How to determine if a family office is right for your needs

Family offices combine the expertise of financial, accounting and legal professionals all under one roof. However, the term “family office” is sometimes a confusing phrase that needs further clarity and understanding.

The family office is unique in and of itself. As the old saying goes, “If you’ve seen one family office, you’ve seen but one family office.”

“Each family office has myriad services it can offer a family, and there are two different types of family offices: single-family offices and multi-family offices,” says Floyd A. Trouten III, CPA, a Director at Barnes Wendling CPAs.

“Both types cover separate family office functions for a mixture of family groups. Multiple generations of family members can be part of the family office. The function of a family office is defined by the family and individual member needs.”

Furthermore, a critical role of the family office is providing financial education to younger generations.

“These educational services can include offering mentorship for family members as they begin to enter the business world and assistance in the development of next generation leadership within the family,” Trouten says. “Generally, family offices will also provide office services as necessary for any philanthropic planning or governance.”

Higher-level family office services can include concierge travel arrangements, calendar control and maintenance, bill pay, budget preparation, analysis and other direct financial functions.

Smart Business spoke with Trouten about the evolution of family offices and how to determine if they are a fit for your particular needs.

How have family offices evolved?
In recent times, family offices have reinvested heavily in closely held operating businesses. The pendulum has swung away from pure financial assets to ownership in operating entities. In fact, some family offices will co-invest, or outright compete, with private equity groups for highly valued targets. Family offices, unlike private equity funds, usually do not have a limited hold period for the investment, thus providing the luxury of taking a longer term view.

All in all, family offices serve as a way to protect family financial assets, minimize risk, educate family members and develop next generation leadership. From a purely financial perspective, family offices are able to control costs, manage taxes and cash flow, provide objective measurements of financial returns and assist in choosing what assets to invest in.

How can an accounting firm help family offices?
An accounting firm can provide valuable services to family offices, such as tax planning, compliance services, cash flow management, asset protection planning and investment management.

An accounting firm can also screen outside service providers, determine the risk profile for various buckets of investment dollars and review private investments as part of the overall asset diversification plan. An important service family offices should offer is specialized estate and trust planning that accounts for beneficiary needs while providing the most advantageous tax positions.

Difficult discussions may need to occur in order to make sure the family office has a clear purpose so the entire family is focused on what is best for the group. The financial needs of one family member should not outweigh the others. Prudent and thoughtful advisers are needed to help reach the optimum group goal.

How does someone determine if their needs require the services of a family office?
The more complicated your situation, the more you may need a family office. For example, if you’re selling your business and need to make important decisions regarding financial or legal management, an accounting firm specializing in family office services could manage these issues for you.

The assets of the family are much more efficiently and effectively managed when using one overseeing organization. The greatest value of an accounting firm is its ability to coordinate all of the various professional services needed to manage the financial affairs of a family.

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