Has the time come to separate the family finances from the family business by creating a family office? Do you already have a family wealth structure that is due for review? There are many scenarios which could lead to the formation of a family office, but it will generally be relevant when a family has significant investable assets and a wider group of multi-generational beneficiaries.
As your wealth continues to grow, there will be more complexity and your needs will change. Operational management associated with running a family office, for example, multiple staff, global assets, investment portfolios, and many generations, perhaps located in different countries, will bring different challenges.
Family offices can develop organically within a family business with one person becoming responsible for managing an individual’s or the family’s increasingly complex affairs. They can help to consolidate the administration and management of personal, charitable, business and tax affairs.
Eventually, it will need dedicated individuals and a separate entity. In establishing a separate private organisation to oversee the financial and personal affairs of the family you will need to consider a variety of issues, for example:
- consolidating your existing support and services to capitalise on economies of scale;
- bringing elements of the family’s needs in-house (eg investment, concierge services);
- examining potential financial, reputational and operational risks for the family;
- creating a single vision of the family’s legacy;
- agreeing a family constitution or governance document.
Employing household staff or staffing your family office means having to comply with employment regulations including legal issues (eg contracts), tax issues (eg compliance, reporting) and administrative issues (eg disciplinaries, grievances, managing sickness absence, addressing performance standards).
It will also be necessary to have the right employment contracts in place with staff, comply with employment laws including regulation about pension auto-enrolment, national minimum wage and holiday rights, and ensure payroll is administered and tax paid.
All of these requirements draw valuable time away from the family and business and can lead to further challenges, such as:
- complying with employment law;
- avoiding employment tribunal claims;
- keeping on top of administration;
- ensuring staff issues are managed and addressed so as not to impact the household;
- making sure employees are paid correctly and on time.
By undertaking an holistic review of your and your family’s current position and devising a range of appropriate options, we can work with you to implement the preferred structure bringing your vision to life; or review, and potentially enhance, existing structures you have in place.
If you have an existing, mature family office, you should consider undertaking a health check of the family office structure from time to time to ensure it is fit for purpose and review whether it is appropriate to outsource any, or all, of your requirements.
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