generations, not seven to 10 years, he points out.

“It’s sticky capital,” says D’Argento. “They hold and keep investments until it’s appropriate to exit them. There’s less of an institutional feel, and it’s a bit more personal.”

Take Vincent Mai, who spent more than 20 years in private equity. Mai says he found it frustrating “to be selling really good businesses I didn’t want to sell, and I saw the need for an alternative structure.” In 2012, he founded The Cranemere Group, a private holding company backed by family offices that acquires and holds family businesses for the long term.

Lansing Crane, former chairman and CEO of Crane Currency, which partnered with private equity in 2008, thinks family offices provide distinct advantages. “I think they’re a great solution,” he says.

But 10 years ago, family office wasn’t an option for his family business, Crane says.

“Most of the time, a strategic single-family office is much better than private equity because there’s an alignment of interests,” says Robles.

But because the family office sector is so discreet, finding a partner can take work, say those in the field.
“It’s a fragmented, cloudy world,” D’Argento says.

Patricia M. Soldano, a consultant with GenSpring Family Offices, suggests that family business owners join a network and attend conferences to learn what the various family offices do.

“It’s hard. There’s no list [of family offices seeking investments],” Soldano acknowledges.

Stover agrees most connections between family enterprises and family office happen through networking. 

“It’s known as ‘quiet capital,’” he says.      

Maureen Milford is a business writer based in Wilmington, Del.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact



There's the American Dream, and then there's the spectacular success achieved by immigrant brothers David and Paul Merage. Born in Iran, they came to the U.S. in the 1960s as students and settled in California. A decade later, they made an astute observation that would change their lives.

Attentive to shifts in American culture, they noted two coalescing trends: Sales of microwave ovens were increasing as more women entered the workplace. Spotting an opportunity, they set out to develop a nutritious frozen-food product that women and their families could pop into a microwave oven for a quick meal or snack. In 1977, David and Paul introduced Hot Pockets, frozen handheld sandwiches with a variety of fillings. Sales took off, generating new varieties of "pockets." By 2002, their company, Chef America Inc., was one of the most profitable privately held food companies in the world; the brothers sold it to Nestlé for $2.6 billion.

Financially set for life, David could have enjoyed a grand retirement, but the concept is contrary to his nature. "Retirement? I never considered it for one minute," he says. "I come from a family of entrepreneurs and trendsetters. Setting new challenges and mapping new territories is what I do."

Today, David, 66, is principal of Consolidated Investment Group in Denver, the firm he started in 2002. For the past 13 years, he has divided his time equally between building his business and actively guiding his philanthropy.

Entrepreneurial background

David was the fourth of five children born to Andre and Katherine Merage. David, who grew up in Tehran, remembers everyone in the family—including the women—taking a keen interest in business. "My father used to tell us stories about successful family businesses," David says. "He instilled in us the belief that family members working together were stronger than any one of us could be working alone."

Iran was not a promising country for entrepreneurs when Andre was starting out. In the 1920s, he moved to France, where he ran a successful business importing and exporting high-end antiques. When the Nazis invaded Paris in 1940, he fled to Iran and resumed his life there.

Having raised his sons with dreams of excelling in business, Andre sent them abroad to be educated. At 15, David attended secondary school in England. His older brother, Paul, had graduated from the University of California at Berkeley. In 1968, David joined Paul in California.

"California felt like home," says David. "I felt an immediate connection with the people and the culture. I knew I was destined to become an entrepreneur and it would happen here."

In 1971, Andre and Katherine also moved to California. After graduating from Sacramento State University with a degree in marketing, David began investing in real estate with his father and demonstrated a keen eye for identifying and capitalizing on market trends. Meanwhile, Paul, who had had ten years of management experience working with major packaged food companies, suggested that he and David start a business importing and marketing consumer products from Europe and Japan.

On one European trip, the brothers discovered Belgian waffles. Paul—referred to by David as a marketing genius—was convinced that there was a big market for them in the States. Although the brothers had no experience in developing food products or designing machinery, they were undeterred. "For months we spent every night in our mother's kitchen cooking up recipes," says David. "After a year and a half of testing, we developed the first generation of frozen waffles. There was nothing like them."

In 1974, David and Paul formed a company in Southern California, which they originally called General American Foods. They soon learned there was already a big corporation called General Foods, and they changed the name to Chef America Inc. Andre was an investor and an adviser to the business.

Success breeds more success

Working six and a half days a week, the Merages marketed their frozen waffles to coffee shops and restaurants. In just three years, Chef America became the No. 1 company in the world mass-producing frozen Belgian waffles. In 1977, annual sales topped $12 million, but the brothers recognized that they would have to expand beyond the breakfast market for the business to keep growing. "We couldn't compete against the lunch and dinner market," says David, "so we started thinking about satisfying snacks that kids could make in a microwave oven without cutting or burning themselves and that adults could eat on the run."

Once again, the brothers were back in the kitchen experimenting with recipes. After two years of trial and error, they developed a frozen sandwich that tasted good and didn't get soggy when heated. They called the sandwiches Hot Pockets and, in 1983, started marketing them to vending machines, catering businesses and schools. The business really took off in 1985 when Chef America started selling Hot Pockets in retail supermarkets nationwide. Later, it introduced two other popular lines, Lean Pockets and Croissant Pockets.

Chef America wanted a more central location between its California and Kentucky manufacturing operations. In the mid-1990s, it relocated its headquarters to Englewood, Colo. David's family and the entire executive team made the move.

As a mark of their business acumen, David and Paul never raised the original price of Hot Pockets, even though they improved the quality and increased the varieties over the years. How did they do it? "When the prices of ingredients went up, we asked our research and development team to find ways to offset them," says David, "and we looked for ways to be even more efficient."

Feeling tremendous pressure to keep the business growing at a rate of 15% a year, David and Paul talked about selling the company and spending more time on their philanthropy. They decided to quietly market the business, but they knew it wouldn't be easy. "Only four food companies were in a position to buy a business the size of Chef America," says David. "And we wanted to sell to an operating company that would retain our management team and other employees."

At its peak, Chef America was manufacturing 30 different pocket products, and each production line was turning out 800 to 900 Hot Pockets a minute. When Nestlé bought Chef America, the company had sales of $750 million a year, employed 1,800 people and generated 6,000 jobs through its supply chain.

New venture

After the sale of Chef America, the brothers pursued separate projects. Paul set up an in investment firm in Southern California, and David started Consolidated Investment Group (CIG), an investment management company in Denver that invests for a select group of clients. After having all of his wealth in one basket in Chef America, David sought to build a diversified portfolio for CIG. The firm has four areas of operation: private equities, public equities, commercial real estate and philanthropy. It invests domestically and internationally and mostly for the long term. Its investment portfolio is currently valued in excess of $2 billion.

At Chef America, David's strong suit was creating the company culture that contributed so much to the business's success. He has worked to re-create that culture at CIG. "I bring together a team of the most creative and committed people I can find and set high expectations and goals," David says. "CIG is driven by excellence. We compare how we're doing in each of our operations to the 5% best companies in the U.S."

CIG currently has a staff of 74, including David's daughter, Sabrina, 29; his wife's nephew Ben Levy, 34; and Rob Nelson, one of six former managers from the Chef America team. Nelson has worked with David for 30 years, as vice president of food services, sales and marketing at Chef America and, since 2005, as a member of CIG's executive team. "David's recruiting process is incredibly rigorous," says Nelson. "He surrounds himself with exceptionally capable people and then gives everyone opportunities to learn, contribute and succeed. That, plus a culture of respect and honesty in everything we do, makes CIG an exciting environment in which to work."

Capitalizing on David's expertise in the food business, CIG began actively seeking investments in American-owned companies in the food and beverage industry that are promising or in distress, or those whose sales have plateaued but still have potential for substantial growth.

In 2012, CIG made its first investment in a Minneapolis-based company, Funky Chunky, which makes artisanal chocolate caramel popcorn and gourmet snacks. Why was this company an attractive investment to CIG? "The management shared the same culture as Chef America [and] had a high-quality product and room for growth," says David.

CIG does not just write a check. It considers itself a resource to the companies it invests in, drawing on its decades of experience in the food industry. It has advised Funky Chunky on matters such as designing equipment, redistribution channels and human resources. In just one year, the company's sales increased by double digits.

CIG is in the process of buying another food company, which David declines to identify because the deal has not yet closed. CIG has set an ambitious goal of closing one or two deals a year.

David's nephew Ben Levy started working with CIG in 2011 as a private equities manager. He spends a lot of his time on the road looking for investment prospects and assessing businesses. "What I've learned from working with David," he says, " is that product quality is king. It doesn't matter what it is; it has to be superb. David is a discerning investor who's always looking for what others haven't thought of. He approaches opportunities by asking not only what assets can we unlock but also whether we are the right fit in terms of corporate culture. That's very important to him."

Philanthropic projects

Philanthropy is the fourth CIG operation and, David stresses, is equal to the firm's other operations. "The role of CIG is to support our non-profit activities," he says. "We run our philanthropy with the same discipline and high expectations as we do our business."

CIG supports five family foundations: the David and Laura Merage Foundation, the Andre and Katherine Merage Foundation, Early Learning Ventures, the Jonathan Merage Foundation and the Sabrina Merage Foundation. Their primary funding interests include early childhood education, economic development in Israel, weather research, and educational programs for young people that promote tolerance and diversity. The family believes in hands-on philanthropy; all of the foundations have family boards and are overseen by executive director Sue Renner.

David's wife, Laura, also born in Iran, is an artist who has a strong presence in the Denver art community. She founded RedLine, a non-profit gallery that offers educational programs, art activities for people in the community, and gallery exhibition space for emerging and established local artists. David and Laura's 33-year-old son, Jonathan, has forged his own path as a storm chaser interested in extreme weather and its consequences. His sister, Sabrina Merage, has been vice president of corporate strategy at CIG and a core member of the business team since 2012. "My dad and I work together and talk about corporate strategy every day," she says.

Last year, Sabrina launched her own investment company, Echo Capital Group, an offshoot of CIG. Sabrina is the principal; her cousin Ben Levy is the vice president. Like CIG, Echo invests in food and beverage companies. The difference is that Echo targets new companies started by millennial entrepreneurs. Echo's venture capital comes from CIG, which also offers its resources and operational expertise to the companies in Echo's investment portfolio. So far, Echo has invested in Boomerang Pies, a company in Austin, Texas, that sells frozen, handheld, all-natural, minced meat and kidney pies, adapted from Australian recipes. Echo has also invested in Stacked Wines, based in Southern California, which sells individually packaged, sealed wine glasses filled with quality wines, suitable for picnics or occasions when people don't want to open a bottle of wine.

"We're not passive investors," Sabrina says. "We think both of these products will appeal to millennials on the go, and we'll use all of our resources to make their manufacturing and operations more efficient."

Sabrina was a teenager when her father and uncle sold Chef America, but she says she was unfazed by the publicity or comments from kids at school. "It just rolled off my shoulders," she says, "because my family was never fixated on money but on values. My parents told us that the money wasn't to be used to change our lives, but to change the world around us."

Andre Merage died in 2001. To kindle the younger generation's interest in philanthropy, their grandmother, Katherine Merage, gave each of her 13 grandchildren the gift of a foundation and the freedom to make their own decisions about how to give away the money. At the time, Sabrina was just graduating from college and thinking more about her career. "Initially the money felt like a burden," she says, "but once I came up with a mission, I realized what an amazing gift my grandmother had given me." Now enthusiastic about philanthropy, she sits on several non-profit boards and attends conferences on philanthropy. Katherine remains active in her philanthropic endeavors.

David and Laura, who came to the U.S. as teenagers, recognize that America has been very good to them. "I don't know of any other country where people can succeed through their best efforts as they can here," David says. "I've been fortunate to do what I love for the past 40 years and derive such joy from my work. Every morning I wake up and say to myself, 'This is the start of another good day.' " 

Deanne Stone is a business writer based in Berkeley, Calif.

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact

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Dan Agnew and his brother-in-law, Dick Lytle, were partners in Mt. Hood Beverage Co., a beer distributor in the Pacific Northwest. Through a series of acquisitions in the 1990s, the business prospered. Dick's two sons were already working in the business, and three of Dan's children would soon be graduating from college. Dan understood that for a family business to succeed over the generations, younger family members had to be prepared to work together as a family and a business. But he didn't have a plan for educating them.

In 2004, he hired a consultant to work with the extended family. Over the next eight years, they met twice annually to build a cohesive and supportive family—one in which family members were knowledgeable about financial matters and comfortable talking candidly with one another. Then, in 2012, the family received an unsolicited and irresistible offer to sell the business, which it accepted.

Dan wasn't ready to give up on his desire to have the family work together over the generations. He proposed that the family pool the proceeds from the sale and set up a family office to invest their money jointly. The family agreed, and The Agnew Company was born.

Steve Lytle, 47, a fourth-generation family member who serves on The Agnew Company's board, says the family segued smoothly from business owners to an investor group because their work with the consultant helped lay a solid foundation. "We were running on parallel tracks, concurrently taking care of the family business and the business of the family," Steve says. "The family systems and family processes we had been developing during that time made the smooth transition possible. We couldn't have done it without them."

Starting on the right path

The impetus for hiring a consultant came from an article Dan had read about family businesses. The article said that most family companies failed before the third generation, but those that had formal governance, family meetings and transparency had a better record of surviving. "That rang true to me," recalls Dan, 70, who is CEO of The Agnew Company. "I wanted to get our family started on that path."

Dan knew from personal experience what can happen when younger family members are excluded. His grandfather, Sam Agnew, founded the Agnew Lumber Company, a manufacturer of lumber products near Centralia, Wash. Over two decades, Sam acquired large tracts of timber in Oregon, California and Canada as well as a plywood factory. He also owned and operated a commercial cattle ranch operation in Washington, managed by his son and only child, Jay.

After Sam died, Jay ran the business. When Jay died in 1980 at age 59, Dan and his sister, Zan, were in for a shock. They knew little about their father's businesses and never imagined he would leave his estate in such a mess. It took the family the better part of a decade to sort it out with the IRS.

"My grandfather hid everything about his businesses from his son, and my father did the same with us," says Dan. "Only when he was very ill did he start talking, but by then there was little time left, and his directions for passing on authority to me and my brother-in-law were muddled."

Dan was determined to avoid mistakes like this. In 2003, he was introduced to Lee Hausner, a clinical psychologist and business consultant. Hausner is senior vice president of Family Enterprise, a division of First Foundation Inc., in Los Angeles. After a lengthy conversation with Hausner, Dan was optimistic that his family could accomplish what he wanted it to do. In 2004, Hausner organized the first meeting of the Agnew family. She and the extended Agnew family have continued meeting twice a year ever since.

"What's important about the Agnew family's story," says Hausner, "is that they recognized from the start that this was an ongoing process. Businesses and families change over time. Healthy families know that to be viable, they have to keep thinking and talking about what they want to be, and that takes a lot of work."

Getting the family on board

The fourth generation consists of Dan's four children and Dick and Zan's two sons. When Dan presented the idea of working with a consultant, his three youngest children were still in college and skeptical that this was another of "Dad's crazy ideas."

"Dad said that he wanted the family to be transparent about money, but we really didn't grasp what it was all about," says Sam Agnew, 35, a fourth-generation family member who serves on the board and on the family council.

When the fourth generation was growing up, their families lived simply. Dan was a ranch manager and Dick Lytle ran a mill operation in a small town in Oregon. In 1977, Dick bought a small wine and beer distributorship in Oregon that represented Lucky and Gallo brands. Riding the early wave of consolidations in the industry, he continued acquiring mini-distributorships, merging them under the name Gold River Distributing. Then, in 1990, Dick, Dan and Zan bought a larger distributorship that represented Coors, Pabst Brewing and other breweries in Portland; they named the distributorship Mt. Hood Beverage. The family also had investments in timber, real estate and private equity, in addition to a commercial cattle ranch. When Dan and Zan's grandfather Sam Agnew died in 1963, he left his heirs timber holdings of more than 70,000 acres and land with an undeveloped coal resource.

At the first family meeting, Dan reiterated that he didn't want to keep any secrets about the businesses from the family. In the first demonstration of full disclosure, Hausner wrote down the amount of the family's wealth for everyone to see. "The kids just about dropped off their chairs," she says. "They knew the family had money, but not great wealth."

Hausner is a proponent of treating wealthy families as businesses. "Most have shared assets," she says, "so family members should be held accountable as they would be in [a] business." Hausner steered the Agnew family through the process of writing a mission statement and developing a constitution, considered a living document subject to amendments.

Her work with the family centers on an educational approach she calls FISH: developing the financial, intellectual, social and human capital of every family member. Dan, who has become an advocate for FISH, says, "I'm a firm believer that families that don't invest in all of the components of FISH won't be able to sustain financial capital over the generations."

Hausner also guided the Agnews in establishing a family assembly, a gathering of the entire family. The family assembly began meeting twice a year in 2004. Each family meeting includes education on one component of FISH, often presented by an outside expert. Aspects of financial education covered at the meetings have included reading financial reports, money management, estate planning and talking about money. Education on improving communication is ongoing.

Sam remembers the first family meetings as intense and emotional. "Lots of tears were shed as family members starting opening up about conflicts with parents, problems with kids, miscarriages and divorces," he recalls. "Since then, we've had a lot of education on communication, managing conflict and parenting. Now we're comfortable talking about any personal stuff, and we go all in. Everyone walks away from these meetings feeling good about the family and with something that they can take back to their work or family that will help them. We've created a really cool family culture."

One of the first obstacles the family encountered was the younger generation's resistance to the requirement that any family member who becomes engaged must have a prenuptial agreement. "At first the young people were offended and protested against what they argued was a lack of trust," says Zan. "It took years before everyone got comfortable with it and understood why it was necessary."

In 2007, the family established the Agnew Family Foundation with a gift from Zan and Dan. Zan, 68, is the foundation's president. Currently, there are ten women family members on the board. Why only women? "Because the women in the family came up with the idea," says Zan. "We've invited men in the family, but they're too busy with work." The foundation supports programs for children in the communities where family members live. For now, it accepts only eight proposals a year so that it can do proper due diligence. It also has a junior board of eight fifth-generation members who serve as observers.

Forming the family office

In 2008, Dan and Dick merged their two distributorships, Gold River and Mt. Hood, with another family-owned beverage company to form Columbia Distributing. It became the largest beverage distributor on the West Coast. Dick and Zan's sons, Steve and Andy Lytle, worked in the business; Steve succeeded his father as Mt. Hood's president and CEO. Dan's son Sam Agnew joined in 2005.

In 2012, the Agnew family received the offer to buy Columbia Distributing. The terms of the deal were not disclosed, but some in the industry estimated the sale price to be in excess of $500 million. The family was at turning point. Third- and fourth-generation family members could either go their own way or pool their assets to invest together in a large family office. Dan made the case for investing together. Besides more opportunities for large-scale purchases and breaks on fees, he argued, they would have fun learning and investing as a family.

The years of working together to educate the family about finances and build an open and trusting environment paid off. The family unanimously recognized the benefits of investing together and of continuing to meet as a family. Every adult household voted to pool their money; 90% of the after-tax proceeds of the sale was returned to the family office to be invested together.

The Agnew Company, the family office, manages the family's collective assets held in two holding companies. Only blood descendants can be shareholders. Dan and Zan opted out because they want the family office to benefit future generations so, for now, the shareholders are the six members of the fourth generation. Dan and his son-in-law, Darrin Kasteler, are the only family employees.

With the establishment of the family office, the family formalized its board, bringing on two independent directors. Its goal is to eventually have 50% independent directors. Simultaneously, the family set up a family council, which works with the board. While only blood descendants serve on the board, the extended family is invited to attend family assembly meetings.

The family has had five divorces among the third and fourth generations. It credits the work it's done on interpersonal relations to help family members heal and move on. After Zan and Dick divorced, they recognized the benefits of remaining business partners. Zan is now remarried to Jack Peat. He and his children attend family assembly meetings, and Dan, Dick and Jack frequently play golf together. "The difference between where the family was when we began and where we are now is like night and day," says Zan.

A few years ago, Dan and Zan bought a vacation house in Eastern Oregon, which they gave to the fourth generation to encourage them to work together collaboratively. According to the agreement, the six would have to decide how to decorate and maintain the house and determine who got to use it when and how often. "They embraced the idea," says Dan, "and figured out in a supportive and trusting way a system for use that included spouses and stepkids."

Planning for the future

The family experiment Dan launched in 2003 has brought the family closer, multiplied opportunities for investing and learning, and increased their enjoyment in being together—by all measures a great success. "It hasn't been all sunshine and lollipops," says Steve, "but the moments of tension and stress have all been manageable." In fact, Steve was so impressed by his family's experience that, after the sale of the business, he became a professional adviser to multigenerational family businesses.

Hausner, who wrote a book about children of affluence, is alert to the negative effects great wealth can have on children. The Agnew family, she says, doesn't have any slackers. "No one is sitting around on trust funds," Hausner observes. "Everyone is working and productive. Everyone is committed to having a healthy family that does good with its wealth for the family and for others."

Dan is the acknowledged patriarch of the family whose vision of a successful multigenerational family brought the family to where it is today. After leading the family and business for more than 30 years, he will likely retire as CEO of The Agnew Company in the coming years, an event the family is planning for. "We're knee-deep in discussions now," says Steve. "All the work we've done over the years is building toward a smooth succession. Governance is a decision-making process, and the end game is a successful transition of leadership and wealth." 

Deanne Stone is a business writer based in Berkeley, Calif. 

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact

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The decision to sell your business was a difficult one. Yet the timing was right, you found the right steward to buy your company and negotiated an exit that met the needs of your family. Now it's time to look ahead so you can enjoy the fruits of your labor in a way that makes the next chapter of life as rewarding as the prior one.

Redirecting the family's focus from the business to another meaningful pursuit is a high priority for many sellers. Numerous options exist to smooth the transition.

Adjusting to a liquidity event

A significant liquidity event need not be destabilizing. The business owner and his or her family often retain ongoing leadership roles at the company, particularly when they maintain a meaningful ownership stake in the business. This is best accomplished by selling your company to a buyer who values your involvement and encourages you to maintain ownership.

The family should acclimate to its newly liquid wealth over time to prevent the kind of radical changes in lifestyle that can occur with sudden wealth. This usually involves restricting access by younger family members to the sale proceeds. One way to do this is by contributing the sale proceeds to family investment partnerships with redemption restrictions. Another strategy is to keep proceeds in the legal entity and make distributions over time.

In a situation in which proceeds are distributed at the time of a sale, many families find it is better to put the pieces back together by creating a family office. This will allow the shareholders to jointly reinvest the proceeds in an organized and cohesive manner. A family office can also be a vehicle to pursue business and philanthropic activities and provide support to family members.

Running a family office

Family offices come in all shapes and sizes, and no single solution is best for everyone. Identifying the right type of family office depends on factors including the magnitude of the sale proceeds, the number of family members and trusts established for their benefit, and the willingness of the business owner to manage the people and resources necessary to form a family office.

Families may choose to form their own captive family office, known as a "single family office." It generally is cost-effective to do so when liquidity exceeds around $500 million or more. A single family office is usually a distinct legal entity formed to serve the needs of a single family as well as trusts established for their benefit.

Using a multi-family office may be a better solution when the cost of forming a single family office is not justified, or when the family simply does not want the hassle of hiring employees and managing a captive organization. Multi-family offices usually offer lower infrastructure costs by sharing resources. The tradeoff, of course, is just that. Resources are shared and so are not dedicated to a single family or family member. It is usually a good idea to figure out what services are going to be provided by the family office, and to whom, before deciding whether to form your own office or rely on a multi-family office instead.

Functions of a family office

Overseeing the investment of a family's assets is the most important function of a family office. The logical first responsibility of a newly formed family office is to create an investment strategy for family members and entities served by the office, usually embodied by the development of investment policy statements that dictate asset allocation. Once this is done, the next step is identifying and gaining access to best-in-class investment managers. Options to be considered include hiring external third-party investment managers and creating an internal team to direct the family's investments.

The choice of whether to bring investment expertise in-house or to use outside managers is often determined based on the size of the family's asset pool. Families with less than $500 million of assets or those wishing to maintain a simple family office structure typically outsource the investment management function. This is the most straightforward option, as outside managers already have the infrastructure, investment discipline, and policies and procedures in place for this purpose.

Some families with a sizeable asset base prefer to establish a captive, internal investment effort. This requires a significant financial commitment from the family, in part because high-quality investment professionals command a high salary, including a portion of their compensation based on portfolio performance. The advantages of an internal investment management function include added flexibility and a highly customizable approach to investing that is carefully tailored to fit the risk profile of each investor.

In addition to implementing an investment strategy and monitoring investment performance, many family offices oversee the family's philanthropic efforts. Creation and administration of a private family foundation—frequently embedded within a family office—is a wonderful way to jump-start your post-sale career and give back to the community. A private family foundation is often formed with a specific purpose or objective in mind, using the collective resources of the family to effect real change by supporting a handful of specific causes.

Aside from investments, family offices usually oversee tax and legal services for the family, plan estates and manage personal real estate. They also frequently perform concierge services such as arranging travel, maintaining personal assets, managing household help and paying bills.

On to new business—the family bank

Many family business owners have motivated children who aspire to be entrepreneurs themselves. An additional feature of the family office is to establish and oversee a "family bank," which provides funding for new business ventures without simply throwing a pile of cash at a new business.

A family bank is a legal entity formed to lend money to family members for appropriate business opportunities. The family bank usually requires creation of a thoroughly vetted business plan before initial or subsequent funds are advanced. Such a structure enables the business owner to encourage entrepreneurial behavior but also dissuades younger family members from diving headfirst into a business venture without sufficient planning and preparation. While a family bank will typically advance funds on more favorable terms than a commercial lender and without the usual collateral requirements, the mere fact that the funds are loaned results in family members giving new business ventures their undivided attention.

Key decisions

The establishment of a successful family office requires forethought and planning. Thinking through in advance whom the office will serve and what services will be provided will allow the family to properly size and staff the office. Giving top priority to the investment function will allow the family to create a value proposition for the office predicated on the economies of scale of investing together.

From there, the family should focus on the desired level of service and how to deliver it in the most efficient manner. When establishing a family office, you must determine up front what services will and will not be provided by the office as well as how the family office will be funded. This helps prevent any one family member from monopolizing the limited resources of the office. Charging family members and family entities based on their use of the family office is one effective way to control this. It is usually a good idea to start small, with just a few key employees, and then expand the office gradually as more services are brought in house.

In time, the successful family office will address ownership, governance and succession issues. When done right, this will enable the office to survive the founder and serve future generations of the family. Good governance usually starts by encouraging younger family members to take an active role in managing the office and participating in major decisions. This can evolve into the creation of a board of directors including multiple generations and representatives from various branches of the family. Ownership of the office, which almost always starts in the hands of the business owner, should also be transitioned over time to the next generation as their responsibilities increase and they mature.

Planning for the future

The sale of the family business should be the ultimate fulfillment of the owners' dream. But for this to be true, careful planning is required, both before and after the sale, to ensure that the legacy of the business and the owner continue in a meaningful way. Creation and use of a family office is one way to achieve this goal, as it can keep the keep the family's assets together and serve as a mechanism to redirect the family's efforts after the business is sold.

Steve Thorne is a retired partner of Deloitte Tax and former head of Deloitte's Family Wealth Planning and Family Office practices in the Chicago office (

Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact

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