Family Offices — Lessons for Everyday Families

It’s normal for high net worth families to have “family offices” that manage banking, investments, bill paying and more. But most of us aren’t born with the name Rockefeller and we don’t have family offices. However, I believe there are lessons to be learned from family offices that are helpful for any family who wants to get a better handle on their financial situation.

As a CPA and Certified Financial Planner, I work with high net worth clients who have family offices. I apply some of the principles behind family offices to my other clients.

Let’s look at family offices, their purpose and how we can apply their benefits to the financial matters of everyday folks.

What’s the Point of a Family Office?

A family office manages multi-generational family assets under one roof. No two family offices operate the same, just as no two families share the same dynamics. Family offices, however, share common goals. Whether your family’s money is generational, or if you and your siblings just sold a business that your parents established, the goals of the family office can be summarized as follows:

Wealth Preservation for the Family

Combining family resources and having multi-generational involvement creates a sense of shared responsibility and a better chance that the money will be there for the next generation.

Pooling of Expenses

Having a family office means that all family expenses, including insurance, investment fees, legal and accounting, can be managed in one place.

Philanthropic Activity

Family members get together and work on philanthropic goals, grooming the younger generation to think about giving and how it aligns with the family’s charitable intentions.

Succession Planning

By having all of the assets controlled under one umbrella, a family office allows for estate planning maneuvers and a holistic plan for the entire family.

Tax Planning

Having one CPA firm that understands the entire family’s tax position presents tax planning opportunities that may not be available if each family member had their own CPA.

Intangible Benefits

Having multi-generation family members work together to accomplish a common goal brings closeness and unity within the family.

What Resources Are Needed to Run a Family Office?

The net worth of the family, complexity of the assets, and expertise of the family members will help determine what kind of resources are needed to help run a family office.

Aside from back-office help — accounting, paying bills, scheduling, etc. — the family will need to assess who will be needed to help with investment, legal and tax issues, and whether they want to bring this expertise in-house to the family office or have a third-party team up with them. If there is a family business involved, or if a family member is very fluent in the world of investments, then perhaps it would make sense to have their own attorney or to manage the investments in-house.

The Role of a CPA Firm In a Family Office

A CPA can be very beneficial with the startup, maintenance and oversight of a family office. Having a CPA involved from the beginning can help determine what resources, assignment of duties among family members, overall goals and strategies are appropriate for the family office.

The CPA can also help recommend and interview other third-party professionals like attorneys, investment advisors and bankers, and determine if they are a good fit for the family. Once the office is setup, the CPA can help assess whether things are on track and whether the family is reaching their goals. The CPA can help monitor progress and be an independent advisor, especially when it comes to investment choices. Of course, the CPA will be there to help with tax, estate and succession planning.

Lessons for Everyday Families

Now that we have some general background of what a family office is, let’s apply some of these ideas to a typical family.

Wealth Preservation for the Family

By planning how your assets are structured (e.g., who is your beneficiary on your retirement account) and which assets should be preserved vs. which should be spent down during your lifetime, you can significantly impact the wealth that you will be able to transfer to the next generation.

Pooling of Expenses

Build a network of service providers such as attorneys, CPAs, doctors and mechanics. Any services you use will go far when negotiating price and the quality of the service you will receive.

Philanthropic Activity

Regardless of whether you donate $10 or $10 million dollars a year, teaching your children to get involved in giving back will be a valuable lifelong lesson.

Succession Planning

If you own a business, succession planning is very important. There are so many factors and planning opportunities available but they must be planned and implemented at the right times.

Tax Planning

Obviously this depends on the age of your children, but teaching about general tax strategy, 401(k) plans, charities and budgeting will help your children navigate their own financial life.

Intangible Benefits

Any involvement or financial education that you transfer to your children will be invaluable in their future.

Even if your name isn’t Rockefeller, there’s a lot you can learn from the concept of a family office, and apply to your own family’s financial situation. On top of possibly saving some money, building wealth and creating a strategy behind your family’s financial decisions, you’ll be passing along that knowledge to your children, giving them a nice leg-up when starting out in the world.

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