Setting Up A Single Family Office: The Planning Stage

Setting Up A Family Office: The Planning Stage – I need a single family office, now what?

Wealthy clients, when they reach around $200m+ liquidity, often want to establish a single family office. Sometimes this desire is based on a gnawing feeling that they have lost control over their affairs, or the knowledge that family wealth rarely transfers down the generations succesfully.

The first step is that the family need to ask themselves these questions:

  • Why do we want to set up a single family office?
  • What will the office do? Who will it do it for?
  • How will the family office relate to the family business, assuming there is one?
  • How will the family office be related to the other structures established by the family?
  • How and where will the family office operate?

If having answered these questions in principle, they believe that the single family office is the right structure for them, then the next step should be set out a business plan.  Ideally they should approach the planning stage methodically, either setting out the business plan themselves or asking a trusted adviser to do so.

The plan will normally cover this information:

  • Background on the family, its history, structure, strategy and mission. This should include the skills, experience and nationality of family members, particularly if they are intending to be deployed in or on behalf of the office.Details of those family groups who are to be serviced should be included, as should where the limits of who is defined as “family” both now and in the immediate future.
  • Analysis of the strengths, weaknesses, opportunities and threats of the status quo and ultimately the proposed new structure. This should include an understanding of the rationale for creating the family office and an analysis of why alternative structures, such as a Multi-family office have not been chosen.
  • An outline of the services to be provided, and a detailed analysis of those that should be in-sourced or outsourced to specialists.
  • A detailed plan for the first few years of operation including:
  • Financial information, including a five year summary of profit and loss, projected turnover, cash flow projections, a forecast balance sheet, and a detailed explanation of assumptions
  • Property and staffing plan, outlining the needs for business premises, personnel requirements and hiring costs
  • An external communications plan, including considerations of staff confidentiality, social media and web presence (if any)
  • IT Plan, including detailed consideration of cyber threats.
  • Overview of Legal Structures, including the jurisdictions the family will be subject to
  • Governance – a summary of how decision making and communication will take place between the family and the staff and between the family members themselves. This should include KPIs for the family office and what kind of financial reporting the family prefer.
  • Family and Next Gen financial and other educational considerations
  • Regulatory plan, a summary of how the regulatory environment will impact and what is required to address these regulations

Given the questions that need to be asked and discussions that needs to take place direct with the principals and other prominent family members, you should expect the business planning stage to be thorough and demanding. Skip this at your peril!