How to tell if a family office is right for you

By Dan Terlep

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:

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.

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.

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’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 complexities. A family office can help manage financial issues and guide the family toward good governance.

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