The Complete Family Office Handbook

In the wealth management space, there is increasing interest in the family office, especially now that celebrities and well-known business moguls are establishing their own. Once a relatively unknown, private vehicle reserved for the über-affluent, the family office has increasingly become more mainstream—yet it remains an enigma. What is a family office? What are the typical paths that lead a family to either start their own single-family office or join a multi-family office?

Designed to support families whose family members desire to collectively manage, sustain, and grow their wealth across multiple generations, family offices can aid families in managing their tax, fiduciary, and compliance needs; assist in investment management, risk management, estate planning, and trust administration; provide support for philanthropic activities; conduct financial education programs for family members; and support family governance and wealth transfer and create continuity, cohesion, and purpose for families around their wealth.

Those who may be familiar with the concept of the family office may not know how to identify whether it is right for their families or client families.

This book demystifies the concept of the family office, clarifies who should consider joining a multi-family office or starting their own single family office; explain what services may be rendered by the office and what the expense to the family may be. This guide will educate affluent families, individuals, philanthropists, practitioners, and industry professionals about the important functions that the family office may provide today and for generations of family yet to be born.

Contributing Authors

Chapter 1: Introduction to the Family Office

This chapter provides an introduction to the family office, starting with a macro view of global wealth, a discussion of the amount of wealth needed to start a family office, and the purpose and function of the family office. Next, the chapter provides a historical perspective of the roots of the family office and the growing state of the family office industry today, and provides the Rockefeller family office evolution as a case in point. The chapter then provides a discussion of the various core functions of a family office as a keeper, executor, guardian, confidant, and brain trust. Finally, an overview of the types of services offered in a family office and rationale for the family office as an important option in the wealth management industry today are provided.

Chapter 2: Inception of the Family Office: Pathways to a Family Office

This chapter provides insights into the various pathways to creating a family office, including evolution from family business to family office, sudden wealth, sudden liquidity event, and need for focus on investment. Issues explored are motivations for separating the management of wealth from the family’s operating business, the link between the process of creating a family office and the family’s vision for its wealth, the qualities and characteristics of a family that enhance their chances of creating a unified family office, and the impact of the family business on the family office. This chapter also addresses the attraction to, and the challenges presented by, the family office embedded within the family business structure. A discussion of the evolution of the separation of the family office from the family business is provided, along with an in depth case study of the Kessler family’s experience in creating family office structures. The chapter closes with a synthesis of different goals and potential outcomes that a family office might experience. 

Chapter 3: Family Wealth Needs: Determining your Family Office Solution & Services

There are a number of choices available to families regarding the family office concept. This chapter helps individuals explore their family wealth needs and provides insights into the various options available. It describes current trends in the family office industry, as well as six different family office archetypes including the multigenerational family office, the investment family office, the founder’s family office, the administrative and compliance family office, the family business centered family office, and the legacy and philanthropic family office. It then conducts a Strengths Weaknesses Opportunities and Threats (SWOT) Analysis for the Single Family Office as well as the Multi-family Office. The chapter then offers a comprehensive list of recommended questions for an individual to ask providers during the engagement phase. It closes with an overview of the Response for a Proposal (RFP) process. 

Chapter 4: Family Values, Mission, and Vision and the Family Office

This chapter focuses on the importance of understanding a family’s values in order to create a mission and vision for the family and a strategic plan for the family office. The concept and process of values exploration are introduced. This is followed by a discussion of how a family may create its values statement and mission statement, illustrated by sample values and mission statements. The chapter then moves into a discussion of the importance of a vision for families, elements of a successful vision, and the process for building a family office vision, and offers a case study from the Pitcairn Family. Finally, this chapter ties together the critical elements of values, mission, and vision in the description of a five-step process for creating a family vision. The family office develops a strategic plan that aligns with the family’s vision. 

Chapter 5: Establishing and Structuring of Family Offices

This chapter provides an overview of legal, tax, and corporate governance considerations typically confronted when establishing and structuring a family office. Ultimately, legal structure and tax efficiency must be integrated into the existing family governance, communication, and decision-making of a family enterprise because, if well structured, the use of a family office will become a way of life for the family. Family members must understand and respect the infrastructure and architecture of their overall family office structure, including the roles and responsibilities of each respective component (whether as a family member, a shareholder, and/or a manager). The chapter explores the integration of legal, tax, and governance considerations through a series of questions that address the choice of legal entity, the costs and capital of establishing and operating the family office, and the ownership, management, taxation, and risk management associated with the formation, structuring, and integration of a family office into a family enterprise. 

Chapter 6 - Advising Families: Developing a Family Office Baseline

This chapter provides a starting point for their newly-formed family office to begin working with the family. For the single-family office, it will provide an assessment overview of steps to be conducted in order to understand their current financial planning, estate planning, investment management, tax needs and more. For those who are leaning toward a multi-family office, this chapter outlines the types of information that may initially be gathered when joining a new MFO. It will provide a checklist of documentation that you should be ready and able to furnish to your MFO service team. This chapter will formulate how to create the foundational reviews that will identify the gaps and opportunities for further advisement. In addition to creating a base of knowledge about what already exists, this chapter will lead readers through the necessary steps to expand their thinking about the ultimate purpose of the wealth and to then identify specific objectives and long-term goals for their wealth, their family and their family office.

Chapter 7: Legal and Compliance Standards and Practices for Family Offices

This chapter reviews compliance requirements that impact single-family offices, ranging from recent regulatory changes to ongoing compliance obligations. A key development discussed in this chapter is the recently enacted family office exemption that allows single-family offices that provide investment advice to avoid registering with the U.S. Securities and exchange Commission. This chapter also discusses disclosure requirements relating to “beneficial ownership” of and high volume trading in publicly-traded equity securities. In order to help clarify the practical effect of these disclosure requirements and the single-family office registration exemption, the chapter demonstrates how these rules apply to a sample family office structure. The overview of disclosure requirements is followed by a discussion of insider trading, highlighting recent cases that serve as cautionary examples of how family members may find themselves unwittingly caught in insider trading investigations. This chapter closes with discussions of the need for, and the components of, a family office compliance policy and document retention policy, as well as insights into the special issues that family offices consider in the current regulatory environment. 

Chapter 8: Investment Management and the Family Office

Investment management is the focus of this chapter. It provides guidance on the investment approach, philosophy, and strategy that are prudent for the interests of the family and how this is unique to its institutional counterparts. It explores some of the theoretical underpinnings of investing, how family offices are approaching investments, a simple yet important foundational principle of how a family office weighs the importance and desire for lifestyle versus legacy goals of the wealth. Next the chapter discusses the importance of deriving an investment philosophy and how one’s investment philosophy provides the guiding principles to create one’s investment objectives and investment policy statement. Later on, there is a discussion of the investment process that provides components of common elements in one’s investment policy statement. The final section discusses the option to outsource the CIO function and provides a case that illuminates and integrates the thinking of this chapter. 

Chapter 9: Operations and Information Technology in the Family Office

Operations and information technology have always been a prominent and vital component of family offices, but they are of particular importance for the modern family office. This chapter reveals the technological advancements being made within the family office space as it relates to privacy, security, document sharing, reporting, knowledge management, and due diligence. It provides insights from leading information technology, security, operations, and risk experts, as well as checklist of operational requirements for the twenty-first century family that will help readers assess their level of complexity, thereby helping to outline an appropriate family office infrastructure. This chapter identifies ways to craft an efficient, resilient, and adaptive operating and administrative system, which complements the needs and goals of the family. 

Chapter 10: Talent Management in the Family Office

This chapter focuses on talent management in the family office, which has been under-discussed in the family office literature, despite its importance. The chapter provides an introduction to staffing talent in the family office and why there is typically a unique profile for individuals who are attracted to working in the family office. It then overviews the typical organizational structure and the common roles in the family office, including President/CEO, Chief Investment Officer, Chief Financial Officer, Accountant and Wealth Advisor. It overviews the process to find the best of breed talent for the family office and the importance of chemistry fit, background checks, and providing high touch service. A discussion of best practices for managing talent, comparable compensation, and incentive packages is provided. The final portion of the chapter shares some best practices to managing talent in the family office including having role clarity, job descriptions, and robust performance management. Family members are often engaged in a leadership role, thus a discussion of having family at the helm of the family office is offered, as is a talent management case study. 

Chapter 11: Governance Issues for the Family Office

This chapter explores family governance and its impact on the family office. It discusses the process of joint decision making and the governance procedures that benefit a single family office. The governance in a family office can play a very important role in keeping the family cohesive, an important goal for the long-term continuation of the family (and also for the family office). The chapter emphasizes the importance of making governance explicit, given that family governance is currently most often implicit in families. The governance of family office will evolve over time; regular family meetings, establishing acode of conduct for the family, and understanding the purpose and function of a family constitution, a family council, or a family board are recommended. This chapter thus walks the reader through the steps to build a foundation of governance and implement it, and then addresses the importance of succession planning in the family office, and the steps involved. 

Chapter 12: Preparing Succeeding Generations: Family Education in the Family Office

A great emphasis is placed on preparing succeeding generations for the responsibilities that come with wealth. This includes mentorship, education, and awareness-building for family members at various ages. Preparing to be a steward and responsible owner of wealth is a life-long journey. This chapter covers some of the opportunities and challenges that inherited wealth brings and provides several case studies to illustrate real life personal experiences of inheritors. The chapter discusses the importance of setting clear expectations for what wealth affords and the responsibilities that come with it. Communication of wealth transfer intentions is a focal point of the chapter and a discussion of the timing, approach, and tactics for communicating inheritance is also provided. The chapter also addresses the opportunities and challenges of inspiring entrepreneurial spirit in succeeding generations and the importance of mentors and role models to aid in cultivating grounded, prepared beneficiaries. Finally, the chapter concludes with the importance of building a base of financial literacy and competence as well as the role that a family office may have in preparing the next generation. 

Chapter 13: Family Entrepreneurship and the Family Bank

This chapter addresses the characteristics and traits of an entrepreneur, why entrepreneurship is a key ingredient for the long-term success and viability of affluent families, and how next-generation family members might make the shift from thinking of themselves as recipients of wealth to being wealth creators. The chapter covers discussion on the family bank’s purpose and scope, how a family bank enables family members build their own entrepreneurial ventures, options in the creation of a family bank, and how this can be an instrumental to instill entrepreneurship across generations. Governance in a family bank and general principles that can inform its structure, tax and legal implications, as well as how family banks vary and evolve over time are also covered. The benefits and potential disadvantages, pitfalls and limitations of the family bank are covered and illustrated through cases. The role of the family office is discussed. 

Chapter 14: Legacy and Philanthropy in the Family Office

The family office phenomenon was once primarily a Western concept; however, there is an ever-increasing international interest in the family office. Adapted versions of the family office are surfacing in all parts of the globe. Insights and stories from family offices in Asia, Europe, and South America will be featured in this chapter along with the challenges of being a “cross-border” family with multi-jurisdictional planning considerations. It will also touch on the privacy and security issues that exist in certain countries and the different cultural considerations of the family office.  This chapter will engage family offices from abroad and will discuss more of the legal, tax and multi-jurisdictional considerations for international family offices.

Chapter 15: Globalization of the Family Office: International Families and Family Offices

This chapter puts the family office in a global context. It starts with an overview of the state of the world’s wealth and a geographical overview of the ultra-high net worth landscape. Next the chapter provides insights into some of the geographical and cultural differences across the U.S., Asia, Europe, Oceania, Latin America, the Middle East, and Africa. Family examples and cases from different parts of the world are offered to illustrate the different needs, issues, concerns of the family office, which is largely dependent on cultural, political, economic, and social norms. The chapter closes with trends and opportunities for the global family office. 

Once again Dr. Rosplock gets it right! In my experience, few have the insiders knowledge that comes shining through in this book. Not only was it helpful, it was a pleasure to read.

Wendy L Craft
COO,
Favara, LLC (SFO)
New York, NYC

The Complete Family Office Handbook captures the essence of today’s family office and paves the way to best practice for every family and advisor entrusted with sustaining generational wealth. Kirby has written what is sure to be an industry classic.

SARA HAMILTON
Founder and CEO,
Family Office Exchange

The world’s best and brightest family offices are devoting ever more capital to direct investing. Now is the critical time for advisors, CIOs, and family members to share a common understanding on how to source, screen, diligence, structure, monitor, and harvest direct investments. Dr. Rosplock’s handbook provides the roadmap.

Brian Smiga
Partner & Co-founder,
Alpha Venture Partners

There are many good books and articles about private investing in general but few that tackle the topic from the unique lens of the family office. Family offices have advantages and constraints relative to other institutional investors. They need to be understood. Kirby Rosplock’s book should be read by both family members and professional managers to better understand how to craft and advance a direct investment program.

Sam Altman
President,
Joddes Limited
Montreal, Canada

The family office space has long needed a comprehensive introduction to direct investing for non-specialists—which it now has thanks to Rosplock and her co-authors. A great place to start.

Grant Kettering
5th Generation Member of Kettering Family,

Kirby Rosplock expertly captures the complexities of the practical and emotional choices that affluent families and their advisors face.

SUSAN REMMER RYZEWIC
President and CEO,
EHR Investments, Inc.

The Complete Family Office Handbook is an important resource on the opaque world of the single family office. Comprehensive and easy to read, the book incorporates the views of many thought leaders on diverse topics from the importance of a family office vision to the current legal and compliance standards for the single family office. Those who are new to family offices and those of us who have worked in the field for decades will use it as a valuable reference for issues and ideas.

KATHRYN M. McCARTHY
Director,
The Rockefeller Trust Company, N.A. and an independent advisor to families and family offices

The Complete Directing Investing Handbook is a wonderful and really the education needed in the family office world. I think we seek out direct investing to diversify risk while enhancing overall returns. However, with direct investing comes the challenges with sourcing the deals, screening the deals and doing proper due diligence, structuring the deals and then monitoring these investments. Your book touched upon all these areas will great educational direction for families to easily understand and use in their offices. The book also touched upon other areas such as millennial perspective and international regard which I felt was extremely helpful. I found the book very comprehensive, informative and a very useful source for our family office.

JULIO GONZALEZ
CEO,
Julio Gonzalez – Single Family Office

In The Complete Direct Investing Handbook Dr. Rosplock and her contributing authors impart a wealth of global family office and investment expertise designed to educate affluent families and their professional advisors regarding the nuances of direct investing. This well researched new resource will prove to be an invaluable tool in navigating the rapidly growing field of direct investments.

Thomas J. Handler, Esq.
Chairman, Advanced Planning & Family Office Practice,
Handler Thayer, LLP

Dr. Kirby Rosplock has created an indispensable resource for family offices seeking to invest in private equity. She explains how to analyze winners and avoid the pitfalls, and discusses the extensive due diligence required even after initial investment. This is the conclusive guide to direct investing, which provides investors with the information necessary to ascertain how to proceed. Rosplock has written the essential manual for what will be a major investment trend for family offices in the years to come. 

Howard Cooper
Private Investor,

Kirby Rosplock's "The Complete Direct Investing Handbook" is a must read for anyone interested in direct investing. With key insights reinforced by practical case studies from noted experts in the field, this is an essential guide for current and potential direct investors.

Joanne Pace
Former Managing Director and Chief Operating Officer,
Morgan Stanley Investment Management

Kirby blends leading industry research, real world case examples and best practices to architect the first book to comprehensively outline the infrastructure, costs and considerations for building and sustaining a world class family office. My hat is off to her.

JOHN BENEVIDES
President,
CTC Consulting | Harris myCFO

Most wealth books are written for managers and contain lots of details but no sense of the daily life and concerns of the people who are to be served. This Handbook is one of a kind—written for real concerned and want-to-know people. The book starts not with concepts but with concerns and offers clear ideas about what to do, laced with details about real families managing the dilemmas of great wealth and an expanding family. There are few such families, but this handbook is for every family member of such families.

DENNIS T. JAFFE, PhD
Professor of Organizational Systems and Psychology,
Saybrook University

Kirby Rosplock dedicated a year of her life to writing this book and it shows. This is the must-have book for anyone dealing with high levels of wealth—it will support wealth holders as well as wealth advisors and service providers in creating the most efficient structure possible for handling and preserving a high net worth person or family’s financial and human assets. Rosplock and her collaborators clearly demonstrate their command of the subject and why they are globally known to be at the top of this industry.

STEFFI CLAIDEN
Founder/CEO,
Family Office Review/Family Office Capital Network

Kirby Rosplock has written an extraordinarily comprehensive 'owner's manual' for family offices already, or seriously contemplating, investing directly in illiquid private markets. The book cogently sets forth not only the 'why' behind these families' desire to get closer to the source of private market returns, but importantly the 'how' to go about identifying, diligencing and structuring direct investments. Given the fast growing proportion of family office capital in direct private deals, this book's insights are exceptionally timely.

Tom Mahoney
Senior Managing Director,
Tangent Capital Partners