How a family office benefits your practice
How a family office benefits your practice Vertical

How a family office benefits your practice

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In the late 19th Century, the first family offices served wealthy families with a net worth equivalent to $100+ million today as a separate entity from the family business. Their CEOs, usually well-versed financial executives supported by teams of bookkeepers and personal assistants, handled matters of accounting, law, investment, and risk management, assembling subject­-matter experts for other concerns. Family offices often assisted with company valuation and succession planning, as well as more mundane tasks such as monthly reports and tax planning. They even functioned as “pseudo-parents,” arranging for personal care of travel arrangements.

Multi-Family office

In contrast, today’s family offices usually take the form of the multi-family office: for-profit, professional service firms that serve more than one family. But their primary responsibility is the same: centralized management of the family’s financial affairs. They compile monthly reports on financial assets, properties, and asset holdings, overseeing family estate plans, entity structures, and philanthropic activities. These firms often share a strong personal relationship with the family—especially its founding or senior members—and may serve in other capacities as well, including personal and business concierges.

Firms who wish to offer multi-family office services should consider the following:

  • Firms whose clients’ net worth exceeds $25-50 million can benefit the most from this model, simply because it greatly elevates client experience.
  • Most multi-family offices charge a flat fee for a list of services rather than hourly compensation. Flat fees are also added for assets under management or for the selection of an asset manager.
  • It is crucial for practices to provide proper documentation for their services, compensation methods, and licenses. This is due to the broad, relational nature of multi-family office services. For example, while a CPA’s input may be incidental to their accounting role, it is subjective whether they are concretely shaping family goals and objectives, and providing financial advice. Therefore, firms should seek professional counsel on whether investment advisor registration is necessary.
  • If investment advisor registration is found to be necessary, then the same rules of compensation, marketing, and audit also apply. A compliance professional or consultant will be necessary.
  • A firm seeking to provide asset management alongside multi-family office services should consider the size and makeup of their current staff. For example, larger firms with more sophisticated investment capabilities will naturally find this easier. On the other hand, for smaller firms, outsourcing such responsibilities to subject-matter professionals is a sensible choice, because it shortens the sharp learning curve of establishing a multi­family office. It also helps avoid potential mistakes, allowing you to lean on existing seasoned staff. Avoid affiliating with a firm that already serves your projected client base, especially if fee-sharing is involved.

Implementing a family office in your practice

Chances are your current practice serves a broad spectrum from retirees to high-net-worth individuals and businesses. It’s important to not only prepare annual tax returns and other compliance work, but to seek out opportunities to better serve your existing client base.

As your practice grows, so will your clients’ businesses. In time, some clients will grow to the point where they will be needing this concierge type of service to better help them create a legacy that extends beyond their lifetime. A family office would allow you to help your clients set up a legacy that extends beyond their lifetime.

Intuit Accountants Team

The Intuit® Accountants team provides ProConnect™ Tax, Lacerte® Tax, ProSeries® Tax, and add-on software and services to enable workflow for its customers. Visit us at https://proconnect.intuit.com, or follow us on Twitter @IntuitAccts. More from Intuit Accountants Team

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