CUT THROUGH THE CLUTTER: UNDERSTANDING THE FAMILY OFFICE LANDSCAPE - Presentation delivered by Speaker Michael Zeuner, Managing Partner, WE FAMILY OFFICES at the IFG Wealth Management Forum Fall 2014.

1. || Understanding the
Family Office Landscape
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2. The Family Office Landscape:
Cluttered & Confused
|| ”Family Office” has become a popular term
|| Family Office label being put on firms of many different stripes for marketing purposes
|| Many different kinds of family offices
|| The RESULT: It can be confusing and difficult for families to cut through the clutter and understand
the landscape
“Single Family
ffi ”
“Virtual Family Office”
Office” “Smith Family
Office” “ il
“Multi-Family
Office”
Family Investment
Office”
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3. EXHIBIT A: BLOOMBERG RANKINGS
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4. HOW DOES A FIRM MAKE THE
BLOOMBERG LIST?
|| ”Family offices…were included if…[they] offer direct and comprehensive investment and non-investment
services to high net worth families”
|| ”Non-investment services may include family meetings, financial education, art consulting, estate
planning, family governance, foundation management, business consulting, property management, travel
arrangements and shopping assistance.”
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5. LET’S TAKE A STEP BACK AND LOOK AT
THE FAMILY OFFICE IN A HISTORICAL
CONTEXT
|| The concept of ‘offices’ or ‘gate-keepers’ or ‘protectors of
family wealth’ goes back to the Crusades and then on to the great banking families of
Europe, including the Medicis through to the Rothschilds, and on to the American industrial families
such as the Rockefellers, Phipps and the Pitcairns
|| In China in the 17th Century, there were individuals…dedicated to serving, protecting and preserving
families and their members across several generations
Source: PRIVATE Magazine, Jahrbuch 2008, Dr. Steen Ehlern
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6. WHAT ALL OF THESE HISTORICAL FAMILY
OFFICES HAVE IN COMMON IS THE ROLE THEY
PLAYED FOR THE FAMILIES THEY SERVED
|| Tailored approach catering to the financial
and non-financial neds of the family
|| Reduction of costs
|| D il’ d t f th f il
|| Reduction and management of complexity
|| Access to a wide range of experts, services
Devil’s advocate for the family
|| Training, education and succession planning
and opportunities
|| Consolidated view and reporting of overall
global || Family cohesion
|| Family values, stewardship and philanthropy
wealth
|| Professionally run service organization
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Source: PRIVATE Magazine, Jahrbuch 2008, Dr. Steen Ehlern
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7. TODAY’S FAMILY OFFICE CAN PERFORM A
WIDE ARRAY OF ACTIVITIES FOR A
FAMILY
"Chart of family office services" by Anja Bauer ‐ http://www.switzerland‐family‐office.
com/services.html. Licensed under Creative Commons Attribution‐Share Alike
3 0 via Wikimedia Commons ‐
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3.0 http://commons.wikimedia.org/wiki/File:Chart_of_family_office_services.jpg#media
viewer/File:Chart_of_family_office_services.jpg

8. BECAUSE EACH FAMILY IS UNIQUE, EACH
FAMILY OFFICE WILL LIKELY PROVIDE A
UNIQUE SET OF SERVICES
|| Investment oriented
|| Focused on administration and reporting
|| Finance and book-keeping focused
|| Focused on tax and estate planning
|| Focused on developing Human Capital
|| Comprehensive
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9. AND IN TODAY’S ENVIRONMENT THERE IS
ALSO A WIDE ARRAY OF FAMILY OFFICE
OPTIONS
Single Family
Office
Shared Family
Office
Cooperative
Family Office
Multi‐Family
Office
Virtual Family
Office
• Traditional
single family
offices
owned and
• Single family
offices
opening up
to other
• Amulti‐family
office,
owned
collectively
• Independent
organizations
established
to provide a
• A collection
of
outsourced
service
managed by,
and
dedicated to
serving the
families to
share
expenses
and increase
by families
that use it’s
services
family office
experience &
benefits to
families that
providers
across
multiple
disciplines
interests of, a
single family
• e.g.
leverage • e.g. Market
Street Trust
don’t want
to establish
their own
(Investing,
planning,
bookkeeping,
etc.)
Okabena,
Pritzker,
Waycrosse
• e.g. Geller,
Pathstone,
Vogel, WE
• e.g. Carol
Pepper
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10. CRITICAL POINT: NO MATTER WHAT SERVICES
THE FAMILY OFFICE PROVIDES, OR IN WHAT
FORM IT IS ORGANIZED, THE FAMILY OFFICE
ROLE WILL ALWAYS BE DISTINCT
|| Professionals hired and compensated by a family to exclusively
serve the family and its agenda, often across generations
|| Complete alignment of interests
|| Help the family stay in control of their wealth
|| Provide oversight and quality control
|| Primary activities: advising, buying and integrating
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11. VIEWED THROUGH THIS LENS, A
FINANCIAL INSTITUTION SHOULD NOT BE
CONSIDERED A FAMILY OFFICE
|| A financial institution’s role and business model is to manufacture and/or provide financial service
products to their clients
|| This role is essential to a family – all families need financial institutions for wealth management products
and services, including:
• Investment management
• Custody
• Brokerage
• Trust
• Banking
• Lending
|| But it’s important that families understand the differences between the provider role and the buying and
integrating role
• Potential for multiple agendas
• Potential for misalignment of interests
• Purview limited to capabilities of the provider institutions
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12. WHEN IS A FAMILY ‘READY’ FOR A
FAMILY OFFICE?
|| When the extent of the overall family wealth
exceeds a certain size, and the number of
family members, activities, businesses,
etc…reaches a certain level of complexity, there
is a need for a central coordinating resource,
over all wealth management activities
Source: PRIVATE Magazine, Jahrbuch 2008, Dr. Steen Ehlern
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13. HOW CAN A FAMILY UNDERSTAND WHAT
FAMILY OFFICE OPTION IS RIGHT FOR
THEM?
1. There is no single “right answer” for every family, and it is not just about the ‘size of wealth’
2. Conduct a thoughtful assessment about what’s important to them in the degree of involvement
and control they want to have in managing the wealth
3 3. Use the results of the assessment to evaluate the fit of each potential ‘family office’ provider – be
an INFORMED buyer
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14. THE MOST IMPORTANT QUESTION:
SHOULD WE THINK OF OUR WEALTH AS
AN ENTERPRISE?
|| Is it large enough?
|| Level of complexity?
|| Would an explicit strategy and mission help provide direction for our wealth management?
|| Is a formal governance structure relevant?
|| Do we need ongoing processes to oversee and manage it effectively?
|| Are sustainability and succession relevant concepts?
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15. IF SO, THEN A FAMILY OFFICE IS
PROBABLY A GOOD CHOICE
|| A FAMILY OFFICE SOLUTION:
|| Has dedicated resources to serve the family wealth enterprise
|| Can be a partner in helping the family oversee and manage their enterprise at both
strategic/planning and day-to-day execution levels
|| Is a professional organization that helps the family source and buy the right financial
products and services, at the right price, in the right way – according to the family’s
objectives
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16. IF AN ENTERPRISE APPROACH IS
WARRANTED, THEN A NEXT SET OF
QUESTIONS MUST BE ANSWERED
|| Are we willing to pay a fee for Family Office services in addition to the fees we pay our other wealth
management providers?
|| Who are we as a family, and what are we trying to accomplish and what role do we want to play in
the management and oversight of our wealth?
|| What family office option(s) is/are right for us?
|| Are we willing to open up and share all of the information related to our wealth enterprise?
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17. COST OF A FAMILY OFFICE
|| Both single and multi-family office fees are in addition to fees for financial services including
investment management, custody, brokerage, trustee, and banking fees
|| Dedicated, comprehensive, SINGLE FAMILY OFFICE: Minimum of $1-3million (or more!) per
year
|| Multi-Family Office: fees typically a % of assets under management (AUM) or an annual
retainer
|| % or AUA typically 0.20% - 0.75%
|| Annual retainer typically between $150,000 - $1,000,000
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18. IF THE FAMILY DOESN’T WANT TO
ESTABLISH A SFO, IT HAS OTHER
OPTIONS
|| Many firms offer Multi-Family Office (“MFO”) solutions to families – estimates are 300+ firms in the
US
|| Every firm is unique in terms of:
• Breadth of service
• Type of investment advice provided
• Depth of talent
• History and motivations of principals
• Ownership, affiliations and compensation model – and management of any resulting
actual or potential conflicts of interest with clients
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19. WHAT SHOULD A FAMILY LOOK FOR IN A
MULTI-FAMILY OFFICE?
|| Clarity on how the MFO is compensated
• Do they receive fees/commissions from multiple sources (clients and financial product
providers)?
• Are they affiliated with financial services companies?
|| Form of Business Association
• Will the management of the firm be empowered to make decisions that are best for the
family office business?
• Who regulates the MFO?
• Are they subject to the FIDUCIARY STANDARD?
|| What type of families does the firm serve?
|| MFOs that focus on a wide spectrum of the wealth market
|| MFOs that serve both wealth families and institutions
|| The experience of the professionals working in the MFO
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20. TO SUM IT ALL UP...
|| It’s important to understand the role of the family office and
how that differs fundamentally from the role of a financial
services provider
|| There are a series of important questions and assessments a
family can make to determine if:
a. a family office is right for them, and
b. if so, which family office is right for them?
|| There are many options in the multi-family office space –
understanding the business model and structure of each being
considered is critical.
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21. FOR MORE INFORMATION ON “CUTTING
THROUGH THE CLUTTER”
|| Series of white papers aimed at helping families understand the wealth management landscape
and determine the right solution for them
|| Topics covered include:
• Diff Differences b t between wealth lth t
management
providers
• Options and implications of different
choices for families
• How to understand the difference, what
questions to ask
• How to read a registered investment
adviser’s disclosure form ADV
|| wefamilyoffices.com/think-publications/
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