amily office services
E Y F a m ily
fice ide
P athway to successf ul f amily and
wealth management
I n collaboration w ith
Contents
o t s
oe od
nt od ction
at is a family office
ection
1
y set p a family office
2
amily office services
3
e costs of r nning a family office
4
amily office governance
5
6
7
8
1
2
onstr cting a
siness plan, staffing and strategic planning
Risk management
3 2
T he investment process
3 5
I T , trading tools and platforms
4 1
endi
T he legal setup ( excluding the U S)
4 4
U S regulatory and tax considerations
6 0
ont i
to s
Re e ences
ontact s
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1
Ab out us
o a
ente o
a i
siness
ce ence
EY is a mark et leader in advising, guiding and recognizing
family businesses. W ith over a century of experience
supporting the w orld’ s most entrepreneurial and
innovative family firms, we nderstand t e ni e
challenges they face — and how to address them.
T hrough our EY Global F amily Business Center of
Excellence, w e offer a personalized range of services
aimed at t e specific needs of eac individ al
family business — helping them to grow and succeed
for generations.
e enter, t e first of its ind, is also a powerf l reso rce
that provides access to our k now ledge, insights and
experience through an unparalleled global netw ork of
partners dedicated to help family businesses succeed
w herever they are.
F or further information, please visit ey. com/ familybusiness.
a i
fice e ices
O r services for families and family offices are a re ection
of our broad range of expertise and a symbol of our
commitment tow ard family businesses around the w orld.
O ur comprehensive and integrated approach helps
families to structure their w ealth and preserve it for
future generations. O ur goal is to unlock the development
potential of the family through a multidisciplinary
approach that scrutinizes operational, regulatory, tax,
legal, strategic and family- related aspects.
F or more information about the full range of our family
office services, please visit ey com familyoffice
Ab out our
research partners
edit
isse
redit isse
is one of t e world’s leading financial
services providers and is part of the Credit Suisse group
of companies ( referred to here as “ Credit Suisse” ) . As an
integrated bank , Credit Suisse is able to offer clients its
expertise on the issues of private bank ing, investment
bank ing and asset management from a single source.
Credit Suisse provides specialist advisory services,
comprehensive solutions and innovative products to
companies, institutional clients and high net w orth
private clients w orldw ide, and also to retail clients in
Sw itzerland. Credit Suisse is headq uartered in Z urich
and operates in over 5 0 countries w orldw ide. T he group
employs approximately 4 6 , 3 0 0 people. T he registered
shares ( CSGN ) of Credit Suisse’ s parent company, Credit
Suisse Group AG, are listed in Sw itzerland and, in the
form of American D epositary Shares ( CS) , in N ew York .
F urther information about Credit Suisse can be found at
w w w . credit- suisse. com.
e ente o a i
siness
ni e sit o t a en
T he Center for F amily Business of the U niversity of
St. Gallen ( CF B- H SG) focuses on research, teaching, and
e ec tive ed cation in t e conte t of family firms and at
international level.
T he CF B- H SG’ s w ork involves initiating, managing,
promoting and running training and transfer programs,
research projects and courses.
t t e t allen amily Office or m, representatives of
erman spea ing single family offices meet twice a year
in a discrete and trustful setting. T he aim is an intensive
exchange of experiences, best practice, and ideas.
2
w w w . cfb. unisg. ch
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
F oreword
D ear Reader,
I t gives us great pleasure to bring to you our 2 0 1 6 revised edition of the EY Family
Office Guide.
I n the last decade or so, w e have seen a distinct acceleration in the establishment of
family offices aro nd t e world and even more so in t e emerging mar ets owever,
irrespective of geography, there’ s a certain consistency to the motivations behind setting
p a family office Mitigating family con icts, preserving family wealt and ens ring its
inter generational transfer, consolidating assets, dealing wit a s dden li idity in
, and
increasing wealt management efficiency are some of t em
not er reason for t e emergence of family offices is families’ desire to ave greater
control over t eir investments and fid ciary affairs w ile red cing comple ity
is need
for a ig er degree of control was partly provo ed y t e financial crisis, in t e aftermat
of w hich w ealthy families w anted to ease their concerns about dealing w ith a w ide range of
external products and service providers.
amily offices are rat er complicated str ct res, neit er easy to nderstand nor simple to
implement. T his publication w ill offer a step- by- step process that aims to demystify w hat’ s
involved in setting p and r nning family offices
is revised edition of t e g ide, w ic was first p lis ed in
, is certainly one of
the most comprehensive and in- depth ever published. I t is designed as a learning tool to
provide g idance to families considering setting p a family office
ey incl de siness
families w ho w ish to separate their family w ealth and assets from the operating business,
and successful entrepreneurs look ing to structure the liq uidity gained from a highly
profita le sale in order to f rt er grow and preserve t eir wealt t is also a sef l g ide on
t e c rrent leading practices for t ose w o already ave a family office
W hile compiling this report, EY w ork ed extensively w ith Credit Suisse, the U niversity of
t allen, and family offices t emselves ll t ese organi ations and individ als ave
provided inval a le insig ts into family offices and t eir concerns, and t e report wo ld
not have been possible w ithout their help.
e ope t at yo will find t is report elpf l and ill minating for yo r decision ma ing as
you plan the path for your family into the future.
ete
n isc
Global L eader, EY F amily
Business Center of
Excellence
ete
ock
amily Office ervices
L eader, EM EI A and GSA
Ric a d o ce
Ro e t
amily Office ervices
eader, sia Pacific
amily Office
o
to e
amily Office ervices
L eader, Americas
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
3
I ntroduction
4
1 . F or more information see
roc efellerfinancial com
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
at is a a i
o fice
amily offices ave t eir roots in t e si t cent ry, w en a ing’s
stew ard w as responsible for managing royal w ealth. L ater on, the
aristocracy also called on this service from the stew ard, creating
the concept of stew ardship that still exists today. But the modern
concept of t e family office developed in t e t cent ry n
, t e family of financier and art collector P Morgan fo nded
the H ouse of M organ to manage the family assets. I n 1 8 8 2 , the
oc efellers fo nded t eir own family office, w ic is still in
existence and provides services to other families. 1
lt o g eac family office is ni e to some e tent and varies
w ith the individual needs and objectives of the family it is devoted
to ( D aniell and H amilton, 2 0 1 0 ) , it can be characterized as a
family- ow ned organization that manages private w ealth and
other family affairs.
Over t e years, vario s types of family offices ave emerged
e most prominent ones are t e single family office
O and
t e m ltifamily office M O , t t ere are also em edded family
offices
Os lin ed to t e family siness, w ere t ere is a low
level of separation betw een the family and its assets. T he SF O s
and M F O s are distinct legal entities and manage assets that are
completely separated from the family or the family business.
W ith the progressive grow th of the family tree — ow ing to the birth
of children and grandchildren and the addition of in- law s — and
an increase in the complexity of the family’ s asset base, families
usually professionalize their private w ealth management by setting
up SF O s. As subseq uent generations evolve, and branches of
the family become more independent of each other, investment
activities w ithin the original SF O activities become separated. T his
is the cornerstone for the emergence of an M F O . Sometimes these
offices open p t eir services to a few non related families
ince t e individ al services of a family office are tailored to t e
clients, or the family, and are correspondingly costly, the amount of
family w ealth under management is generally at least U S$ 2 0 0 m. I t
is more revealing, how ever, to calculate the minimum w ealth under
management in the light of return expectations and targets, and
t e res lting costs of t e family office
is s ows t at t ere is no
clear lower limit for a family office
e costs of t e family office,
plus the return target, must be achievable w ith the chosen asset
allocation and structure.
amily offices are arg a ly t e fastest growing investment
vehicles in the w orld today, as families w ith substantial w ealth are
increasingly seeing t e virt e of setting one p t is diffic lt to
estimate ow many family offices t ere are in t e world, eca se of
t e vario s definitions of w at constit tes a family office, t t ere
are at least ,
single family offices in e istence glo ally and at
least half of these w ere set up in the last 1 5 years.
T he increasing concentration of w ealth held by very w ealthy
families and rising globalization are fueling their grow th.
Particularly important in the years ahead w ill be the strong grow th
of family offices in emerging mar ets, w ere for t e most part
they have yet to tak e hold — despite the plethora of large family
businesses in these economies. 2
is report attempts to define t e family office in a t oritative
detail. I t look s at issues such as the reasons for setting up a family
office ey staffing concerns w ic services a family office s o ld
cover and w ic s o ld e o tso rced ow to optimi e investment
f nctions and to ens re t ey wor for t e enefit of t e family
e
report also look s at regulatory and tax issues in k ey mark ets, w hich
anyone considering setting p a family office needs to now t also
addresses the relationship betw een the family and the external
professionals w o are ro g t in to r n a family office t is cr cial
for a family office to esta lis a alance etween t ese two gro ps
if it is to function w ell.
amily offices are comple organi ations t at re ire deep
k now ledge — not just of investment variables, but also a host
of other factors. T his guide is a detailed handbook for those
planning to set p a family office and also for t ose loo ing to set
enc mar s of leading practice wit in t eir e isting family office
2 . Credit Suisse Wealth Report 2015
As w ealth grow s, particularly
in the emerging mark ets, there
is no do t t at family offices
w ill play an even bigger role in
the management of substantial
w ealth in the years ahead.
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5
hy set up a amily o fice
Section
1
6
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
As concerns about w ealth preservation and succession planning
w ithin family businesses continue to rise, w ealthy families are
increasingly eval ating t e enefits of setting p a family office
e easons
•
ere are many reasons w y setting p a family office ma es
sense, but at the root of these is the desire to ensure smooth
intergenerational transfer of w ealth and reduce intrafamily disputes.
T his desire inevitably increases from one generation to the next,
as the complexity of managing the family’ s w ealth grow s. W ithout
being exhaustive, the follow ing points set out the reasons w hy a
family office ma es sense
ri acy an confi entiality
F or many families, the most important aspect of handling of
their private w ealth is privacy and the highest possible level of
confidentiality
e family office often is, and s o ld e, t e
only entity that k eeps all the information for all family members,
covering the entire portfolio of assets and general personal
information on a holistic basis.
• Gov ernance and management structure
family office can provide governance and management
structures that can deal w ith the complexities of the family’ s
wealt transparently, elping t e family to avoid f t re con icts
t t e same time, confidentiality is ens red nder t e family
office str ct re, as wealt management and ot er advisory
services for the family members are under a single entity ow ned
by the family.
• Alignment of interest
family office str ct re also ens res t at t ere is a etter
alignment of interest etween financial advisors and t e family
c an alignment is estiona le in a non family office str ct re
w here multiple advisors w ork w ith multiple family members.
• P otential higher returns
T hrough the centralization and professionalization of asset
management activities, family offices may e more li ely to
achieve higher returns, or low er risk , from their investment
decisions amily offices can also elp formali e t e
investment process, and maximize investment returns for all
family members.
ain t
es o a i
edded a i
amily offices allow for separation, or at least a distinction, etween
the family business and the family’ s w ealth or surplus holdings.
• R isk management
amily offices allow for operational consolidation of ris ,
performance management and reporting. T his helps the advisor
and principals to mak e more effective decisions to meet the
family’ s investment objectives.
• C entralization of other serv ices
amily offices can also coordinate ot er professional services,
including philanthropy, tax and estate planning, family
governance, communications and education, to meet the
family’ s mission and goals.
• F ocal point f or the f amily
I n cases w here the main family business has been sold, a family
office can offer a new focal point of identification for t e family
mem ers, for e ample w en t e family office manages t e
philanthropic activities of the family.
a i
fice
An EF O is usually an informal structure that exists w ithin
a business ow ned by an individual, or family. T he family
considers private assets as part of their family business and
therefore allocates private w ealth management to trusted
and loyal employees of the family business. U sually the
c ief finance officer
O of t e family siness and is
department’s employees are entr sted wit t e family office
d ties s not necessarily t e most efficient of str ct res,
more and more entrepreneurial families are separating their
private from their business w ealth and are considering tak ing
t e family office f nctions o tside t e family siness, not
least for reasons of privacy and tax compliance.
• Separation
i t t e e e do
o fice
o fices
ts a o t settin
a
e esta lis ment of a family office is a ig nderta ing, and t ere
ave een cases w en family offices ave not met t e family’s
expectations. Some of the potential doubts and concerns about
setting p a family office are
• C ost
T he cost of regulatory and compliance reporting remains high,
w hich means that the level of assets under management that a
family office needs to nderpin m st e s fficient to offset its
fi ed costs
in e a i
fice
An SF O is a separate legal entity serving one family only.
ere are a n m er of reasons for setting p an O
• T he retirement of the business- ow ning generation
• A greater desire to diversify and w iden the asset structure
eyond t e focal family firm
• A rising exposure to non- investment risk s, such as privacy
concerns and legal risk s
e family owns and controls t e office t at provides
dedicated and tailored services in accordance w ith the needs
of the family members. T ypically, a fully functional SF O w ill
engage in all, or part of, t e investments, fid ciary tr sts
and estate management of a family many will also ave a
concierge function.
ti a i
o fice
m ltifamily office will manage t e financial affairs of
multiple families, w ho are not necessarily connected to each
other. As w ith an SF O , an M F O might also manage the
fid ciary, tr sts and estate siness of m ltiple families as
w ell as their investments. Some w ill also provide concierge
services. M ost M F O s are commercial, as they sell their
services to other families. A very few are private M F O s,
w hereby they are exclusive to a few families, but not open
to other families. O ver time, SF O s often become M F O s.
T his transition is often due to the success of the SF O ,
prompting other families to push for access. Economies
of scale are also often easier to achieve through an M F O
structure, promoting some families to accept other families
into t eir family office str ct re
• Mark et, legal and tax inf rastructures
amily offices f nction etter w en operating from centers w ere
there are sophisticated mark ets and legal and tax structures.
T he absence of these in emerging mark ets has undermined the
development of family offices t ere
is as often meant t at
there has been little connection betw een the huge level of w ealth
in some emerging mar ets and t e n m er of family offices
M uch of the w ealth in emerging mark ets is still controlled by
t e first generation
is as also in i ited t e growt of family
offices, eca se many are la nc ed d ring a wealt transition
from one generation to the next.
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
7
• T he MF O of f ering
T o address the problem of the high operating costs of a family
office, families often set p M Os, in w ic several families pool
their w ealth together. O ften these M F O s w ill be directed by the
lead family t at initiated t e office n M Os, all assets are
managed under one umbrella. But M F O s typically cater for a
range of family size, w ealth and maturity levels. T his means that
families can run the risk of not receiving the personalized advice
t at t ey wo ld ave done in a dedicated family office set p
en considering esta lis ing a family office, some can see
potential positives as negatives. T his tends to be particularly
prevalent in t e following cases
• T he pref erence f or priv acy
Some families may be hesitant about consolidating their w ealth
information t ro g a centrali ed family office str ct re
• T rust of external managers
etting p a family office is typically contingent on t e level of
trust and comfort families have w ith external asset managers.
H ow ever, trust typically stems from long- standing relationships
w ith external managers.
• Expectations on returns
8
ltimately, family offices rely on t eir longevity t ro g
ens ring wealt preservation
is diffic lty of sec ring mar et
returns in recent years has led to some tension in this respect.
rt ermore, d ring generational transitions, family office
structures are tested, often to the point of destruction, as the
next generation presses for different goals and objectives to
manage the family’ s w ealth.
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
amily o fice ser ices
Section
2
t t e eart of any family office is investment management, t
a f lly developed family office can provide a n m er of ot er
services, ranging from training and education to ensuring that
best practice is follow ed in family governance. T his section look s
at t e f ll range of services a mat re family office co ld potentially
provide see fig re
ese incl de
inancia
annin
I nv estment management serv ices
•
ypically, t is will e t e main reason for setting p a family office,
as it is central to ensuring w ealth preservation. T hese services
will incl de
val ation of t e overall financial sit ation
•
• D etermining the investment objectives and philosophy of
the family
etermining ris profiles and investment ori ons
• Asset allocation — determining mix betw een capital mark et and
non- capital mark et investing
• Supporting bank ing relationships
• M anaging liq uidity for the family
• Providing due diligence on investments and external managers
P hilanthropic management
n increasingly important part of t e role of a family office
is managing its philanthropic efforts. T his w ill include the
establishment and management of a foundation, and advice
on donating to charitable causes. T hese services w ould
typically involve
• Philanthropic planning and strategy
• Assistance w ith establishment and administration of charitable
institutions
• Guidance in planning a donation strategy
• Advice on technical and operational management of charities
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
9
• F ormation of grant- mak ing foundations and trusts
• Customized services for estate settlement and administration
• O rganizing charitable activities and related due diligence
• Professional guidance on family governance
L if e management and b udgeting
• Professional guidance regarding w ealth transfer to succeeding
generations
ome of t ese services are typically defined as concierge in
nature, but they are broader in scope, inasmuch as they also
incl de dgeting services ervices nder t is eading will incl de
• Club ( golf, private, etc. ) memberships
• M anagement of holiday properties, private jets and yachts
• Budget services, including w ealth review s, analysis of
short- and medium- term liq uidity req uirements and
long- term objectives
t ate
usiness an financial a
isory
• D ebt syndication
• O rganizing family meetings
• Ensuring family education commitments
• Coordination of generational education w ith outside advisors
R eporting and record k eeping
T he maintenance of records and ensuring there is a strong
reporting c lt re is anot er core part of a family office’s services
ey to t ese services is
• Consolidating and reporting all family assets
• Promoter financing
•
ridge financing
•
tr ct red financing
• Consolidating performance reporting
• Benchmark analysis
• Private eq uity
• Annual performance reporting
• M aintaining an online reporting system
• M ergers and acq uisitions
• M anagement buyouts
• Business development
Estate and wealth transf er
amily offices will e involved in siness s ccession and legacy
planning, enabling the transfer of w ealth to the next generation.
ese services will incl de
• W ealth protection, transfer analysis and planning related to
management of all types of assets and income sources
amily Office
M uch of this revolves around the education of the next generation
on iss es s c as wealt management and financial literacy, as well
as wider economic matters
ese services will incl de
o e nance
eyond t e asset management advisory, family offices will also
provide advisory services on financing and siness promotion
ese will incl de
1 0
T raining and education
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
• T ax preparation and reporting
Administrativ e serv ices
dministrative services, or ac office services, are essential to t e
smoot r nning of a family office
ese services will incl de
• Support on general legal issues
• Payment of invoices and taxes, and arranging tax compliance
• Bill payment and review of expenses for authorization
• O pening bank accounts
• Bank statement reconciliation
•
mployee management and enefits
•
egal referrals and management of legal firms
• P
lic relations referrals and management of p
lic relations firms
• T echnology systems referrals and management of these vendors
d iso
• Compliance and control management
Succession planning
T ax and legal adv isory
Ensuring a smooth succession and planning for future generations
is integral to t e long term via ility of t e family office and t e
family it serves
ese services will incl de
T ax, in particular, has become a much more important issue for
family offices in recent years and as s c as ass med a more
important part of t e f nctions of a family office egal matters
are also important family office will typically employ a general
co nsel and or a c artered or certified acco ntant, or several
accountants and tax experts. T hese professionals usually provide
t e following services
• Continuity planning relating to unanticipated disruptions in
client leadership
• Evaluation of the strengths, w eak nesses, opportunities and
threats ( SW O T analysis) of senior executives both w ithin and
outside the family
• Construct a tax plan that best suits the family
• D esign investment and estate planning strategies that tak e into
account both investment and non- investment income sources and
their tax implications
• Re- evaluation of family board regarding roles of
non- family directors
• Structuring of corporate social responsibility platforms and
programs
• D evelopment of formal k now ledge sharing and
training programs
•
• I mplementation of intergenerational estate transfer plans
doption of a family c arter or constit tion, specifically aiming to
1 . F ormalize the agreed structure and mission of the
family business
efine roles and responsi ilities of family and
non- family members
3 . D evelop policies and procedures in line w ith family values
and goals
4 . D etermine process to resolve critical business- related
family disputes
•
ns re all parts of t e family office are ta compliant
C ompliance and regulatory assistance
amily offices need to ens re strict compliance wit reg lations
pertaining to investments, assets and business operations. T hese
services will incl de
• Providing auditing services for internal issues
• Establishing a corporate governance mechanism
• Ensuring a high level of staff hiring
• Group performance monitoring and compliance
• O ffering recommendations on independent and board advisory
formation
• Strengthening the regulatory investment process
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1 1
• Physical security of the family
•
ata sec rity and confidentiality
• Review of social media policy
and development of reputation
management strategy
1 2
amily Office
y
nc
e
r
S t
a
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
at
ea e
sf lth
er
s
ni sion
ng
T rai
ning
a
edu nd
catio
n
na
e
cc
Su plan
• D evelopment of strategies to ensure
hedging of concentrated investment
positions
F a m ily
O f fic e
S er v ic es
te
g
• Protection of assets, w hich could involve
the use of offshore accounts
F ina
nc
ia l
ry
so
r
v e
G o
• F ormulation of disaster recovery
options and plans
ting
R epor
cord
and re g
n
k eepi
• Evaluation of security options for clients
and property
P
ma hila
na nt
g
L if e nt
me
nage
ma b udgeting
and
• Evaluation of existing policies and
titling of assets
I nv estm
manage ent
m
serv ic ent
es
ng
nni
p la
• Assessment of insurance req uirements,
policy acq uisition and monitoring
e
nc ry
lia lato e
u nc
ta
egal
and l y
x
a
T
isor
adv
A d
v i
• Risk analysis, measurement and
reporting
amily o fice ser ices
ic
op t
hr men
e
T his is a service that has assumed a more
important role in recent years because
of t e financial crisis of
and
the subseq uent fallout. I t w ill be a crucial
service for family offices in t e f t re as
well
ese services will incl de
igure
R isk man
a
and insu gemen
t
ra
serv ic nce
es
an C om
d
p
as reg
sis
R isk management and
insurance serv ices
Ad
min
is
serv trativ e
ices
ess
Busin cial
an
and fin ory
s
i
adv
t
Es w
d
an tran
ete inin se icin
ake o
di e
a
io ities t e
• T he net w orth and complexity of the family w ealth
• T he family’ s geographical spread
ven t e largest family office, in terms of assets nder
management, w ill need to assess w hether or not to outsource
services O tso rcing certain services can e eneficial from a
cost efficiency and now ow perspective, offering advantages to
family offices t at incl de
• T he variety of assets, both liq uid and illiq uid, under
management
• T he existence of a family business and the link betw een this and
private w ealth management
•
e s ills and
•
e importance of confidentiality and privacy
• Reduced costs and overheads, and improved staff productivity
• Economies of scale, particularly for high- value professional
services, thus enabling low er prices for related services
•
e enefits of o ective advice from e perienced professionals
w ho possess specialized sk ills
•
elp wit defending t e family office’s reg latory independence
w hen outsourcing investment management, by allow ing
investment decisions to be made by external providers
•
•
O n the other hand, a number of k ey services are usually k ept
in o se
e advantages of t is are mostly related to confidentiality
and t e independence of t e family office, and incl de
• Assurance of independent and trusted advice
•
o ld t e family office act as t e asset manager for all family
mem ers, or s o ld it st e an advisor for some specific
services to selected family mem ers
•
s t e family office’s core tas t at of a financial advisor, or
more that of an educational facilitator for the next generation
of family mem ers
•
at services s o ld t e family office offer from t e range of
asset management task s, controlling and risk management, tax
and legal advice to concierge services and educating the next
generation
• Consolidated management of family w ealth
evelopment of s ills specifically tailored to t e family’s needs
• Greater and more direct family control over its w ealth
• K eeping investment k now ledge w ithin the family
• Assurance of optimal goal agreement, along w ith the avoidance
of con icts of interest wit e ternal providers
Given these considerations, it is crucial to obtain the right balance
and to identify those services best suited for management in- house.
Many factors involved in t e ma e or y decision are specific to
t e set p c osen for t e family office, in partic lar
• T he size of the family and how many family members w ant to use
t e family office
o s o ld e t e eneficiaries of t e family office and w at
is the overall strategy of the family to secure and expand its
wealt over generations
• I s the family’ s priority traditional asset management of liq uid
funds, w ith or w ithout a portfolio of direct entrepreneurial
investments nd w ere does p ilant ropy fit into t e
mi , if at all
ig er levels of confidentiality and privacy
•
e consideration of w et er t e family office s o ld e a cost
or a profit center
T his variety of factors highlights how vitally important it is for
the family to clearly determine its expectations and address k ey
estions prior to creating t e siness plan for t e family office
ese incl de priority setting and scope definition for t e services
to e offered from t e family office
• D ue diligence and continuous monitoring can be carried out by
t e directors of t e family office to ens re performance and
security against risk
•
alifications of family mem ers
lt o g t e ma e or y decision m st e ased on t e specific
set p of t e family office, some general considerations can elp
to determine the optimal solution. Best practice is based on the
goal of o taining t e most effective services in an efficient way
and avoiding potential operational risk s.
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1 3
T ab le 2 . 1 . Key determinants of the mak e- or- b uy decision
C ost and b udget
scalating costs can pose a serio s c allenge to family offices learly, it is nreasona le to inso rce t e w ole range of potential
services wit o t considering t e economic enefits ppointing an o tside provider can ens re ality, and possi ly cost savings, as t e
family office wo ld enefit from economies of scale
Expertise
e priority services as defined y t e family will most li ely e covered in o se in order to ens re independent e pert advice to t e
family owever, t e family office will gain from o tso rcing certain selected services t at re ire specific e pertise
R egulatory restrictions
family office s o ld consider all reg lations, depending on its distinct legal str ct re
ile Os are significantly less reg lated, as
t ey deal wit iss es wit in t e family, M Os often fall nder specific reg latory regimes n t e a sence of professional management, a
family office r ns t e ris of serio s fallo t from negative p licity egal action co ld also e costly and armf l to rep tations
T echnology and inf rastructure
e tec nology employed y an e ternal provider can serve t e family office effectively
more of a priority as financial operations ecome more comple
C omplexity
f t e family’s assets are s stantial and comple , t e family office will ave to ire more staff or o tso rce services t t e same
time, t e in o se decisions on all matters ave to e final so internal staff ave to maintain t e ltimate overview and
decision- mak ing process.
ata confi entiality
f confidentiality is a prere isite, t en services w ere t is is a priority s o ld e ro g t in o se
infrastructure can be outsourced.
T he traditional model
ypically, financial planning services, asset allocation, ris
management, manager selection, and financial acco nting and
reporting services tend to be provided in- house. Global custody,
alternative investments and private eq uity, and tax and legal
services are often outsourced.
a le
1 4
ying in t ese services as ecome even
on critical systems and
H ow ever, families should be aw are that the greater the level of
o tso rcing, t e less direct in ence t e family will ave over
t e decision ma ing process wit in t e family office, and t e less
exclusive the products and services w ill be. T able 2 . 2 provides
an overview of selected family office services, w ic can e
categorized as in- house or outsourced based on mark et analysis.
amily o fice ser ices in house or outsource
T ype of serv ice
Serv ice category
I n- house
O utsourced
I nv estment management
and asset allocation
F inancial planning
asic financial planning and asset allocation decisions
should be provided in- house
T he more complex, specialized and diverse assets
mak e outsourcing a practical option
T ax and legal adv isory
Advisory
Selectively done in- house
O ften outsourced to a trusted advisor to ensure
state- of- the- art q uality of service
R eporting and record
k eeping
Governance
ecord eeping and doc mentation demand confidentiality
and so this should ideally be done in- house
Basic reporting tools and softw are may be provided
externally
P hilanthropic
management
F inancial planning
I n- house expertise should serve to assist w ith
philanthropic activities
Setting up a foundation and related activities often
outsourced to a consultancy
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
T ype of serv ice
Serv ice category
I n- house
O utsourced
C ompliance and
regulatory assistance
Advisory
i e of family office mig t re
accountancy expertise
R isk management and
insurance serv ices
Advisory
Some risk management sk ills should be provided in- house,
in order to ensure ultimate peace of mind
Can be outsourced, as external risk and insurance
professionals can offer trusted expert advice
L if e management and
b udgeting
F inancial planning
o ld e done in o se if information confidentiality is
a priority
O nly specialized services w ould tend to be brought
in- house, less specialized services can be outsourced
T raining and education
Strategy
Can be done in- house, as identifying suitable options for
education is by its nature an internal process
Can be outsourced if expert opinion on higher
education is req uired for training and development
Business adv isory
Strategy
Often t e general co nsel or t e finance director of t e
family siness is involved in t e set p of t e family office
T he services of an external expert can offer a
competitive edge
Estate and wealth
transf er
Strategy
n o se e pertise is re
vital
T he family can consult external legal advisors for
procedural and legal issues
Administrativ e serv ices
Governance
Administrative services req uire daily monitoring and so
can be done in- house
O utsourcing could lead to greater costs
Succession planning
Governance
Clarifying level of interest of next generation members
wit regard to t e siness and family office
Education, objective assessment of managerial sk ill,
and definition of entry pat of ne t generation family
members
ire f ll time legal and
ired as data confidentiality is
enefits o in house
•
ig est level of confidentiality and privacy
• I ndependent and trusted advice to the family is ensured
•
• T otal and consolidated management of family w ealth
amily office can develop distinct s ills, specifically tailored to t e
family’ s needs
• Greater and more direct family control over its w ealth
•
• K eeps investment k now ledge w ithin the family
ns res optimal goal agreement and avoids any con icts of
interest w ith external providers
F ull- time legal staff w ill be an unnecessary and costly
addition to family offices, w ic are not large eno g
to req uire them, so can be outsourced w hen needed
enefits o outsourcing
•
elps a family office red ce costs and over eads, elps wit staff
productivity
• H elps deliver economies of scale, particularly w hen it comes to
high- value professional services, thus enabling low er prices for
related services
• Offers t e enefit of o ective advice from e perienced
professionals w ho possess specialized sk ills
• O tso rcing investment management may elp a family office
defend its regulatory independence by allow ing investment
decisions to be made by external providers
• Suggests less direct control, w hich implies due diligence and
continuous monitoring can be carried out by the directors of the
family office to ens re performance and sec rity against ris
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1 5
P hilanthropy
hilanthropy mo ing rom gi ing to creating impact
T he w orld, and the challenges it faces, are changing rapidly.
Grow ing ineq uality, the forces of climate change, rapid urbanization
and resource scarcity are increasingly putting pressure on the
w orld’ s most vulnerable people, both at home and abroad. 1 W e
need new strategies to meet these challenges — strategies that
involve a fundamental rethink of the nature of philanthropy.
T raditional paradigms of philanthropy are evolving. W ith a
focus on creating impact, they are becoming more accessible,
s staina le and effective e ective of t e social and tec nological
changes happening around the planet, this evolution reminds
us that, in a globalized w orld, small groups of people can have
profound impacts.
Philanthropy is one of the most rew arding, and distinctively
different, activities t at can e nderta en from a family office
s wit all family office activities, p ilant ropy too deserves to
be conducted w ith total professionalism and commitment. I ts
challenges and rew ards should be ack now ledged.
I t has also been found that philanthropy is an integral component
of many w ealthy families’ lives. F or example, America’ s 5 0 most
generous donors increased their giving by 3 3 % last year. 2 T here
has also been a rise in the number of technological entrepreneurs
under 4 0 using their w ealth to engage in philanthropic w ork .
W hile some of the trends in philanthropy are changing, the level of
commitment to give back to society and create a positive impact
remains the same.
o can a amily o fice help the amily achie e its
philanthropic goals
One common estion facing family offices and family mem ers is
how to structure philanthropic endeavors to achieve tax, economic
and long- term charitable goals. M any families see philanthropy
as a w ay to not only mak e a lasting impact on their communities,
their countries, or the w orld, but also as a w ay to connect w ith and
guide the principles that w ill impact the multiple generations that
ave eit er enefited or may enefit from t e family wealt
e
1 . EY Megatrends 2015
2 . “ T he 2 0 1 5 Philanthropy 5 0 ” , T he Chronicle of Philanthropy
1 6
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
form of charitable giving may vary from a direct gift to a charitable
organization to a donation to a charitable vehicle ( discussed below )
established by the family for ongoing philanthropic activities.
P hilanthropy as a way to guide f uture generations
M any families view philanthropy as a long- term mission that is
critical to teaching future generations responsibility and the impact
w ealth can have on society. T hey believe philanthropy can teach
younger family members valuable life and business sk ills, enabling
t em to develop t eir passions and find f lfilment in wor ing for
something they believe in. I n some of these families, the future
generations w ill even get to decide w hich charities should receive
enefits, ow m c and for ow long
family office s o ld memoriali e t e family’s p ilant ropic goals
in the family mission statement or the family constitution. I t should
mak e sure the charities q ualify for tax- exempt status and that
c arita le pledges are f lfilled in a timely manner t is t e family
office t at will li ely e involved in deciding w ic assets to donate
to charity. I n the U S, for example, the type of asset donated can
impact the amount of the eligible deduction as w ell as the potential
yearly deduction limitations.
P hilanthropy through inv estment choices
W ealthy families have made substantial charitable donations
in recent years. T here is also a trend for families to align their
investment choices to their charitable motives. F amilies are
increasingly mak ing investments that can be categorized as impact
investing or socially responsible investing. Both of these strategies
seek to further philanthropic goals on the basis of how , and in w hich
companies, the family invests.
I mpact inv esting seek s to mak e a difference to communities by
c oosing to invest in companies t at align profits wit c arita le
intentions. F or example, a family may decide to invest in a
company that w ill produce methods to purify w ater in economically
challenged regions.
M odern philanthropy, how ever, is decidedly different. T oday’ s
p ilant ropists se innovative sol tions to solve specific pro lems,
w ith approaches that are targeted and selective, and impacts and
outcomes that are measurable. Philanthropy is also not seen as
exclusive anymore. N ow , philanthropists come from a w ide range of
ages and back grounds, ranging from individuals and businesses to
Os and not for profits, all of w om are ro g t toget er y one
common goal, to help fellow human beings.
Socially responsib le inv esting seek s to maximize delivery of
philanthropic goals, even at the cost of potentially higher returns.
An example of socially responsible investing may be divesting your
portfolio of all shares of Company X stock if they are producing
goods in a manner that is not environmentally safe or if their
chairperson mak es a public statement on a position that the family
does not agree w ith.
amily identification wit p ilant ropy can e a means of onoring
t e family’s fo nder t can e a ve icle for finding new roles for
family members — including those w ho might feel that their sk ills
and interests may not lie in the family business. A systematic
program of philanthropy can be both a shield ( offering a proper
process for responding to the many unsolicited and perhaps
inappropriate re ests for f nds commonly received y ig profile
families and a sword ena ling t e family to ave a significant
positive impact on an issue of concern to it) . M ost importantly,
philanthropy can provide a family w ith at least one notable
commonality — acting as “ the glue that holds the family together” —
especially as a family increases in size and diversity.
L eading practices — the b uilding b lock s of an
e ecti e, amily o fice ase philanthropy
reating an effective, office ased p ilant ropic program re
decisions to e made on matters s c as
• Should there be a mission statement for the philanthropic
strategy
•
• Should the overall program be thematic or general and, if
t ematic, w at s o ld t e priority iss es e
at s o ld t e geograp ic reac of t e program e
• Should the program be proactive ( programs to be funded and
initiated y t e office or reactive inviting applications from t e
comm nity
P ilant ropy can e pand a family office’s networ s, add s ills,
generate employee satisfaction, and offer new and post- career
options amily office or siness involvement in p ilant ropy
can be a tangible demonstration of corporate citizenship and can
en ance t e profile of t e family
•
ill t e f nding e s ort term or long term
• W ill funding be directed at projects or general organizational
s pport
efinition an change o er time
T he goal of philanthropy has alw ays remained the same, to promote
the w elfare of society and to increase the business’ s public value.
H ow ever, the means of achieving this goal have undergone rapid
transformation.
T raditional notions of philanthropy emphasized doing good through
donations or through the establishment of charitable foundations.
T his approach, born of social obligation, w as free from the
expectations of measurable impact, accountability, transparency
and direction. I n this traditional approach, philanthropy w as also
seen as exclusive — only accessible to those w ith enough money to
give aw ay — or organized through religious or political institutions
wit specific interests and agendas
ires
•
o ld t ere e a few large grants or several smaller grants
•
o ld t ere e p
•
at s o ld t e internal decision ma ing process e
lic g idelines and an ann al report
• H ow w ill the directors be chosen and w hat succession
arrangements s o ld e made
• W hat is the role of non- family members as professionals and
directors
• Are professional advisors involved and is the philanthropic
strategy carried out professionally to optimize tax and legal
implications
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1 7
• W ill collaboration w ith other funders be sought in order to gain
t e enefits of collective impact
• W hat priority should be given to impact and public value
assessment, and y w at means
• I s there an investment charter to direct the length, asset type and
ris of t e corp s f nds
nature of the philanthropic sector that much remains ambiguous
and subject to different approaches. T his, how ever, mak es it all the
more important that the commitment to, culture of, and processes
for, re ective and systematic p ilant ropic practice e in place
in a family office ort nately, t e p ilant ropic sector is ric in
accessible and helpful w ritten resources, and personnel w ho are
w illing to advise, collaborate and share.
T hese are only some of the matters to be considered and only a few
of these q uestions can have simple right or w rong answ ers. I t is the
o t ends
Seek ing to align
their estab lished
philanthropic
activ ities with
strategy and v alues
2
1
L ook ing f or
strategic direction
with their
philanthropic
activ ities
1 8
amily Office
High- impact
philanthropic
inv estment
3
Ev aluate impact of
estab lished
philanthropic
portf olios
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
4
Creating societal
value and addressing
complex challenges
T here are a number of global trends shaping the modern
philanthropic landscape.
T he role of technology
T echnology has impacted every aspect of modern philanthropy.
T he internet has given people access to a w ealth of information
on virtually every topic imaginable. T his pow er not only enables
light to be shined on otherw ise ignored topics, but also provides
access to the information needed to mak e contributions. W hile
modern technology enhances the ability to form local and global
partnerships more effectively, it also ensures that in some small
measure, any individual can be a philanthropist.
Socially conscious b usinesses
Philanthropy is increasingly seen as core to modern businesses’
operations, crucial to their social license to operate and enhanced
by the entrepreneurial spirit. M odern philanthropic activities tak e
many forms, including donations, charitable projects and social
vent res owever, t ey can also ta e a s staina le and profita le
form, such as through impact investments that are targeted
toward specific program related social o ectives Many of t e
largest companies in the w orld have philanthropy built into their
business plans, and the trend is increasingly turning tow ard seeing
financial performance as st one of t e many meas res of a
business’ s success.
I mpact inv esting
I mpact investments are as those that set out to achieve positive
social and environmental impacts, in addition to financial ret rn,
w hile measuring the achievement of both. I mpact investing
dismisses t e notion t at profita le investments and giving money
to charitable w ork are separate activities, distinguishing it from
other forms of philanthropy. I mpact I nvesting Australia suggests
that the mark et for such investments is expected to reach U S$ 5 0 0
billion to U S$ 1 trillion globally over the next decade.
C ollectiv e impact
N o single policy, program or organization can tack le the
increasingly complex problems the w orld faces today. Collective
impact refers to the commitment of a group of important actors
from different sectors to a common agenda for solving a specific
social pro lem
e collective impact approac was first disc ssed
y o n ania and Mar ramer in t e
Stanford Social Innovation Review
ey identified five ey elements of an effective
collective impact approach, including a common agenda, the
consistent measurement of results, mutually reinforcing activities
and the use of a back bone organization.
R esponsib le inv estment f ramework
A responsible investment framew ork helps organizations use
their w ealth to mak e socially ethical investment decisions, often
based on environmental, social and governance ( ESG) factors.
Such framew ork s w ill commonly involve thorough monitoring
practices, rigid reporting policies and a great deal of accountability
and transparency. F or many organizations that are using part of
their portfolio for ethical or impact investments, a responsible
investment framew ork can ensure that the remainder of their
portfolio is aligned to the same goals and does not deter or diminish
the impact outcomes sought by part of their portfolio. An example
of this is the Rock efeller family’ s decision to sell their investments in
fossil fuels to reinvest in renew able energy.
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
1 9
Section
3
T he costs of running a
amily o fice
amily Office Primer,
Family Office Exchange, 2013.
2 0
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
amily offices are ni e to t e family t at sets t em p nd,
to define w at an average family office s o ld loo li e is not
meaningful. T heir size may vary from 1 employee to up to 5 0 or
more, depending on the services provided, the number of family
members to be served, and how the services are to be delivered.
espite t ere eing no standard definition of a family office,
anecdotal evidence s ggests t at a f ll service family office will
cost a minimum of U S$ 1 m annually to run, and in many cases it
will e m c more
is wo ld s ggest t at for a family office to e
viable, a family should be w orth betw een U S$ 1 0 0 m and U S$ 5 0 0 m.
Of co rse, a family office can e set p wit
m or even less,
but the service range w ill probably be limited to administration,
control of assets, consolidation and risk management. A fully
integrated family office will re ire a great deal more wealt
T able 3 . 1 break s this dow n in more detail.
igure
amily o fice types ase on assets an costs
amily o fice type
Assets ( U S$ m)
O v erhead cost per year ( U S$ m)
Administrativ e
5 0 to 1 0 0
0 . 1 to 0 . 5
Hyb rid
1 0 0 to 1 , 0 0 0
0 . 5 to 2 . 0
F ully integrated
> 1 ,0 0 0
1 . 0 to 1 0 . 0
o rce The Global State of Family Offices, Cap Gemini, 2012.
ta costs
esearc from cons ltancy amily Office c ange as fo nd t at a
significant portion of t e total costs of a family office are allocated
to staff compensation and enefits 1
F igure 3 . 2 illustrates this cost break dow n in more detail.
f lly integrated family office providing most, if not all, of t e
services mentioned in section three — w ould have a typical staff
structure represented in F igure 3 . 3 .
Setup costs w ould also include the employment of headhunters for
recruitment, compensation specialists, relocation costs, legal setup
costs, and t e searc for infrastract re s c as office space and
technology solutions.
e a costs
amily offices typically ave operating costs of etween
asis
points and 1 2 0 basis points. A recent report by Campden Research
and U BS2 states t at family office costs are on t e rise glo ally,
approac ing t e
mar as offices employ more staff
e report
concl des t at t e costs of r nning family offices as increased
igure
as a percentage of Assets U nder M anagement ( AU M ) over recent
years and t at t e costs remain on an pward trend Offices wit
the low est running costs focus primarily on a limited number of
w ealth management services, such as handling real estate holdings.
H ow ever, there is no strong correlation betw een the size of AU M
and the operating costs.
amily o fice costs
ersight o fice ith sta o
hie n estment ficer
an internal
ersight o fice ith sta o three
1 6 %
2 7 %
2 8 %
3 9 %
9 %
3 2 %
External investment fees
External professional fees and ow ner education
Office operations
2 5 %
External investment management and
custody fees
External professional fees and ow ner education
Office operations
Staff compensation
c ange,
amily o fice sta
ie
Chief
inancial Officer
Accountants
1 0 %
taff compensation wit c ief investment officer
o rce The cost of complexity, understanding family office costs, amily Office
igure
1 4 %
External investment consulting fees
Chief
nvestment Officer
I nvestment
analysts
ec ti e
fice
Chief
Operating Officer
dministrative
staff
nformation
tec nology
awyer
ontrollers
o rce A guide to the professional family office, amily Office
c ange,
2 . The Global Family Office Report, Campden
Research/ U BS, 2 0 1 5 .
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
2 1
amily o fice go ernance
Section
4
2 2
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
efinin
o e nance st ct es
amily office governance is often ignored as a topic eca se
families s ally foc s on managing t eir financial assets and
investments and overlook the importance of implementing good
governance practices in t eir private family office elow is a g ide
to ma or iss es regarding family office governance
Strategic planning
I t is important to start the initial discussion w ith the family
participating in a long- term review of their vision and strategy for
the future. Such an exercise is very helpful in capturing the w ishes
and vision of the family as w ell as informing the management so
they can develop a long- term strategic plan.
Board of directors
s family offices s ally stem from t e desire of t e fo nders
to preserve the family w ealth and protect the future of the next
generation, they often tend to depend on trusted advisors w hom
they k now w ell and have been w ork ing w ith for several years.
Accordingly, the concept of a board of directors managing the
strategic direction of t e family office is often neglected owever,
w hen the w ealth is transferred to the next generation, managing
t e family office in t e same manner may e a ca se of con ict and
dispute betw een family members.
ere is a need to define a proper governance str ct re t at ta es
into account the req uirements of all family members. Electing a
strong and active board that follow s the direction of the family and
tak es into consideration the interests of all family members, not just
a few , is very important. M oreover, including independent directors
w ho add their experience and provide independent advice to the
family is crucial in enhancing, strengthening and diversifying the
family office investments and operations
I n many cases families are very reluctant to include independent
directors and open their book s to outsiders because of privacy
issues. T hose families may choose to appoint an interim advisory
board w ith no voting pow ers to help strengthen the board and
provide advice on specific topics
is step elps t e family prepare
and be more comfortable w ith including independent board
members in the future, to create a fully functional board.
Accountab ility
o nders are often rel ctant to s are m c financial information
w ith their children, in an effort to shelter and protect them
from eing acco nta le for t eir financial decisions
is is not
a s staina le model wit responsi ility comes acco nta ility,
and the family members need to be prepared from an early age
to be responsible for their actions and understand that they w ill
be accountable to the rest of the family. I n order for them to be
successful in the stew ardship of w ealth, they need to create the
process and the opportunity for family members to grow and
develop t eir s ills and talent, as well as manage t eir financial
affairs responsibly.
D ev eloping a proper structure
t is important for every family office to develop a proper
management and legal structure to protect the operation of
t e family office and t e assets of t e family eveloping proper
policies and procedures, and identifying k ey talents capable of
leading t e office are important factors in t e s ccessf l operation
of t e family office Moreover, in order to protect t e family from
any unnecessary tax implications and legal impact, it is also very
important to select the right legal structure and jurisdiction for
setting p t e office
ock o de and do
e a enc costs
cr cial point for family offices to ta e into acco nt w en
considering governance is that they are often exposed to
substantial agency costs that result from managing nearly every
aspect of t e office
s a res lt of t e two main f nctions family offices serve, i e ,
managing complex asset bases and aligning family interests,
family offices enco nter family loc older as well as do le
agency problems that can result in additional costs ( Z ellw eger
and K ammerlander, 2 0 1 5 ) . F amily block - holder costs can emerge
w hen not all family members agree on the strategy of the
family office or e ample, one mem er of t e family mig t e
interested in s ort term li idity to finance lifestyle am itions,
w hereas other members might be more interested in holding onto
investments for potentially better long- term gains. T his can lead to
a misalignment of interest, w ic is a cost to t e efficient r nning
of t e family office
amily Office
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2 3
D ouble agency costs, similarly to family block - holder costs, can
emerge w en t e interests of t e family con ict wit t e interests
of those non- family members hired to manage the family’ s w ealth.
An example of this is w hen the family is more concerned w ith the
long- term outcomes of managing their w ealth, compared w ith the
often s ort term o tloo of family officers and t eir s ordinated
asset managers w o loo to ma imi e t eir own financial enefits
to the detriment of the family’ s w ealth. T his leads to a misalignment
of interests, w ic is a cost to t e efficiency of t e family office
F amily b lock - holder costs
amilies do not necessarily act in a nified way at er, family
dynamics mig t co nteract interest alignment and lead to con icts
involving costs that are referred to as family block - holder costs. A
lack of governance of the family ow ners opens up the possibility of
negative family dynamics.
Particularly destructive effects are expected in an EF O , w hich
is characterized by the absence of formal and unambiguous
governance instruments, such as boards, regulations and statutes.
T here are no clear responsibilities in controlling the EF O that
shares part of its resources, staff and command structure w ith
the operating business, w hich in turn could increase the possibility
of family loc older con icts and t e related costs compared
w ith an SF O .
n increase in con icts and str ggles etween family mem ers
can lead to particularly severe effects on family w ealth, since
con icted family loc olders mig t e tempted to engage
in spendthrift lifestyles. T his could split the family w ealth and
conseq uently prevent the cohesion of the family and its assets
across generations. Also, the absence of clear responsibilities,
accountabilities and rules of engagement on the part of EF O
employees w ho serve tw o masters could even aggravate the effects
of family loc older con icts and t eir conse ent costs
D oub le agency costs
Costs resulting anytime authority is vertically delegated dow n
tw o tiers of hierarchies, are referred to as double agency costs.
D ouble agency creates problems of control and accountability
w hen tw o seq uential sets of control relationships are involved,
s c as from t e family as wealt owner to t e family officer
and the subordinated asset managers.
2 4
amily Office
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T he principal’ s ( i. e. , the family’ s) loss of control over its agents
t e family officers and t e advisors follows from incentives for
opportunistic behavior. T he striving for more autonomy and the
behavior by agents to receive a remuneration is a major problem.
T he principal is increasingly exposed to biased information passed
on from asset managers to t e family officer and s se ently
from t e family officer to t e family
is p enomenon gains partic lar intensity in t e family office
environment, w here the principal family usually lack s the
sop isticated financial and investment nowledge t at family office
staff have, thereby increasing the probability of agents’ empireilding at t e e pense of t e principal eca se t e family office
often serves as the trusted advisor of the family for much of the
family’s financial affairs, and given t e limited insig ts and now
how of the family into the complexity of these affairs, the family
office is potentially well placed to act opport nistically if it is not
properly monitored or incentivized.
ncentives for opport nism arise partic larly in family offices
since t e family as principal may ave diffic lties in controlling t e
activities of a family officer and even more diffic lties in s pervising
asset managers w ho are often external experts that are not part
of t e family office’s own staff Monitoring t e family officer and
is or er dealings wit t e asset managers is partic larly diffic lt
in SF O s. T he formal setup and hierarchies often serve as barriers
preventing t e family from closely monitoring family office staff,
accessing first and information on an ongoing asis, s pervising
asset allocation decisions, and controlling t e efficiency of t e
family office operations
f t e family fails to provide ade ate oversig t, family office
staff w ill be more prone to engage in collusive agreements w ith
external asset managers and service providers or “ self- dealings, ”
w ere family officer and asset managers internally agree pon
opportunistic dealings to the detriment of the family’ s w ealth. Such
cond ct y family officers and asset managers ndermines t e
preservation of w ealth and generates potential reductions of the
wealt and inefficiencies for t e family
F amily v ersus non- f amily memb ers
T he extent of double agency costs certainly depends on w hether
family office staff are composed of family or non family mem ers
t re ects t e dilemma t at families s ally ave to deal wit
employing as family officer a non family mem er w o is well versed
in financial matters, or relying on a family mem er as family officer
w ho might not have that competence but is trustw orthy, thus
diminishing double agency costs.
Successfully navigating concerns betw een principals and agents is
not an easy task for families. But, they can mitigate these tensions
by implementing appropriate governance structures and incentive
contracts. Selecting appropriate benchmark s is also important,
as poorly designed benchmark s may cause fund managers and
external partners to w ork against w hat families w ish to achieve.
F amilies should also consider establishing formal processes to mak e
investment decisions, as t is can elp family offices to set clearly
defined o ndaries and goals, and avoid ad oc decisions t at are
not in line w ith the broader mandate or long- term strategy.
he amily o fice ilemma
ltimately, family offices face a dilemma on t e one and, t e
family as the ultimate asset ow ner w ishes to appoint the most
alified people to r n t e family office ometimes, a competent
person is available w ithin the family, but this is not often the case.
en, a professional non family family officer as to e appointed
e enefit of doing so is t at family loc older con icts can e
mitigated t ro g t e non family mem er r nning t e family office
But a natural conseq uence of such delegation of control is the
risk of losing control altogether. T his is particularly true for w ealth
structures that involve trusts and foundations, but the problem is
also apparent in the case of SF O s.
I n light of this dilemma betw een professionalization and loss
of control, families wit a family office will ave to find ways
to combine the best of both w orlds, achieving professional
management w hile maintaining control.
Boards, investment advisory committees, the personal involvement
of family members in selected activities, incentive systems for the
managers and monitoring systems are often put in place to tack le
the challenge.
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2 5
Section
5
C onstructing a b usiness plan,
sta fing an strategic planning
2 6
amily Office
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annin a st ate ic a
o
ad
f a family decides t at it needs a family office, w at are t e
ne t steps
t is an increasingly widely eld view t at a family office even
an SF O — should not operate in the long term on a deficit asis,
i. e. , purely as a cost center. M ost successful entrepreneurs w ould
not start a business w ithout a w ritten business plan. O nce the
business is running, these entrepreneurs generally create and
update short- and long- term strategic plans for the business.
eading family offices provide t at same level of diligence for
t emselves cr cial part of t e strategic plan is staffing, w ic is
discussed in the section 5 . 1 , Family office staff.
siness
an
e first step in creating a siness plan is nderstanding t e
vision for the family ( usually described in a family charter) , and
s se ently t e vision for t e family office ere are some of t e
ey components of s c a plan
Summary
t is important to descri e t e vision for t e family office, e plain
w hy it is being created, w hom it is designed to serve and how it is
expected to evolve. I s there an intention to serve other families,
t s ecoming an M O, or st to serve t e single family
F amily b usiness
s t ere a siness lin ed to t e family office, or as t e siness
een sold amily offices often start as an O wit in t e siness,
and become a separate entity w hen the family, its complexity and
its risk s outgrow the business staff.
Structure
at type of entity will o se t e office, and w o will own it
at
is the plan for passing ow nership across generations ( assuming the
office is intended to s pport more t an t e first generation
ill
t e office s pport sinesses, wit t e potential of aving some
e penses ded cti le against siness income t is important to
discuss the intended tax impact of the structures to ensure that
the family understand their potential conseq uences. T ax and legal
advisors generally ave a significant advisory role on str ct re and
jurisdiction.
J urisdiction
lo al families need to consider w ic co ntry t e office will e
ased in, t t is decision goes m c f rt er it in specific
countries such as the U S, states have vastly different tax, legal, and
dicial enefits
e siness plan s o ld specify w ere t e office
and entities w ill be based.
Gov ernance
overning oards or co ncils need to e defined, incl ding ow
they w ill w ork . T his structure often includes a family council,
investment committee and even a philanthropic committee. T he
plan s o ld define w at oards will e ist, ow oard mem ers will
be selected, how the boards w ill change over time, how decisions
w ill be made w ithin them, and w hether they w ill include non- family
participants.
ta fing
T his section w ill need to discuss the types and number of staff in
t e office, in addition to t e organi ation or reporting str ct re
Often, t e family officer reports to a family co ncil or per aps to
a particular family member. I t also helps if this section discusses
conditions under w hich family members may be permitted to w ork
in t e office
O perations
H ow w ill the services be delivered, and w hat technology is req uired
to s pport t em
e team s o ld e a le to delve into t e ey
types of tec nology, eit er selecting t e specific tools or narrowing
them dow n to tw o or three providers. T his section also describes
w hich services are intended to be outsourced and w hich should be
delivered directly y family office staff
F inancials
ere s o ld e pro forma dgeting for t e office, incl ding
staff, facilities, technology, and outsourced services. T his section
descri es ow t e office will e f nded, w et er t ro g
siness
activities, billing family members, a charge on investments, or some
other mechanism.
Serv ices
ere needs to e a description of t e services t e office will
deliver, and for w hich family members or generations. I n some
cases, there is a list of base services available to all family members,
w ith additional services available on an à la carte basis.
amily Office
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2 7
W ork plan
ere needs to e a detailed plan of ow t e office will e implemented
initially and ro g t in o se later see fig re
igure
ervices may e rolled o t in p ases, or per aps o tso rced
amily o fice implementation plan
E d u c a tio n, p eer netw o r k ing a nd c o lla b o r a tio n w ith a d v is o r s
S c o p e a nd
p u r p o s e
Establish the purpose
and long- term goals
and objectives
U nderstand the
family’ s core assets,
current needs, and
future plans
Consider initial
thoughts on scope of
services
U nderstand how each
family member w ants
to participate in
services
S tr u c tu r e
a nd d es ig n
S o u rc e
a nd b u ild
Assemble a w ork ing
team of advisors
efine operational
models and family roles
D evelop a detailed
business plan
W rite job descriptions
and recruit candidates
F or each service
define w et er
in- house, outsource,
or combination
Select technology
platforms and evaluate
data security
Review resources,
technology, people,
and facilities
Estimate operating
costs and capital
req uirements
Consider potential
sources of capital
funding
I nitiate contracts for
outsourced services
I dentify, contract, and
build- out space
Chart processes,
wor ows, and
benchmark s
D evelop framew ork for
governance
T es t a nd
im p lem ent
T est systems and
processes and
implement
Review business
continuity needs
and develop
emergency plans
amily Office
F ine- tune hardw are
and softw are
M easure results
against benchmark s
Assess initial
governance, and
determine if additional
efforts are needed
Review netw ork ing
opportunities for
peer- to- peer
education and best
practices
Perform final review of
processes
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efine dget models
to minimize capital
constraints and
surprises
D evelop formal
periodic review process
for people, processes,
risk s, vendors, and
technology
I terativ e analysis and modeling
2 8
egin family office
operations
Consider disaster
risk s ( cyber attack ,
theft, personal
security, etc. )
Create policy and
procedure manuals
Evalutate legal
structures, consider
legal and tax impacts
for t e office and
participating members
L a u nc h a nd
m o nito r
t ate ic
annin
e
Once a family office is operational, strategic planning remains an
important exercise. Annual strategic planning is important for
all family offices, t offices t at ave contin ed for generations
often create additional or
year strategic plans amily offices
respond to a w ide variety of demands from many family members,
and it is easy to just be reactive. Staff must tak e the initiative in
t eir strategic planning see fig re
igure
amily o fice strategic planning
F a m ily
c h a r ter
V ision of what the f amily
wants to b e in 1 0 0 years
ea st ate ic
an
or family offices t at ave e isted for a long time and are
supporting multiple generations, recent years have seen an
increase in 5 - or 1 0 - year strategic plans. T hese plans are
designed to bridge the gap betw een the vision in the family
charter ( sometimes considered a 1 0 0 - year plan) and the annual
strategic plan.
O ften, the process the family goes through is just as important as
the outcome. T ak ing time to plan w hat they w ant to accomplish in
the next 1 0 years causes them to think very differently than for
annual planning. H ere are the major elements often considered in
t ese plans
Succession planning
1 0 - y ea r
s tr a teg ic
p la n
Multi- year plan to
accomplish
milestones toward
the f amily v ision
Preparing family for leadership tak es many years, w hether that
is for leading the business, governance committees or the family
office amilies may develop programs for an entire generation,
offering training, mentorship, and business internship programs to
give them the experience to lead the family.
Business or inv estment growth
A nnu a l
s tr a teg ic
p la n
P lan f or the next year
F amilies may consider starting a new business, or perhaps a
large real estate development plan, or a shift into private eq uity
investing.
D irect philanthropy
Some families set philanthropic goals of changing a particular
community, providing higher education or solving health issues.
T hese may be long- term goals, better served through a
1 0 - year plan.
e to t e nat re of t ese planning efforts, families often find it
eneficial to engage an o tside advisor to lead and facilitate t e
process, w hich can help to bring new perspectives.
amily Office
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2 9
nn a st ate ic
annin
T he outcome of annual planning is an evaluation of activities in the
previous year, goals for the coming year, and a plan for achieving
t ose goals ere are some important factors in t e strategic plan
e ection
ow ave t e family and t e office performed against t e c rrent
year plan
at are t e strengt s and wea nesses of t e family
and t e family office
at ma or c anges ave occ rred since t e
last planning e ercise s t e family s ccessf lly moving toward its
long term vision specified in t e family c arter, or are t ere ma or
gaps etween t e stated goals and w at t ey are act ally doing
F eedb ack
ctively find o t w at family mem ers t in of t e office, its staff,
and the support it provides. Q uite often, the older generation
are pleased wit t e office, w ile yo nger generations are less
happy w ith it.
R isk s
at are t e ma or ris s t e family and t e family office face, and
ow mig t t ey e mitigated
is is an opport nity to consider
succession planning, risk s from staff or operations, economic, legal,
or tax events, and how business risk s might impact the family or
how family risk s might impact the business.
amily o fice operations
val ate t e c rrent family office and its operations Priorities often
change, and some services may be better delivered by an outside
provider. T his is a good time to consider each outside advisor or
service provider t may e t at t e office needs additional staff, or
needs to plan for coming retirements or other changes.
T echnology
is is a growing concern among family offices, and re ires a lot of
time and reso rces t is eneficial to compare c rrent offerings wit
the rapidly changing mark etplace, including how the various tools
w ork together to meet the family’ s needs. Cybersecurity must also
e considered, as to ow it co ld impact t e family’s finances as well
as its potential effect on the family privacy and physical safety.
F amily initiativ es
onsider w at new initiatives t e family desires and ow t e office
w ill support them. Are there new businesses being formed, a
real estate development activity, new philanthropic initiatives, or
per aps a ma or family anniversary to plan for
Budgeting
Bringing together the above components w ill help determine
the budget for the coming year, including a plan for how it
w ill be funded. W hen the family agrees w ith the planning and
future initiatives, they w ill be much more lik ely to agree to the
req uired funding.
Rec itin de e o in and incenti i in
a i o fice sta
taffing is cr cial for t e s ccess of a family office and a ig
challenge for them is to identify, attract and retain the best talent.
I n larger institutions this process is usually overseen by the human
reso rces department, t family offices cannot rely on s c
infrastructure. Conseq uently, recruitment often becomes the
responsibility of the w ealth ow ners and their trusted advisors —
both of w hom are less trained to mak e these decisions.
en it comes to staffing t e family office, one as to disting is
betw een members of the ow ning family, w ork ing for the family
office and non family professionals
ile a recent st dy in
Sw itzerland and Germany found that many of the investigated
family offices are led y a family mem er,1 w e decided to focus our
attention here on the process of recruiting non- family professionals.
Guidance on structuring the recruitment process, formulating
incentive pack ages and then maintaining strong relationships w ith
the new employees, is often necessary.
D espite the lack of formal recruitment structures, families can have
advantages in attracting talent — often because they are able to
offer more e i ility in compensation and incentive pac ages for
ieger, P ilipp Zellweger, Thomas: Entrepreneurial Families: From a Family Enterprise to an Entrepreneurial Family redit
Suisse AG, 2 0 1 3 .
3 0
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
senior recruits. T hey can also offer a w ork ing environment and
culture that can appeal to the right candidate look ing for a change
from big- company culture.
2 . F eedb ack
D elivery
M any executives move from a highly structured corporate
environment and can feel uncertain about their performance,
and the family’ s satisfaction w ith their role, due to a lack of
meaningful feedback . F amily members may be unused to
having to satisfy this need for feedback , but attempts should be
made at a fair and thorough assessment of performance w here
possi le t as een o served t at Os at family offices often
feel unimportant, largely because of a lack of feedback , rather
than concern over compensation.
•
Receptiveness
ig c allenge w en staffing a family office is ow family
office e ec tives and family mem ers can maintain a sense
of partnership, w ithout the impartiality of the executive being
affected y t e family amily office e ec tives m st e open
to giving and receiving feedback so that an environment of
onesty and openness can o ris
is process of feed ac is
in itself dependent on the long- term commitment to the family,
cultivated by appropriate incentive planning and personal
c emistry an n antifia le element in t e process
iven t ese factors, amily Office c ange elieves t e following
examples of best practice can help to underpin a successful
recr itment process
•
•
o description
is can e e i le, t m st capt re t e ey
elements and essence of t e role amily office e ec tives are
often involved in multiple projects.
• I nterview committee. T he responsibility of hiring for roles such as
CEO and CI O should not be undertak en by one person. Sharing
the process and risk of the hire is advisable.
• Check ing references. T he recommendation from a trusted
advisor or family member is valuable, but more extensive check s
should be made. T he process should be rigorous in order to
ensure objectivity.
Retainin ta ent
T he k ey to retaining people once they have been recruited depends
heavily on compensation and the feedback process. H ere is a useful
c ec list
1 . C ompensation
•
Conversations
T he feedback process must be performance- based, consistent,
and incorporate an element of long- term compensation.
•
I ncentives
•
Can include things such as phantom stock ( future cash payment
based on mark et value of shares) , co- investment opportunities,
transaction bonuses and, in some cases, partnerships. I ncentive
plans often re ect t e standards in t e ind stry t at created t e
family’ s w ealth, so pack ages vary by industry.
Benchmark s for compensation
A CEO ’ s base salary in the U K ranges from U S$ 2 4 0 , 0 0 0
to U S$ 6 3 0 , 0 0 0 , w hile in Sw itzerland CEO s managing
multijurisdictional w ealth receive betw een U S$ 4 5 0 , 0 0 0
and U S$ 7 2 0 , 0 0 0 as a base.
amily Office
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3 1
R isk management
Section
6
3 2
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
nte atin
isk
ana e ent
T he maintenance of family w ealth across generations is an
extremely complex task . T here are many risk s, any of w hich can
prevent a family from achieving their long- term legacy. F amilies
should develop an integrated risk management approach betw een
the family business assets and the private family assets, in order to
protect themselves from risk s.
C ategories of risk
e family office is t e rig t entity to manage t e different ris s
facing the family. T ypically, the family w ealth originates from the
sale in w hole or in part of the family business, or from free cash
ows t at are not reinvested in t e e isting siness
is process
of asset diversification goes and in and wit t e enterprise ris
management process.
gainst t is ac gro nd, family offices are tas ed wit
complementing their existing standard risk measures w ith
additional ones, particularly as direct investments in real assets
gain in importance is management at family offices is moving
aw ay from a mere controlling role to a time- critical, strategic
advisory role.
T his new demand for risk transparency has led to the desire to
invest more in direct investment opportunities and in real assets,
rat er t an comple financial capital mar et prod cts lower
level of complexity of investment products, the proximity to the
investment, and t e possi ility of aving a real in ence on t e
investment are more sought after now than ever before.
L ong- term investments w ith low er volatility and a moderate
expected return are often combined w ith short- to mid- term
investments wit a significantly ig er ris profile to ac ieve
outperformance. As part of this process, a further professionalization
is tak ing place. F amilies rank investment risk , family reputation and
family data and privacy among the top risk s they face, according
Risk
to a ampden ealt s rvey on glo al family offices in
is
guide recommends that seven risk categories need to be evaluated
as part of a strong and coherent approach to risk management
see fig re
elow
Risk , return and liq uidity are the foremost issues to be considered
in any investment decision and asset allocation process. T hese
prereq uisites w ill be the basis for the risk management system,
w hich in itself w ill cover risk mitigation and cost reduction, and may
lead to val e creation as a res lt
ese factors incl de
F igure 6 . 1 . R isk management
R isk category
Summary description
V ision/ legacy
Stated family vision or purpose, services provided w ithin
t e office, family governance, comm nication, ed cation
and planning
O perations
T ransaction processing and controls
Estate/ regulatory
T ypes of entities, management and oversight of those
entities, compliance, reporting and office management
Business
I mpact ( or potential impact) on the family from the various
businesses they ow n and manage, this encompasses
financial, s ccession and rep tation impacts
T echnology
val ate platforms sed in t e office, and review t e
infrastructure of technology and security, particularly
including cybersecurity
I nvestment
Examine the policies and processes around investment
oversight, from investment policy statements to selecting
managers, e cl sive of eval ating t e ris of specific
holdings or portfolios
D isaster
Review plans and preparation for facing serious setback s,
w hich includes evaluation of existing insurance coverage
R isk mitigation
•
• I dentify and address k ey risk areas
ffectively assess ris s across t e family office, driving
accountability and ow nership
• M anage and mitigate mission- critical risk s
• Establish comprehensive risk framew ork s
•
C ost reduction
ost efficiencies are a critical part of setting p a family office
• I mplement an automated risk management process to materially
improve the cost structure
• Reduce cost of control spend through improved use of automated
controls
• Streamline or eliminate duplicative risk activities
•
F igure 6 . 2 . R isk management system
ana e ent s ste s
mprove process efficiency t ro g contin o s monitoring
V alue creation
R eturn
R isk
L iq uidity
• Achieve superior returns from risk investments
• I mprove control of k ey processes
• Combine risk and control management to improve performance
• U se analytics to optimize the risk portfolio and improve
decision- mak ing
R isk management system
amily Office
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3 3
amily office Os, Os and Os increasingly perceive enterprise
ris management as adding real val e to t e family office operation
According to the 2014 European Family Office Survey by Campden
W ealth, families are w ell aw are of the different risk s, but often have
not implemented an adeq uate risk management process.
I n an appropriate risk management process, each of the seven
categories of risk mentioned before w ill be assessed against
t e specific sit ation of t e individ al family family office
e
assessment of the inherent risk s, if no controls or mitigating factors
w ere in place, combined w ith the existing control environment,
result in the residual risk after controls are tak en into account
( measured, for example, on a scale from low to medium
or high risk s) .
ollowing s c a diagnostic process ris review, ris identification
and risk measurement) structured recommendations can be made
to report the risk objectively, improve the control environment
and ltimately to mitigate t e ris s see fig re
c leading
practices w ould also include an existing disaster recovery plan
for technology and data, as w ell as a physical protection plan
( e. g. , protecting against robbery or k idnapping) and an integrated
man reso rces policy for family office staff
F igure 6 . 3 . R isk management process
R is k r ev iew
Risk identification
•
Establish a detailed
ris identification
process
•
Meas re impact of
risk s on investment
decisions
•
I dentify and
doc ment
q ualitative and
q uantitative risk s
•
Prioritize risk s
according to impact
level and lik elihood
of occ rance
•
efine t e c ief
drivers of volatility
of the main asset
classes and
investments
• Establish risk
appetite of family
and family office
w hat level of risk is
accepta le
•
3 4
efine a common
understanding of
the risk level among
family members,
the investment
committee or ot er
relevant boards and
t e family office
amily Office
R is k m ea s u r em ent
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R is k r ep o r ting
•
ncl de relevant
and s fficient level
of information in
regular reporting
•
Establish family
governance to
deal w ith risk
management
R is k m itig a tio n
•
Establish measures
to mitigate at least
the top priority risk s
•
O pportunities need
to e identified in t e
same w ay as risk s
•
Establish regular
monitoring of
the family risk
landscape
T he inv estment process
Section
7
1 . Credit Suisse, Family
Business Survey,
September 2 0 1 2 .
2 .
I bid.
ack o nd
ow do family offices invest t eir principals’ money
ere are no
fi ed investment reg lations t at apply amily offices tend to follow
their ow n individual investment policies, because, unlik e bank s
and ot er financial service providers, t ey are generally s ect to
the more relaxed regulations applicable to companies, trusts and
foundations. H ow ever, the degree of freedom enjoyed by family
offices is red ced in proportion to t e level of services provided y
t ird parties and t e n m er of families served y t e family office
amily offices can often diversify t eir assets very roadly, m c
more than institutional investors can, thank s to the amount of
assets nder management amily offices are also generally etter
able to think and invest on a more long- term basis, and they
primarily pursue w ealth preservation in order to pass on assets to
the next generations. 1 M any prefer direct investments, and w here
organizations have an entrepreneurial principal, they are more
lik ely to get directly involved in the investment process. M ore than a
third of those surveyed w ould be glad to contribute to the planning
stage of their investments. 2
Many family offices ta e an open approac to t eir investment
policy and try to avoid conventional investment paths. T his can be
seen in the w ay that many invest in alternative investments, such
as yachts, horses, art, forests and farmland, or car, w ine or w atch
collections
is ena les t em to spread ris s w ile re ecting t e
personal preferences and passions of family members.
e growt of family offices is a relatively new trend, and eca se
of the diverse origins of many family fortunes and the different
ac gro nds of Os, it is diffic lt to pinpoint a niform family
office investment process ery roadly, t e process s o ld first set
out an investment “ road ahead” , listing goals and risk tolerance,
and resolving issues relating to business shareholdings and
family member stak es. T he next phase is to establish the portfolio
structure ( i. e. , how much in eq uities, real estate) to deliver the
risk and return trade- off the family req uires. I mplementation and
governance t en follow finding t e appropriate investments to
mak e up the portfolio, and overseeing their performance.
amily Office
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3 5
Ro e o t e a i
T he crafting of an investment process is heavily dependent on
legacy issues. I n w hat economic sector has the family made its
money, to w hat extent is the family still actively involved in the
siness and w at is t e ac gro nd of t e O of t e family office
Each of these factors has a tendency to produce a strong behavioral
bias on how a family’ s w ealth is invested and on the subseq uent
need to prod ce a diversified portfolio for t e long term
Another issue that is also important is the composition of the
family or e ample, a family office t at is set p y a first
generation entrepreneur w ould probably be very different in its
aims to one that is established by a large fourth- generation family.
s a res lt, t e e avioral, financial and legal iss es involved in
str ct ring t e investment process of a family office are comple
and fascinating.
Credit Suisse’ s Family Business Survey 2012 suggests that most
family businesses, even those at the third generation and older,
do not yet ave a family office ost and comple ity are two
contributing factors here, though it is also clear that the rate of
growt of family offices is accelerating, and t at t e need for a
transparent, independent and structured investment process is a
k ey reason for this.
ettin in est ent oa s
F or most investment funds, w hether they are sovereign w ealth
f nds, endowments or family offices, t e first step is to esta lis
clear investment o ectives and ris profiles
ese different
investment structures can have varying goals and objectives, and
there is also variety in how these objectives are constructed. F or
e ample, some instit tional investors wor wit in ation related
return objectives, others might not.
An important distinction can also be made at this stage betw een
liq uid assets, such as tradable securities, and illiq uid assets, such
as direct investments, private eq uity and real estate — the latter
eing diffic lt to val e and often re iring some s pport in terms
of funding. F rom a conceptual point of view , many CI O s tend to
3 6
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
view illiq uid assets in a different w ay, w hen it comes to returns and
investment horizon, to liq uid asset portfolios.
Examining prior investment styles and q uestionnaires can help to
identify the family’ s tolerance to risk . I n addition, scenario testing
that illustrates and draw s out important sensitivities to risk and
portfolio draw dow ns can be useful. I n some cases, the discussion
of the investment process is led by the CI O . I n others, it can entail a
more collective discussion involving family members, and cover any
desires they have to establish charities or philanthropic initiatives
alongside t e family office
O nce an asset allocation recommendation has been review ed,
understood and accepted, the family should formalize their
investment plan in an investment policy statement. Such a
statement is a road map that is the focus for all parties involved in
the client relationship, including investment advisors, investment
managers and trustees. I t also provides a course of action to be
follow ed in times of mark et dislocation w hen emotional reactions
may result in imprudent courses of action.
Once t e specific investment goals and t e ris profile of t e family
office ave een esta lis ed, t e ne t step is to str ct re an overall
portfolio and then bring to bear the necessary investment tools to
drive the investment process. I n some cases, historical asset return
data is used to give a sense of w hat future returns might look lik e,
but, as recent stock mark et history has show n, the past is not a
great guide to the future.
a conside ations
electing t e most efficient com ination of assets for t e family
req uires an adjustment to portfolio optimization that tak es into
consideration the ultimate after- tax return that they w ould expect
to receive. F or each asset class, the expected return should
e deconstr cted to re ect t e income yield from interest and
dividends versus return from capital appreciation. Based on the
level of turnover typical for each asset class, it is possible to
estimate the percentage of asset appreciation that comes from
realized versus unrealized capital gains, and also the extent
to w hich realized capital gains w ould be treated as short- term
as against long- term tax liabilities. Providing asset allocation
analysis on an after- tax basis presents a realistic view of the
return the family can expect from its portfolio investments, as
well as an optimal mi of investments tailored to a family’s specific
tax situation.
t ess testin and
ode in
O nce an initial portfolio shape is in place, several further exercises
can e sef l, s c as stress testing t e ret rn profile of t e
portfolio to demonstrate to family members how the portfolio
might behave during periods of volatility. I n performing this type
of analysis, it is sensible to examine all the family’ s w ealth, not just
their investment portfolio. M odeling the core business holding of a
family as a form of private eq uity or direct eq uity holding, and then
analyzing and optimizing other components of a family’ s w ealth
wit respect to t is, is a diffic lt t necessary tas
I n the context of family businesses, one common outcome of this
part of the process is to show that the initial investment portfolio
of t e family office co ld e etter diversified, since it often as a
large holding in the underlying family business or, in some cases,
legacy investments that tend to be over- concentrated in certain
asset classes ( e. g. , private eq uity) . T here are several different
ways to ac ieve a more diversified portfolio for t e family office
( see F igure 7 . 1 ) .
F igure 7 . 1 . P roj ected total return and v olatility of v arious asset classes
P roj ected total return ( 5 year av erage)
1 2 %
Eq uity
F ixed income
Cash and short term
Alternative investments
1 0 %
8 %
6 %
4 %
2 %
0 %
-2 %
0 %
5 %
1 0 %
1 5 %
2 0 %
2 5 %
3 0 %
3 5 %
P roj ected v olatility ( 5 year av erage)
o rce
e aptial Mar et ss mptions framewor at redit
w hich are show n in the chart.
isse prod ces five year average ret rn and volatility forecasts for
amily Office
asset classes, some of
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
3 7
ei
o tance o cas
o
amily offices are different from ot er organi ations, in t at
there is often a greater and more irregular call on the investment
portfolio. F amily members req uest funds for business- related or
private eq uity stak es, philanthropic and impact investments, or
ongoing expenses. I n this respect, being able to model the impact
of cas ows on an overall investment portfolio is important, and
e perience s ggests t at t e foc s on yield and cas ow tends to
e ig er for family offices t an for ot er client types ccordingly,
families should consider their overall liq uidity needs carefully during
the portfolio creation process.
e entation and o e nance
T he implementation and governance q uality is crucial. F rom an
investment point of view , how a portfolio is implemented must
be consistent w ith its objectives and structure. H aving a formal
investment policy statement in place is an important step in
maintaining an appropriate governance structure. I n addition to
review ing the family’ s goals and objectives, it is vital to review
asset allocation. T his can be done by rerunning asset allocation
diagnostics on portfolios at least once a year, in order to mak e
sure that they perform as initially prescribed. Governance and
transparency are also very important, and regular meetings
and calls etween principals, t e family office staff and e ternal
advisors w ill help to clarify broad macro view s, turning points in
strategy, and issues relating to implementation.
n s mmary, w ile t e family office space is growing and evolving
ic ly, several ilding loc s can e identified as forming t e ey
components of a family office investment process
ese are
• Consideration of how legacy issues determine the starting point
of the fund
• O bjective setting and creation of an investment policy statement
• M apping risk tolerances
• Building a portfolio structure across all liq uid and illiq uid assets
• I mplementation using strategic and tactical investment tools to
ens re t at investment sol tions fit t e goals and o ectives and
meet cas ow needs
• Governance
• Rebalancing
n est ent st ate
Once investment goals ave een esta lis ed, family offices
can begin think ing through how to deploy and manage capital.
e type of investment strategy a family office p rs es is a
function of sourcing capabilities, desired control, liq uidity needs,
investing e perience, and family office infrastr ct re amily office
investment strategies generally fall into t ree road categories i
third- party managed, ( ii) public direct and ( iii) private direct. O ften
family offices se a mi of t ese strategies to diversify investment
exposure and improve risk - adjusted returns.
ird party managed investing consists of family offices sing
asset management funds to invest their capital. F amilies can mak e
high- level decisions around how to allocate their capital betw een
industry sectors and asset classes at the fund selection level. Below
f nd selection level, owever, t ey ave limited in ence over
investment decisions. Asset managers can focus their investments
on public or private entities and on traditional or alternative asset
classes see fig re
igure
llustrati e amily o fice in estment strategy
T h ir d - p a r ty m a na g ed
inv es ting
O ther inv estors
amily o fice
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
D ir ec t inv es ting
amily o fice
$
$
T h ir d - p a r ty a s s et m a na g er
A s s et
$
P u b lic o r p r iv a te a s s ets
3 8
o e ie
P u b lic a s s ets
P r iv a te a s s ets
irect investing involves t e family office ma ing t e decision
to invest capital into a specific asset or sec rity
is re ires
t e family office to do its own researc and d e diligence in t e
investment process
e family office is also responsi le for
continuing to follow asset level performance and manage its
portfolio of these assets on a day- to- day basis.
• Public direct investing is centered on liq uid debt, eq uity
securities and derivatives that trade over a public exchange.
T hese investments are made through the use of public
information and are subject to regulatory req uirements that
both protect and constrain the investor. U nless very large
positions are accumulated, public direct investing provides very
limited in ence over t e nderlying asset’s management and
strategic decisions.
igure
• Private direct investing focuses on tak ing a more active role
in the deal process and underlying investment. T he family
office will often e more involved in siness decisions
and strategy for the entity or asset. T he investment can be
str ct red as de t, e ity, or as a specific asset p rc ase
( e. g. , real estate) . I nformation can include both public and
non- public items. Regulatory req uirements are much looser,
giving the investor greater access to information but more
limited protection.
Presented elow is a s mmary of t e ey enefits and
considerations for family offices regarding eac investment type
see fig re
amily o fice in estment strategy
Strategy
enefits
T hird- party managed
•
C onsiderations
L ow est infrastructure req uirements
•
•
I nvestment access is good but
customization is limited
•
•
T hird- party expertise can be valuable
•
•
L iq uid asset class
•
•
H ighly customizable portfolios
•
•
•
•
•
•
•
•
•
•
•
Avoids management fees
•
tr ct ring e i ility
•
ility to se family office e pertise in
investment selection
•
H ighly customizable portfolios
•
I nfrastructure funds
F und of funds
L imited to public mark et opportunities
raditional investing
I nformation must be public
•
•
•
Eq uities
Commodities
•
O ptions
I nvestment sourcing can be challenging
lternative investing
I lliq uid asset class
•
I nvestment process, including due
diligence and documentation, can be
burdensome
•
•
•
H igh infrastructure req uirements
I ncreased access to information, including
non- public
•
•
•
ility to in ence decision ma ing aro nd
underlying asset
amily Office
M oney mark ets
F ixed income
•
M oderate infrastructure req uirements to
manage portfolio
H ighest potential for “ alpha”
M utual funds
Private eq uity funds
H edge funds
•
Subject to public mark et volatility around
valuation
ility to se family office e pertise in
investment selection
P riv ate direct
•
•
enerally as limited in ence over
underlying entity or asset
L arge investment universe
•
•
Redemption features can impact liq uidity
Avoids management fees
•
nd investing
•
Potential con icts of interest
•
•
M anagement fees
L imited control over how capital is
allocated at fund level
T ransparency can be limited
•
P ub lic direct
Examples
Private eq uity
V enture capital
M ezzanine debt
Real estate
I nfrastructure projects
N atural resources
Royalty streams
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3 9
P riv ate direct inv esting
ecently, a strong trend as emerged of family offices eginning
to pursue direct investments in the private mark et. T he primary
drivers for t is trend ave een i a searc for etter investment
control, ( ii) attractive risk - adjusted returns that have limited public
mark et correlation, and ( iii) low er price volatility. T his type of
investment strategy, how ever, req uires the implementation of a
formal investment committee process to identify, vet and execute
new opportunities, as w ell as manage ongoing portfolio needs.
ome family offices ave c osen to team p wit ot er family
offices to p rs e t is strategy as a cl
is teaming p offers
attractive synergies around infrastructure, deal sourcing, and
idea sharing but does create governance issues w ith investment
selection and ongoing management. F or small- to mid- sized
family offices, t e cl approac also en ances t eir overall
competitiveness in the mark etplace by increasing the capital
available to pursue new opportunities — an important criterion in
w inning a competitive deal.
long t e same lines, family offices can also decide to p rs e
individual deals on a co- investment or standalone basis. T he
private direct investment process can be brok en into three broad
p ases i ma ing, ii managing and iii moneti ing etting p a
formal investment committee process around the implementation
of these phases and setting up the necessary infrastructure in
t e family office for dealing wit direct investments are critical
amily offices need to ma e s re t at t ey ave t e rig t reso rces
available and policies and procedures in place to ensure that the
risk s and opportunities around each investment are understood and
managed see fig re
F igure 7 . 4 . P riv ate direct inv esting process
P hase
M a k ing
M a na g ing
M o netiz ing
D escription
T he process of deciding to mak e
the inv estment
T he ongoing management and
monitoring of the inv estment
T he process to return capital
to the inv estor ( can b e ongoing)
•
•
•
Key
activ ities
•
•
•
•
•
O ngoing
support
network
Researching
Sourcing
Evaluating/ due diligence
Structuring
( e. g. , M & A and tax implications)
F inancing & capital mark ets/
structure
Closing
•
•
•
Strategic objectives
• M & A, organic, etc.
Operations, financial res lts cas
Capital mark ets/ structure
•
efinancing
• D ividend recapitalization
• F uture capital needs
• Compliance
Governance
amily Office
ow
•
F ull sale
Partial sale
Capital mark ets/ structure
• I PO
efinancing
• D ividend recapitalization
• Securitization
F inancing, M& A, tax, legal, regulatory, process improv ement,
technology, risk management, compliance, accounting/financial reporting
ile family offices often possess t e fo ndation needed to create
a successful direct investment strategy, investment gaps can exist
at eac p ase of t e process amily offices, li e traditional asset
managers, often rely on o tside professionals to assist wit specific
services that are not carried out in- house ( e. g. , M & A advisory,
4 0
•
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capital mark ets advisory, legal advisory, tax advisory, accounting) .
is is partic larly tr e as a family office platform initially egins
pursuing the private direct investing strategy. O ver time, how ever,
as it gains experience and builds out its infrastructure, many of
these professional services can be brought in- house.
I T , trading tools and platf orms
Section
8
ec nology plays an important role in creating an efficient family
office rt ermore, finding t e rig t individ als to manage
t ese platforms is cr cial ec nology elps a family office to
navigate core objectives, manage legacy changes and adhere
to ind stry pdates t is important t at a family office identifies
its core technology needs before choosing or creating solutions.
Automation is an excellent w ay to k eep costs under control and
to mitigate ris
tools and platforms t at a family office s o ld
consider are
• Custody platform ( bank , brok erage or trust company)
• Consolidated and holistic reporting
• T rading and portfolio management tools
• Risk management tools
• General ledger and accounting softw are
• Client Relationship M anagement ( CRM ) tools
• T ax preparation softw are
T he selection of I T should be w ell thought out and designed in order
to provide efficient reporting, trading, portfolio management and
accounting. T he technology can range from off- the- shelf products
to highly sophisticated, customized solutions. M uch of this can be
outsourced or provided at low cost from service providers, freeing
p t e family office reso rces to foc s on growing t e wealt
e
follow ing sections examine a selection of the various platforms in
more detail.
stod
at o
T he use of multiple custodians creates the obligation to consolidate
the assets. T his can be done for a fee by a third- party vendor,
in- house w ith the proper investment in systems, or by the use of a
global custodian.
T he custody of bank able assets is the safek eeping and servicing
of assets, either w ith one or multiple custodians or bank s ( see
fig re
amily Office
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4 1
F igure 8 . 1 . Structure with glob al custody
Client
Global custodian
Centralized custody and administration of all securities
• Overview on total assets, easy comparison of PM’s and simplified controlling
Portfolio
Glob al custodian
Portfolio
2
Portfolio
3
Portfolio
4
Global custodian
Portfolio manager
2
Portfolio manager
3
Portfolio manager
4
External positions
Securities
trading
Securities
trading
Securities
trading
Securities
trading
Asset
management
Asset
management
Asset
management
Asset
management
• Real estate
• Yacht
• Car
• Private jet
• Business
o rce Global Custody Pitchbook, Credit Suisse, 2 0 1 3 .
Global custody refers to the custody and administration of assets
wit one c stodian, w ic offers many advantages s c as
•
e consolidation of all an a le sec rities, financial
instruments, and liq uid assets, so that the time- consuming w ork
of consolidation resides w ith the global custodian and not the
family office1
• T he provision of a comprehensive, transparent overview of the
performance of all the assets at all times via a consolidated
investment report ( providing a uniform format and standards for
all assets)
s rvey y amily Office
Exchange in N ovember
2 0 1 2 show ed that family
offices spend one t ird
of their time producing
acco nting and financial
reporting.
4 2
amily Office
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• T he assets can be managed either by the custodian bank , an
external asset manager, or the client himself ( i. e. , the client
selects their preferred asset manager w ith no restrictions,
and the asset manager is free to select the brok ers for
securities trading)
• T he opportunity to include some non- bank able assets, such as
direct real estate investments, mortgages, third- party derivatives,
art collections and yachts
onso idated e o tin
an ca ita and tec no o
A proper design of this process early on w ill allow families to
understand their investments on a holistic basis, identify risk s and
strengt en t eir confidence in t eir family office onsolidated
reporting has been proven to be the most valuable tool of all for a
family office, and is ig ly recommended
adin and o t o io
ana e ent too s
ome family offices employ an asset allocation model, w ic t ey
give to fund managers. O thers mak e their investments in- house,
in w hich case portfolio management and trading systems become
more important.
V arious modules can be added to the infrastructure to deal w ith the
increased scale and comple ity
ese can incl de
• A portf olio management system
T his provides the back bone of a fund’ s operational infrastructure
and acts as the internal book s and records.
• An execution management system
An electronic trading platform that provides D irect M ark et Access
trading connectivity as w ell as direct connectivity to brok er
algorithms.
• O rder management system
is provides t e main trading platform for t e firm s wit an
execution management system, it also provides D irect M ark et
Access trading and brok er connectivity. O ther k ey functions
include compliance ( pre- and post- trade) , rebalancing, order
staging and allocations, and portfolio modeling.
R
too
en c oosing tec nology for a family office, it is imperative to
have the right individual( s) in place to manage and operate the
softw are. Such individuals, w ho may be in dual operational roles,
should have an understanding of performance analysis and of
accounting principles. T hey should be “ detail oriented” , have the
ability to leverage technology for integration purposes and have
basic Excel sk ills. D epending on the size and technical complexity
of t e system, some family offices may ire a ief ec nology
Officer is person wo ld e responsi le for s pport, pdates,
communication and softw are training.
e implementation of in a new or e isting family office may
req uire additional resources. T hese resources might involve
external consultants, w ho can provide advice and support w ith
respect to integration, implementation and t e verification of inp t
and output data.
e entin tec no o
Once t e core needs ave een identified and t e appropriate
solutions chosen, it is vital to implement them effectively.
ppropriate implementation may incl de t e following
• Conceive a detailed project plan, setting out the responsibilities of
each vendor
• Agree the data import processes w ith each vendor
• Create data and functionality test scripts for each platform
• H ire an external consultant for data output testing
• H old freq uent meetings w ith each vendor on progress and on
project plan milestones
M tool is vital for a family office to manage critical information,
such as that relating to family members, in one central location.
I nformation retained in a CRM database should include family
contact information, family discussions regarding services or major
family events, the structure of the family, and third- party contacts,
such as legal counsel, accountants and insurance contacts.
amily Office
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4 3
Appendix
1
T he legal setup
( excluding the US)
ince a family office is a siness, t e
q uestion of w hich jurisdiction provides
the best environment for such activities
often arises. L egal and tax structures w ill
have a big impact on the structure and
operational performance of t e family office
and, as such, need to be given substantial
consideration.
partic lar enefits and disadvantages of
various structures and jurisdictions. T his
analysis is uniq ue to each family. Pertinent
items for consideration in each jurisdiction
incl de
Given that the family is at the center of
t e family office, c oosing a location close
to the family, or at least to the central
members, w ould appear to be much more
important than a tax- optimized choice
of location. Also the proximity to already
existing, substantial family assets can be a
decisive aspect. N evertheless, legal, tax and
regulatory aspects relevant to the setup, as
well as to t e operations of a family office,
have to be check ed carefully.
• Ease of maintaining employees
Structure and j urisdiction
Considering the often global nature
of families and investments today, the
location and str ct re of t e family office
needs to e e i le eno g to manage t e
changing landscape of the family, w hile still
maintaining t e enefits of a traditional,
centrali ed family office
e family s o ld
gather the follow ing information about its
glo al concerns
• Cost of operation versus value received
• Ability to invest and manage assets of a
global family
• Risk s, reputation, and volatility —
economic and political climates
•
eg latory and information filing
req uirements — immigration and visa
req uirements for family members
•
ility to coordinate efficiently wit
advisors in other jurisdictions
• Q uality of communication and relationships
w ith tax and regulatory authorities
• Streamlined exchange of information
• F lexibility to restructure in the future —
including migration
• O pportunities for succession
• L ocation of each family member —
presence in multiple jurisdictions
• F uture migration and travel plans
• Actually ow n the family w ealth
• F uture investment plans and goals in
other jurisdictions
• L ocations w here family members are
subject to various taxes
amily Office
• T ax implications of structure
W hich aspects are actually relevant in each
individual case depends in particular on
w et er t e family office will
• L ocation of substantial family w ealth
4 4
• L egal structures available
O r
• Administer the family w ealth by acting for
the family members
O r
C riteria catalog
• O nly advise family members on their joint
investments, and in selected fields of
activity
After review ing various global interests of
the family, the next step is to investigate
the relevant jurisdictions by w eighing the
D epending on the framew ork provided by
the jurisdiction, there are normally many
aspects that must be considered in order
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
e
to optimize the individual situation w ithin
the given set of legal, tax and regulatory
framew ork s. T his section examines these
considerations in more detail.
•
imitation regar ing financial
activ ities
T he most important law regarding the
reg latory environment for family offices
in Germany is the German Bank ing Act
( K reditw esengesetz — K W G) . T his sets
out the regulatory terms and conditions
for giving investment advice and similar
services. T o w hat extent regulatory
restrictions have to be respected depends
on t e str ct re and t e specific tas s
of t e family office evert eless, t e
following aspects ave to e considered
Ask ing the right q uestions
ab out location
T he most crucial aspect of choosing a
location for a family office may not e t e
legal and tax environment. N evertheless,
there are obviously a few jurisdictions
t at stand o t as centers of family office
excellence.
T he follow ing jurisdiction summaries
provide you w ith information on the
regulatory environment for the provision of
family office services in t e most relevant
jurisdictions and w ith an overview on the
company law and tax issues regarding the
family office itself
is asic information
is intended to illustrate those aspects that
ave to e considered w en defining t e
scope and t e location of t e family office
I t is important to establish w hich q uestions
have to be ask ed — and answ ered — in the
process of setting p a family office
an
•
f t e family office is str ct red as a
company ( corporation or partnership)
that actually ow ns the family w ealth
( w ith the family members as shareholders
or partners) its investments q ualify
as “ ow n account transactions”
( Eigengeschä ften) , w hich do not req uire
a special permit and are not subject
to further regulatory req uirements.
onse ently, t e family office’s
personnel do not req uire special permits.
f, on t e ot er and, t e family office
acts as an advisor to the family or
family members on how to invest
t eir assets, or if t e family office
performs the investments on behalf
of the respective ow ner of the funds,
such activities may req uire special
permission from the F ederal F inancial
Supervisory Authority ( Bundesanstalt fü r
F inanzdienstleistungsaufsicht — BaF in) .
On
ly
, t e ropean
Alternative I nvestment F und M anagers
D irective ( AI F M D ) and the domestic
law based upon this guideline ( K AGB —
K apitalanlagegesetzbuch) became effective
w ith a huge impact on the w hole industry.
I nvestment undertak ings, such as family
office ve icles w ic invest t e private
w ealth of investors w ithout raising external
capital, should not be considered to be
AI F s in accordance w ith this D irective. Any
impact on the activities of M F O s have to be
closely monitored and need to be addressed
individually.
Germany
UK
US
Netherlands
Switzerland
Belgium
Austria
Hong Kong
Mexico
UAE
Qatar
Singapore
Australia
New
Zealand
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
4 5
L imitation regarding legal and
tax adv ice
U nder German law , legal and tax services
may only be administered by law yers and
y certified ta advisors respectively f
a company performs these professional
services, such a company has to be
registered as a law firm or a ta cons ltancy
practice, w hich req uires that the company
is at least partly ow ned and managed by
persons w ho are personally authorized to
render such services. T hus, the provision of
s c professional services y a family office
is only possible if the company meets the
aforementioned req uirements or if it only
arranges for the provision of such services
through trusted advisors.
L imitation of liab ility
( especially stock corporations) do not offer
t e same degree of e i ility as limited
liability partnerships.
But this effect is, more or less, limited to
corporate matters, such as the notarization
of the articles of association and their
amendments and ( in the case of stock
corporations) notarization of other
shareholder meetings. As far as day- to- day
business is concerned, there are no real
differences betw een the relevant structures.
German law does not have structures
compara le to common law tr sts it as
not ratified t e ag e onvention on
the Recognition of T rusts. F or instance, a
foreign trust w ith German- situated property
set up by a w ill is invalid from a German civil
law perspective.
T he extent of possible liability for
professional mistak es is dependent on the
str ct re of t e family office and on t e
legal nature of its services. I f the family
office act ally olds t e family assets as
the legal ow ner) its management is only
accountable w ithin the limits of directors’
and officers’ lia ility inancial losses
are losses of t e family office itself and
cannot be claimed as damages by the
family directly.
L imited liab ility company
owever, if t e family office acts as an
advisor to the family ( still ow ning the
assets according to legal definition any
shortcomings in the q uality of the advice
res lting in financial losses may e claimed
as damages. A total exclusion of liability,
even for gross negligence, is not permissible
under German law . F urthermore, it is
advisable to cover such risk s by using
financial loss ins rance
A stock corporation req uires a minimum
share capital of € 5 0 , 0 0 0 . I t is represented
by its executive directors ( V orstand)
w ho can also act independently. T he
executive directors are chosen by the
supervisory board ( Aufsichtsrat) , w hose
members are elected by the shareholders.
A direct supervision of the executive
directors by the shareholders is not
legally possible.
C ompany law issues
L imited liab ility partnership
amily offices may e str ct red in vario s
w ays in Germany. N ormally, it w ould be
advisable to establish an independent
legal entity using a corporation ( stock
corporation — AG, limited liability company —
GmbH ) or a limited liability partnership
( K G) . T he use of a partnership ( w ithout
built- in limitation of liability) does not seem
appropriate ( but is also possible) . F rom the
point of view of corporate law , corporations
T he limited liability partnership is normally
composed of a GmbH acting as a general
partner, and one or more limited partners
w hose liability can be limited to any amount
( but must be registered w ith the commercial
register of the company) . T he partnership
is managed by the general partner w hich
is a GmbH . O ne or more limited partners
may be managing directors of the GmbH
( general partner) .
4 6
amily Office
A limited liability company ( GmbH ) req uires
a minimum share capital of € 2 5 , 0 0 0 . T he
GmbH is represented by its managing
directors ( Geschä ftsfü hrer) w ho are ( only)
internally bound by shareholder decisions,
but can act independently, against explicit
shareholder instructions, w ith legally
binding effect.
Stock corporation
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
F amily f oundation
According to German civil law , a
foundation is an organization that, by
using its capital, promotes a special
purpose set by the founder. U sually, the
capital of the foundation needs to be
preserved and only the income is spent
for defined p rposes fo ndation
has its ow n constitution regulating its
organizational structure and codifying
the purposes set by the founder.
A foundation has no members or
shareholders and can be formed as
a legal entity.
T ax issues
F rom an income tax point of view , the
treatment of corporations and partnerships
is different. Corporations are subject to
corporate tax ( K ö rperschaftsteuer, 1 5 % ) and
solidarity surcharge ( Solidaritä tszuschlag,
5 . 5 % on the corporate tax) . F urthermore,
trade tax ( Gew erbesteuer, approximately
1 5 % depending on the municipality w here
the business is located) is imposed on the
company.
f a family office is set p as a corporation
and actually holds the family assets,
certain parts of the income ( dividends and
capital gains from the sale of shares in
corporations) are tax- exempt ( except for
5 % of such income w hich is deemed to be
nondeductible business expenses) . T his can
lead to material economic enefits if t e
income is accumulated at the corporate
level
e
ta e emption is not
granted for portfolio dividends ( less than
1 0 % shareholding at the beginning of the
calendar year) received from 1 M arch 2 0 1 3
onw ard. T here are plans to extend this
restriction to portfolio capital gains as w ell.
f, owever, t e profits of t e family
office in t e legal form of a corporation
are distributed to its shareholders
( individuals) , this income ( dividends) may
again be subject to German income tax
( and solidarity surcharge and church tax,
if applicable) , if such shareholders are
ta a le in ermany enerally, a at ta
of 2 5 % and solidarity surcharge ( 5 . 5 %
on the income tax) and church tax ( if
applicable) are applied on the dividends.
I f the shareholding belongs to the private
assets of the shareholder and amounts at
least to 2 5 % respective to 1 % in the case
of the shareholder being employed by the
corporation, the shareholder can opt for the
taxation on the basis of the partial income
procedure ( 6 0 % of the dividend is taxable
and 4 0 % is tax- free) , w hich — in contrast
to t e at ta
allows t e s are older to
consider negative income resulting from the
shareholding.
Partnerships are not subject to taxation
( except for trade tax) . T heir income is
split among the partners ( w ithout regard
to w et er or not a profit distri tion is
actually made) and taxed as their personal
income. Such income of the partners is
subject to income tax ( Eink ommensteuer,
current marginal rate of 4 5 % ) , if the partner
is an individual, or corporate tax, if the
partner is a corporation. D ividend income
and capital gains from shares held at
partnership level may be partially
ta e empt in t is regard, special r lings
may apply ( depending partly on the
shareholder structure) .
it e and
imitation regar ing financial
activ ities
iven t at family offices do not normally
accept deposits from the public on a
professional asis, family offices do
not req uire a bank ing license. Asset
management is a standard activity of many
family offices sset management as s c
i. e. , acting in the name and for the account
of the family — is currently not subject to
licensing in Sw itzerland.
H ow ever, asset managers are subject
to the Anti- M oney L aundering Act, and
must become members of a recognized
anti- money laundering self- regulatory
organization or directly subordinated to
the Sw iss F inancial M ark et Supervisory
t ority
M
f t e family office
acts as an asset manager of a collective
investment scheme ( either Sw iss or
foreign) , a F I N M A authorization is req uired
for the asset management activity. F urther,
if a family office intends to distri te nits
or shares of a collective investment scheme,
this is also a regulated activity and subject
to a F I N M A authorization.
L imitation of liab ility
family office wo ld normally e
established as a share corporation and not
as a partnership. T his is to avoid, as much
as possible, personal liability of the board
and t e managers of t e family office f t e
family office is part of t e family siness
and holds the family assets ( as the legal
ow ner) , the board and the management of
t e family office are only acco nta le to
the company, its shareholders and creditors
w ithin the limits set in the Sw iss Code of
O bligations for any losses or damages
arising from any intentional or negligent
breach of their duties.
f t e family office is separated from t e
family business, and therefore acts as a
contractual advisor to the family and its
companies, the general liability rules for
obligations and agency contracts apply.
nder wiss law, t e family office wo ld e
liable for any fault, w ithout any limitation
w ith regard to the amount. As a matter of
course, the liability is limited by contractual
agreements to gross negligence and w ilful
misconduct or capped at a certain amount
for “ slight” negligence.
C ompany law issues
e legal form of a wiss family office is
neither driven by the complexity of its
functions nor the family’ s w ealth structure.
Given the unlimited personal liability of
at least one partner, Sw iss partnerships
are not a common legal form for a family
office wiss fo ndations are also seldom
used, given their rigid rules in the Sw iss
Civil Code. I n addition, Sw iss law does
not provide for legal forms comparable to
common law trusts, although Sw itzerland
as signed t e ag e onvention of
ly
on t e law applica le to tr sts and on
their recognition, w hich has been in force
in Sw itzerland since 2 0 0 7 . F inally, limited
liability companies are often avoided, given
the need to register company members
w ith the register of commerce. T herefore,
the usual legal form w ould be a share
corporation.
amily Office
M ore important than the legal form is
the fundamental q uestion of w hether
t e family office olds t e family assets,
i e , w et er t e family office is part of
the family- run concern or w hether the
family office is separated from t e family
business. I n practice, both setups exist. A
separation is more often seen in large- scale,
multinational family businesses w ith fully
operational entities, w hereas integration
occurs w here the business is smaller or the
assets only consist of financial investments
T ax issues
D ue to Sw itzerland’ s federal system, taxes
are levied at three different levels, the
federal, cantonal and communal level.
T herefore, the taxation of similar legal
structures varies from canton to canton as
some of the applicable regulations, and in
particular tax rates, are not harmonized.
I n general, corporate taxation for family
offices in wit erland consists of t e
following aspects
• Corporate income tax is levied at the
federal, cantonal and communal level.
W hereas the federal statutory tax rate
is
of t e net profit after ta , t e
cantonal and communal rates vary
depending on the location of the entity
and the tax privileges available, if any. I n
the case of ordinary taxation, the total
effective maximum tax burden, consisting
of federal, cantonal and communal taxes,
ranges from approximately 1 2 % to 2 4 % .
• Provided that a tax privilege is applicable,
the total effective maximum tax burden
starts at approximately 8 % .
• Capital tax on net eq uity is also due
once a year and varies, as it is levied on
the cantonal and communal level only,
betw een 0 . 0 0 1 % and 0 . 5 2 5 % depending
on the location of the entity and the tax
privileges available, if any. Approximately
half of the cantons allow corporate
income tax to be credited against the net
eq uity tax.
s ally, family offices provide t eir services
mainly to related parties in a closed
environment. I n order to avoid discussions
w ith the tax authorities on the taxable
profit, family offices s o ld eit er prepare
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
4 7
s fficient doc mentation on t eir transfer
prices or reach a respective agreement
w ith the authorities in an advance tax
r ling
c a r ling wo ld generally define
t e ta a le profit ased on t e cost pl s
method, w ith a mark up of betw een 5 % and
1 5 % , depending on the value- added of the
operations in Sw itzerland.
A one- off capital duty of 1 % is generally
levied on capital increases or contributions
to Sw iss- incorporated companies. H ow ever,
tax planning is available around exemptions
for ( i) q ualifying mergers, reorganizations
and financial restr ct rings and ii ot er
contributions w ithin incorporations and
capital increases of p to t e first
m
I n addition, a securities turnover tax on the
sale or exchange of taxable securities may
apply if t e family office i
alifies as a
securities dealer in the capacity of a brok er
or dealer or ii trades on t e family office’s
ow n account, provided it holds more than
CH F 1 0 m of taxable securities. T he tax rate
is 0 . 1 5 % for Sw iss securities and 0 . 3 % for
foreign securities.
Economic double taxation, such as
taxation of the corporation and taxation
of the shareholder, according to his or her
distribution, should also be considered. But
it may be reduced or avoided by mitigating
provisions similar to the partial taxation
of dividends distributed to Sw iss residents
or the participation exemption applicable
to Sw iss corporate shareholders, provided
they hold in both structures a minimum
s are of
in t e family office or t e
participation exemption, an alternative
fair mark et value of the participation of a
minim m of
m is s fficient
Also, it is w orth mentioning that due to
t e ag e onvention of
ly
on the law applicable to trusts and their
recognition, w hich has been in force in
Sw itzerland since 2 0 0 7 , Sw iss- based
family offices acting as tr stee or protector
should generally not trigger negative
tax implications in Sw itzerland. T his is
because in neither capacity is the family
office t e eneficial owner of t e tr st
assets, although the trustee holds the legal
title. T rust assets have to be permanently
monitored, controlled and managed,
w hereas less complex structured assets
4 8
amily Office
may req uire less monitoring, but focus
more on asset protection and preservation
for future generations.
st ia
imitation regar ing financial
activ ities
U nder Austrian law , legal and tax services
may only be offered by law yers and
y certified ta advisors f a company
performs such professional services, it
as to e registered as a law firm or a ta
consultancy practice. T hus, the provision
of such professional services by a family
office is only possi le if t e company meets
the aforementioned req uirements or if it
arranges for the provision of such services
through trusted advisors only.
L imitation of liab ility
T he extent of possible liability for
professional mistak es depends on the
structure of the legal form of the family
office and on t e nat re of its services f
t e family office manages a company t at
actually holds the family assets ( as the legal
owner , t e family office is only acco nta le
wit in t e limits of its directors’ and officers’
liability. F inancial losses of the holding
company itself are losses of t e family office
itself and cannot be claimed as damages by
the family directly.
f t e family office acts as an advisor to t e
family’ s companies or the family members
themselves, any shortcomings in the q uality
of t e advice res lting in financial losses
may be claimed as damages. N ormally
the liability is ( and should be) limited by
contractual agreement to gross negligence
and/ or capped at a certain amount.
C ompany law issues
e legal form of a family office in stria
is mainly defined y t e family’s wealt
structure. Complex structures and assets
have to be permanently monitored,
controlled and managed, w hereas less
complex structured assets may req uire
less monitoring, but focus more on asset
protection and preservation for future
generations. D epending on the family’ s
wealt str ct re, a family office’s f nctions
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
range from mere administration to highlevel advice and management services.
M ore important than the legal form is the
fundamental q uestion of w hether the family
office olds t e family assets, i e , w et er
t e family office is part of t e family wealt
or is separated from the family or business.
D epending on the family’ s asset structure,
the Austrian jurisdiction offers different
suitable legal forms. Since the introduction
of the Austrian Private F oundation Act in
t e
s, many family owned fort nes
w ere endow ed in private foundations.
Accordingly, many organizational and
administrative services are provided by the
foundation’ s governing board.
T oday, the governing board not only
manages and coordinates family assets,
t also needs e pertise in ot er fields and
should guarantee independent, complete
and comprehensive advice. Although
the foundation’ s governing board is not
considered the management board of the
private foundation by the Austrian Private
o ndation ct, a family office can e
installed through the foundation deed.
e family office’s mem ers, tas s,
functions, rights and goals, as w ell as the
governing board’ s instruction rights can
be established in the foundation’ s deed.
O utside the legal form of the Austrian
private fo ndation, a family office can e
set up as the managing board of a holding
company w ith limited liability ( GmbH ) ,
w hich actually holds the family’ s assets, or
as a service company w ith limited liability
that offers advisory services to the family’ s
holding companies or the family members
themselves.
T ax issues
F rom a tax planning perspective, family
offices can e set p in a variety of legal
forms, such as corporations, partnerships
or private fo ndations
ic form fits
the req uirement best w ill depend on the
individual asset and holding structure as
w ell as on the range of services provided
t ro g t e family office
F rom an income tax perspective,
corporations and partnerships are treated
differently. Corporations are subject to
tax, w hile partnerships are “ look through”
vehicles and taxed at the partner’ s level.
f a family office is set p as a corporation
and actually holds the family assets,
t en dividends incl ding idden profit
distributions) received by an Austrian
company from other Austrian companies
are exempt from corporate income tax
( no minimum holding is req uired) . Capital
gains derived from the sale of shares in
Austrian companies are treated as ordinary
income and are subject to tax at the regular
corporate tax rate.
An Austrian company is entitled to the
international participation exemption,
if it holds at least 1 0 % of the share
capital of a foreign corporation that is
comparable w ith an Austrian corporation
for more than one year. D ividends from
participations that do not meet the criteria
for international participations are subject
to the general corporate income tax rate
of 2 5 % . H ow ever, shareholdings in EU
corporations, certain European Economic
Area ( EEA) corporations and corporations
that are resident in other countries
w ith w hich Austria agreed to exchange
tax information q ualify as international
portfolio participations. D ividends from
such international portfolio participations
are exempt from tax, irrespective of the
ow nership level.
D istributions from corporations are
subject to a w ithholding tax of 2 5 % ( from
an ary
, t e rate will increase
to 2 7 . 5 % ) , if not q ualifying as repayment
of capital. Partnerships themselves are
not subject to taxation. T heir income is
allocated to the partners ( irrespective of
any distribution) and taxed as the partner’ s
income. Currently, the top marginal rate
for individ als is
from
t is will
increase to 5 5 % .
A private foundation is subject to the
standard corporate tax rate of 2 5 % .
ividends incl ding idden profit
distributions) received by an Austrian
private foundation from Austrian and
foreign companies are exempt from
taxation. Capital gains derived from the
sale of shares are subject to a special
intermediary tax of 2 5 % w hich can
be set against the w ithholding tax on
grants of the private foundation to its
eneficiaries rants are s ect to a
w ithholding tax of 2 5 % ( from 2 0 1 6 the
rate w ill increase to 2 7 . 5 % ) .
legal entity using a corporation ( stock
corporation — N V , limited liability company —
BV ) . T he use of a partnership ( w ithout
built- in limitation of liability) does not seem
appropriate ( but is also possible) . F rom the
point of view of corporate law , corporations
( especially the BV ) offer a large degree of
e i ility
e et e ands
imitation regar ing financial
activ ities
T he most important law regarding the
reg latory environment for family offices in
the N etherlands is the F inancial Supervision
Act ( W et F inancieel T oezicht — W ft) . T he
W ft sets out the regulatory terms and
conditions for giving investment advice
and similar services. T his law is monitored
by the Authority for the F inancial M ark ets
( AF M ) . Any company or person w ishing to
provide financial services will need a permit
from the AF M . T he costs of these permits
range from € 2 , 0 0 0 to € 5 , 5 0 0 . N either the
law nor the AF M distinguishes betw een the
legal forms of a financial services company
Besides a permit for the company itself, all
employees providing t e act al financial
services will re ire a ft certificate i e ,
they must have completed a professional
training) .
L imitation of liab ility
T he extent of possible liability for
professional mistak es is dependent on the
str ct re of t e family office f t e family
office olds t e family assets as t e legal
ow ner) , its management is only accountable
wit in t e limits of directors’ and officers’
liability.
f, on t e ot er and, t e family office acts
as an advisor to the family ( still ow ning
t e assets according to legal definition ,
any shortcomings in the q uality of the
advice res lting in financial losses may e
claimed as damages. N ormally, the liability
is — and should be — limited by contractual
agreement to gross negligence and capped
at a certain amount. I t is advisable and
common to cover such risk s by using
financial loss ins rance
C ompany law issues
amily offices may e str ct red in vario s
w ays in the N etherlands. N ormally, it w ould
be advisable to establish an independent
amily Office
D utch law does have structures comparable
w ith common law trusts ( foundations) .
e et erlands as ratified t e ag e
Convention on the Recognition of T rusts
dated
ly
or ta p rposes,
assets ow ned by a trust- lik e entity
( separated private assets or APV ) are
generally attributed to the settlor or his or
her heirs.
L imited liab ility company ( Gmb H)
A limited liability company ( BV ) req uires
a minimum share capital of € 0 . 0 1 . T he
BV is represented by a board consisting
of at least one director ( bestuur) . T he
members of the board are elected by the
shareholders. T he board is ( only) internally
bound by shareholder decisions, but
can act independently, against explicit
shareholder instructions, w ith legally
binding effect.
Stock corporation ( NV )
A stock corporation req uires a minimum
share capital of € 4 5 , 0 0 0 . I t is represented
by a board consisting of at least one
director. T he members of the board can
act independently. T he board members are
chosen by the shareholders or, in the case
of larger corporations, a supervisory board
( Raad V an Commissarissen) . A supervisory
board is compulsory if the company either
has capital exceeding € 1 6 million, more
than 5 0 employees on a stand- alone basis
or more than 1 0 0 employees on a group
basis. T he supervisory board is elected by
the shareholders.
D utch f oundation
A foundation ( Stichting) is a legal entity
that, by using its capital, promotes a special
purpose set by the founder. A foundation
has no members or shareholders. T he
foundation is represented by a board
consisting of at least one director. T he w ay
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
4 9
the board is appointed is not prescribed by
civil law . A procedure to appoint the board
can e c osen to fit t e appropriate needs
of the foundation, but the choice has to be
included in the articles of association.
I t is prohibited for a D utch foundation
to mak e distributions to its founder( s) ,
director( s) or any other persons unless, in
the latter case, the distribution has a social
or charitable purpose.
T ax issues
F rom a tax point of view , the treatment of
corporations and foundations is different.
C orporations
Corporations are subject to corporate
income tax ( V ennootschapsbelasting, 2 0 %
on t e first
,
of profit,
on t e
profit over t at t res old f a family office
is set up as a corporation and holds the
family assets, certain parts of the income
( dividends and capital gains from the sale of
shares in corporations) are tax- exempt. T he
tax exemption is not granted for portfolio
dividends ( less than 5 % shareholding)
or dividends received from corporations
resident in tax havens. D istributions by
t e family office or corporation to t e
shareholders are generally liable to dividend
w ithholding tax ( 1 5 % ) .
F oundations
T he D utch foundation is only liable to
corporate income tax to the extent
that it performs commercial activities.
I f a foundation engages in commercial
activities, t t e profit does not e ceed an
amount of € 1 5 , 0 0 0 in a year ( or € 7 5 , 0 0 0
in t e last five years , t e e emption will
also apply istri tions y t e family office
or foundation are generally liable to D utch
gift tax ( 1 0 % - 4 0 % ) .
e i
imitation regar ing financial
activ ities
amily offices in elgi m may e s ect to
several law s and royal decrees regarding
t e s pervision of t e financial sector and
5 0
amily Office
of financial services
is legislation sets
out the regulatory terms and conditions
for giving investment advice and similar
services.
T his legislation is monitored by the
F inancial Services and M ark ets Authority
( F SM A) . Any company or person w ishing to
provide financial services will need a permit
from the F SM A. T he cost of these permits
depends on the k ind of services offered by
t e family office
e law limits financial
services to certain legal forms.
Besides a permit for the company itself,
employees providing t e act al financial
services may re ire certain certifications,
depending on the services offered.
L imitation of liab ility
T he extent of possible liability for
professional mistak es is dependent
on t e str ct re of t e family office
f t e family office olds t e family
assets ( as the legal ow ner) , the liability
of its management w ill be covered by
the directors’ liability as described in
the Belgian Companies Code or, if the
management is not a director of the family
office, y t e contract etween t e family
office and t e management
f, on t e ot er and, t e family office acts
as an advisor to the family ( still ow ning
t e assets according to legal definition ,
the liability for shortcomings in the q uality
of t e advice res lting in financial losses
w ill be a contractual liability. N ormally
this liability is — and should be — limited by
contractual agreement to gross negligence
and capped at a certain amount. I t is
advisable and common to cover such risk s
y sing financial loss ins rance
C ompany law issues
amily offices may e str ct red in vario s
w ays in Belgium. N ormally, it w ould be
advisable to establish an independent legal
entity using a corporation ( a public limited
company — N V , or a private limited liability
company — BV BA) .
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
P riv ate limited liab ility company
( BV BA)
A private limited liability company ( BV BA)
req uires a minimum share capital of
€ 1 8 , 5 5 0 . T he BV BA is represented by one
or more directors ( zaak voerder/ gé rant) .
A distinction is made betw een a statutory
director ( appointed in the articles of
association) and a non- statutory director
( appointed by the general meeting of
shareholders) . T he board is ( only) internally
bound to shareholder decisions, but can act
independently, against explicit shareholder
instructions, w ith legally binding effect.
P ub lic limited company ( NV )
A public limited company ( N V ) req uires
a minimum share capital of € 6 1 , 5 0 0 . I t
is represented by a board consisting of a
minimum of three directors ( bestuurders
or administrateurs) . H ow ever w here the
company is incorporated by tw o founders
or has no more than tw o shareholders, the
board of directors may be limited to tw o
members. T he members of the board can
act independently. T he board members are
chosen by the shareholders.
T ax issues
Corporations are subject to corporate
income tax ( V ennootschapsbelasting,
of in principle
e ig est
rate for small and medium enterprises
( SM Es) is, how ever, 3 5 . 5 4 % . An SM E for
the application of the so- called reduced
progressive ta rates is defined as a
company wit a ta a le profit not e ceeding
€ 3 2 2 , 5 0 0 . I ncome below € 3 2 2 , 5 0 0 is
taxed at progressive rates ranging from
2 4 . 2 5 % to 3 4 . 5 0 % , to be increased w ith 3 %
crisis surtax ( subject to conditions, and not
applicable to holding companies) .
f a family office is set p as a corporation
and holds the family assets, certain parts
of the income ( dividends and capital gains
from the sale of shares in corporations) are
( partly) tax- exempt. Capital gains on shares
w hich are held for an uninterrupted holding
period of one year are subject to a 0 . 4 1 2 %
tax. T his rule is, how ever, only applicable
to large companies ( and not to SM Es) . I f
the one- year holding period is not reached,
the capital gain w ill be taxed at the rate of
2 5 . 7 5 % . D ividends received are taxed at
the normal tax rates. H ow ever, according
to the EU Parent- Subsidiary D irective,
the participation exemption provides
for a ded ction of
of alifying
dividends from the taxable basis in certain
circumstances.
the principal, and employment law s and
other public liabilities ( and other litigation)
w ill attach to the individual. F or those
w ho w ish to limit liability, there are three
entities normally considered limited lia ility
companies ( L td) , limited partnerships ( L Ps) ,
and limited liability partnerships ( L L Ps) . All,
in general, protect t e owner from financial
penalty up to the level of eq uity invested in
t e family office entity
istri tions y t e family office or
corporation to the shareholders are
generally liable to a dividend w ithholding
tax ( 2 5 % ) . A reduced rate applies to
dividends paid by small companies on
nominative shares issued as of
ly
provided t ese s ares are
received in exchange for a contribution
of cash into the company and that an
ow nership req uirement and holding period
req uirement are met. T he rate amounts to
2 0 % for dividends distributed during the
third year follow ing the contribution, and to
1 5 % for dividends paid as from the fourth
year follow ing the contribution.
An L P is used primarily as an investment
vehicle w here the aim is purely assetholding, grow th, and income generation. An
L P is normally distinguishable from an L L P
because its ow ners are generally not active
w ithin an L P business. T herefore, an L L P
is most freq uently seen w here the entity
is a trading concern or w here the ow ner
is active in the business. L Ps are more
freq uently used for U K - based families as a
vehicle w hich can be used to transfer w ealth
through the generations in a w ell- governed
and ta efficient manner over time
e
R egulatory env ironment
family office can wor at different
levels — from being run by a small group of
trusted individuals or family members to
being managed by a professional service
provider e laws governing a family office
can vary depending on its structure. I n the
U K , investment advice is given either by
a financial advisor or a stoc ro er ot
have to be registered w ith the F inancial
Conduct Authority ( F CA) , and certain larger
institutions have to be registered w ith the
Prudential Regulatory Authority. T he F CA
is the independent body that regulates
t e financial services ind stry in t e
W ith statutory pow ers invested in it by the
F inancial Services Act 2 0 1 2 , the F CA has
a w ide range of rule- mak ing, investigatory
and enforcement pow ers.
L imitation of liab ility
amily offices can act as an nincorporated
entity and thereby there is no limitation of
liability. All investments remain ow ned by
M any international investors w ant to use
U K law as the governing law of operation
because of the independence and enduring
stability of the U K judicial system. An
often perceived disadvantage of obtaining
limitation of liability is the corresponding
re irement to lodge financial information
w ith the U K authorities, w hich then
becomes available to the public. T hose
wis ing to eep t eir financial affairs
private can, how ever, often tak e advantage
of vario s opport nities to eep t eir profile
private, w ith appropriate structuring. M any
family offices are esta lis ed in t e
as
an advisory function but w ith ow nership
of assets held abroad. T his is to tak e
advantage of t e financial e pertise in
L ondon, but also because certain families,
w ho are not citizens of the U K ( although
they may be tax residents) , can tak e
advantage of the U K tax system, w hich
allow s income earned outside the U K to
not be taxed in the U K unless brought into
the country.
L egal structures
t is possi le to set p a family office in t e
sing any of t e following str ct res
amily Office
L imited company
A limited company is a corporate entity
limited by shares. T he family may be
the shareholders and possibly also act
as directors, w ith or w ithout non- family
professionals at t e family office
company has separate legal personality.
P artnerships
A partnership is tw o or more persons
carrying on a siness wit a view to profit
I t is effectively transparent for tax purposes
( i. e. , the partners are taxed on their share
of the income and gains of the partnership) .
An L P has “ general partners” w ho manage
the partnership, and “ limited partners” w ith
limited liability, w ho do not. An L L P is an
entity that is taxed in the same w ay as a
partnership, w hile affording limited liability
to its members.
A trust
A trust is an arrangement w hereby assets
are eld y tr stees for t e enefit of t e
tr st’s eneficiaries
ey are generally
governed by a trust deed.
I nf ormal or contractual
relationship
F amilies may employ individuals directly to
provide t em wit family office services
Alternatively, there may be an informal
arrangement w hereby individuals w ho
are employed by the family company also
provide family office services to t e family
T ax structures
U K resident limited companies are
legally distinct entities and are subject
to corporation ta on t eir profits on
U K resident companies are not subject
to corporation tax unless they carry out
business in the U K through a “ permanent
establishment. ” I f they receive income from
a U K source other than via a permanent
establishment ( e. g. , from U K property or
other U K investments) , they may be subject
to income tax.
Partnerships ( L Ps and L L Ps) are generally
transparent for tax purposes, and the
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5 1
partners are taxed directly on their share
of the income and gains. T he trustees of
U K resident trusts are subject to income
tax and capital gains tax on the income and
gains of the trust. N on- U K resident trusts
are subject to U K income tax on U K source
income. Anti- avoidance provisions can
apply to tax income and gains received by
non- U K trusts, companies and other entities
for U K residents connected w ith the entity.
T his is a complex issue and advice should
be tak en before establishing a non- resident
entity. H ow ever, offshore entities can
provide tax advantages in certain situations,
particularly in respect of family members
w ho are non- U K resident or non- U K
domiciled. W here payment is made for
family office services nder a contract al
or informal arrangement, the recipient may
be subject to tax on the income. T he precise
ta treatment will depend on t e specific
circumstances of the case.
e nited
a
i ates
T here are limited jurisdictions in the M iddle
ast w ere family offices can e set p to
successfully manage the affairs of a family.
T he D ubai I nternational F inancial Center
and the D ubai M ulti Commodities Center
are tw o free zones w ithin the U AE that offer
vario s enefits, and cater to t e family
office str ct re
T he D ub ai I nternational F inancial
C enter ( D I F C )
T he D I F C w as established in 2 0 0 4 as a free
one financial center offering a convenient
platform for leading financial instit tions
and ancillary service providers. T he D I F C is
a well nown and esta lis ed risdiction
it aims to play a pivotal role in meeting the
growing financial needs and re irements
of the region, w hile strengthening link s w ith
t e financial mar ets of rope, sia and
the Americas.
SF O R egime
I n order to provide a platform for families
to manage their ow n w ealth, the D I F C has
introduced the SF O Regulation, w hich
applies to families comprising one individual
or a group of individuals all of w hom are
the bloodline descendants of a common
5 2
amily Office
O ne of the main criteria for establishing a
D M CC SF O is that the family’ s w ealth has
a minimum of U S$ 1 million of investible or
liq uid assets.
ancestor or t eir spo ses f rt er defined
w ithin the SF O Regulation) . O ne of the main
criteria for establishing a D I F C SF O is that
the family’ s w ealth exceeds the req uired
minimum of U S$ 1 0 million.
L egal structure
M F O s are also possible in the D I F C. I f
providing w ealth and asset management
services to multiple families, this w ill fall
nder t e financial reg lations of t e
ai
F inancial Services Authority ( D F SA) , w hich
reg lates all financial services cond cted
in the D I F C ( purely consulting or advisory
services w ould not fall under D F SA
regulation) .
L egal structures
D M CC SF O s are permitted as free zone
str ct res wit a specific license to
allow the w ealth, asset, and legal and
administrative affairs management of a
single family. T hese can be provided to a
family member, family business, family
entity ( corporate structure) , family trust
or foundation. T he D M CC SF O must be
w holly ow ned by the same family, or by a
registered trust ow ned by the same family
members.
SF O s may be structured in various w ays
wit in t e
several ve icles are
permitted, w hich include ( but are not
limited to t e following
C riteria f or setting up an SF O
• Company limited by shares ( L T D )
T he main criteria for both the D I F C and
M are
• L imited liability company ( L L C)
•
of t e ltimate eneficial owners ip
of the SF O belongs to members of a
single family
•
f t e ltimate eneficial owner is a tr st
or similar entity, 1 0 0 % of the principal
eneficiaries controlling individ als are
members of the same family
• L imited liability partnership ( L L P)
• General partnership ( GP)
enefits o the
T he D I F C offers companies a 1 0 0 % foreign
ow nership structure, no exchange controls,
and a U S dollar- denominated environment.
T he D I F C also follow s an international
legal system based on the common law
of England and W ales, an independent
common law judicial system consisting
of t e
dicial t ority t e
courts) , and a regional international
arbitration center launched by the D I F C
and the L ondon Court of I nternational
Arbitration ( L CI A) .
D ub ai Multi C ommodities C enter
T he D ubai M ulti Commodities Center
( D M CC) w as originally established in 2 0 0 2
as a commodity mark et place. H ow ever,
today it caters to a broad range of activities
and is currently one of the largest and
fastest- grow ing free zones in the U AE. T he
D M CC offers 1 0 0 % foreign ow nership and
recently expanded its offering to include an
SF O license to manage the private w ealth
of family members, w here all individuals
are bloodline descendants of a common
ancestor or their spouses.
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
• T he SF O does not provide services to
t ird parties it manages a single family’s
proprietary assets only
• T he SF O has a physical presence w ithin
the applicable free zone
UAE tax structure
T here is currently no federal U AE taxation.
Each of the individual emirates ( D ubai,
Sharjah, Abu D habi, Ajman, U mm Al Q uain,
Ras Al K haimah and F ujairah) has issued
corporate tax decrees that, theoretically,
apply to all businesses established in the
U AE. H ow ever, in practice, these law s have
not been enforced.
T he D I F C applies a 0 % tax rate guaranteed
ntil
, w ile t e M offers a specific
tax exemption for 5 0 years from the date of
incorporation. T hus, families w ho decide to
set up an SF O in the D I F C or D M CC can tak e
advantage of a 0 % tax rate on income and
profits, as well as t e freedom to repatriate
capital and profits wit o t restrictions
ey may also enefit from t e wide
netw ork of double taxation treaties w ith no
restrictions on foreign exchange.
W hile there is currently no applicable value
added tax or corporate income tax enforced
in the U AE, the introduction of both are
under consideration. All families and
businesses considering establishment in
the U AE should be mindful of the potential
introduction of both direct and indirect
taxes, and of future developments.
ata
T he Q atar F inancial Centre ( Q F C) , w hich
w as established in 2 0 0 5 , is another place in
the M iddle East w here it is possible to set up
a family office
e
stands alone from
the Q atar state regime and has separate
legal, regulatory and tax law s, w hich are
of international standard. T he Q F C is not a
free zone or an offshore center.
After the enactment of the SF O Regulations
( SF O R) in 2 0 1 2 , the Q F C Authority ( Q F CA)
now aims to inform families and advisors
to families to consider the Q F C as the
preferred jurisdiction for SF O s and for other
investment purposes.
enefits o setting up in the
F amilies w ho decide to set up an SF O at
the Q F C can tak e advantage of a 1 0 0 %
foreign ow nership structure w ith extensive
tax exemptions available, a low effective
tax rate ( currently 1 0 % ) , and the freedom
to repatriate capital and profits wit o t
commercial and tax restrictions. T hey can
also enefit from a wide networ of do le
taxation treaties, a w orld- class regulatory
and legal environment, and a sw ift and a
streamlined licensing process.
Setup and activ ity req uirements
An SF O is a corporate body, established
w ithin the Q F C as an unregulated entity that
manages the business, investments and
w ealth of a single family w ith a minimum of
U S$ 5 million in investible or liq uid assets.
F amilies interested in setting up an SF O
in t e
are enco raged, in t e first
instance, to set up a meeting w ith the Q F CA
strategic team, w ho w ill provide them w ith
deep understanding of the setup process
and the documentation req uired. A single
application pack should be submitted to the
Q F CA w hich covers both the licensing and
the registration of the SF O . T he application
m st e accompanied y
etter rom an eligi le firm
e letter s o ld confirm t at t e rticles
of ssociation of t e O satisfies t e
re irements of t e O , confirmation
that the applicant family constitutes a single
family and is ultimately ow ned by one or
more family members of the single family/
family fid ciary str ct res family entities
Statement signed b y the applicant
or its designated representativ e
T his should state the name of the common
ancestor and s fficient information to
prove t at t e applicant alifies as a single
family. T his also includes, but is not limited
to, a description of the sources of assets of
the single family, full details of w ho controls
t e single family, t e legal and eneficial
ow ners, the total number of family
members, the SF O ’ s activities, and details
of the designated representative.
T he SF O must at all times have a registered
office sit ated in t e
or any ot er
approved business building.
uration an
ees
U pon submission of the complete
application pack , the establishment
procedure is generally completed w ithin one
month. T he SF O application and annual fee
amount to U S$ 5 0 0 .
st a ia
R egulatory env ironment
Structures
e laws governing a family office will e
affected by its legal structure. A family
office may e set p in stralia sing
any of the follow ing structures ( or any
com ination of t e str ct res
P roprietary company
A proprietary company is a corporate entity
that is typically limited by shares. T he
family members may be the shareholders
amily Office
or directors of the company, w ith or w ithout
the involvement of non- family professionals.
T he directors have certain common law ,
stat tory and fid ciary o ligations owed to
the shareholders and may be subject to civil
and criminal penalties. A company is a legal
person and has a legal identity separate to
its shareholders and directors.
D epending on the size and status of the
company, t ere will e vario s financial
reporting and auditing obligations imposed
on the company. T he Australian Securities
& I nvestments Commission is the corporate
regulator that administers corporate
legislation and rules.
T rust
A trust is a legal arrangement under w hich
a trustee ( w hich may be a company and/
or family member) holds property for the
enefit of t e tr st’s eneficiaries
e
terms on w hich the trustee may deal w ith
t e property it olds for t e eneficiaries
are generally determined by the trust deed,
trust law and legislation.
pecific ta and reg latory r les apply
for certain types of trusts, including in
partic lar
• Superannuation funds ( i. e. , a type of
pension fund)
• Private ancillary funds ( i. e. , a type of
private charitable foundation)
P artnership
A partnership consists of tw o or more
legal persons carrying on a business w ith
a view to profit partners ip may e
registered as a limited partnership, w here
the liability of one or more partners ( other
than the general partner) for the debts
and obligations of the business is limited.
Compliance w ith statutory req uirements
under Partnership Acts of each state in
Australia may also be req uired.
C ontractual relationship
F amilies may engage individuals directly to
provide t em wit family office services
I ndividuals employed by a family company
( or other entity) may also provide family
office services to t e family mployment of
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5 3
individuals w ill also be subject to statutory
req uirements, including the payment of
salary and superannuation entitlements.
R egulation of serv ices
T he provision of the follow ing types of
services is subject to Australian federal or
state reg lation
• I nvestment advice
• L egal services
• T ax services
• Employment services
Accordingly, care should be tak en to
ensure that the professional services to
e provided y a family office comply wit
the relevant legislative and common law
req uirements.
T hese req uirements w ill include adherence
to rules and legislation that have reporting
and compliance obligations w ith the
stralian a ation Office, and will vary
according to the entities, size and status of
t e family office
ny family office t at operates
internationally should also be aw are of
its obligations w ith regard to foreign
investment policies in Australia. M ost
notably, this w ill req uire liaising and applying
for certain investments w ith the Australian
F oreign I nvestments Review Board.
e family office str ct res descri ed
above ( i. e. , a private company, trust or
partnership) are all recognized as taxpayers
for Australian income tax purposes.
Conseq uently, they are generally req uired
to register w ith the Australian T axation
Office to o tain a ta file n m er and file
annual income tax returns.
Australian resident taxpayers ( e. g. , a
company incorporated in Australia) are
subject to Australian income tax on their
w orldw ide income and capital gains.
or t e year ending
ne
,t e
Australian corporate tax rate is 3 0 % ( or
2 8 . 5 % for companies w ith an aggregated
turnover under AU $ 2 m) . D ividends paid
o t of profits t at ave een s ect
amily Office
Generally, trusts and partnerships are
treated as ow t ro g entities for
Australian income tax purposes. T hat is,
subject to certain exceptions, the taxable
net income of a trust or partnership is
ta ed in t e ands of t e eneficiaries or
partners, respectively, according to their
interests in the trust or partnership. F or the
year ending
ne
, t e ta rate for
an stralian resident individ al eneficiary
or partner w ith taxable income of more
t an
,
is
Another important tax consideration is that
capital gains on trust or partnership assets
ow ned for more than 1 2 months may be
eligible for the 5 0 % CGT discount ( subject
to t e circ mstances of t e eneficiary or
partner) .
ome e ceptions to t at ow t ro g ta
treatment e ist in respect of
• Complying superannuation funds ( w hich
are subject to concessional tax rates)
• Private ancillary funds ( w hich may be
exempt from income tax)
• L imited partnerships ( w hich are generally
taxed as companies)
e
T ax issues
5 4
to Australian tax may be frank ed ( i. e. ,
a frank ing credit broadly provides the
dividend recipient w ith a tax credit for the
underlying company tax paid) .
ea and
R egulatory env ironment
family office can wor at different levels
depending on the family’ s needs and
preferences
e family office can e r n
by a small group of trusted individuals
and/ or family members, or be managed
y a professional services firm
e laws
governing t e family office depend on its
structure.
F inancial advice should be obtained from
an a t ori ed financial advisor registered
under the F inancial Advisers Act, the Code
of Professional Conduct, and other relevant
financial mar et legislation toc ro ers
are also req uired to be licensed w ith
the F inancial M ark ets Authority ( F M A) .
T he pow ers given to the F M A under the
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
F inancial M ark ets Conduct Act 2 0 1 3 are
w ide- ranging and include monitoring,
supervision, investigation and enforcement.
T hey are also responsible for education,
information, policy- mak ing and guidance.
U nder N ew Z ealand law , legal advice
may only be offered by law yers holding a
practicing certificate
L imitation of liab ility
amily offices can act as an nincorporated
entity ( e. g. , trust or partnership) and
conseq uently enjoy no limitation in liability.
I n these cases, all investments remain
ow ned by the principal, and employment
law s and public liability w ill attach to the
individual.
F or those families that w ish to limit liability,
t e family office can e incorporated and
registered w ith the N ew Z ealand Companies
Office company is a separate legal
entity from both a legal perspective and
a tax perspective. T his affords the ow ner
protection from financial penalty p to t e
level of eq uity invested in the incorporated
family office entity company is re ired,
as a minimum, to have one or more shares,
one or more shareholders, and one or
more directors. At least one director must
either be resident in N ew Z ealand, or be
resident in an enforcement country and be
a director in that enforcement country. T he
list of enforcement countries only includes
Australia at present. All directors must be
natural persons.
company m st file an ann al ret rn
confirming t at information eld y ew
ealand ompanies Office is complete and
correct on compliance wit filing may
result in the company being removed from
the Companies Register.
L imited partnerships also afford a level
of protection from liability for the limited
partner w hile the general partners are
liable for all the debts and liabilities of
the partnership, and are generally used
purely as an asset- holding entity. L imited
partnerships are registered w ith the
ompanies Office
T ax issues
F rom a tax planning perspective, family
offices can e set p in a variety of legal
forms, such as companies, partnerships or
tr sts
ic form est fits t e re ired
needs depends on the individual asset and
holding structure as w ell as on the range of
services provided t ro g t e family office
As tax obligations are dependent
on the nature and activities of the
investment entity, advice should be
ta en efore esta lis ing a family office
investment vehicle.
I ncome tax
F rom an income tax perspective,
companies, partnerships and trusts are
treated differently. Companies and trusts
are subject to tax, w hile partnerships are
transparent and taxed at the partners’
marginal tax rate.
C orporate tax
Companies are req uired to lodge an
annual tax return w ith N ew Z ealand I nland
Revenue. T he current company tax rate
is 2 8 % and the standard tax income year
ends on 3 1 M arch, unless prior approval is
received from I nland Revenue.
A N ew Z ealand company is subject to
tax on its w orldw ide income. Relief may
be available under applicable double tax
treaty agreements. Companies that are
1 0 0 % commonly ow ned have the option to
consolidate for tax purposes.
Special rules apply to life insurance,
nonresident insurers, ship- ow ning,
petroleum and mining, and forestry
companies, as w ell as group investment
funds, overseas investments in
controlled foreign companies and
foreign investment funds.
T he dividend imputation system applies to
N ew Z ealand resident companies. D ividends
derived by a N ew Z ealand resident company
are exempt from tax w here the companies
are 1 0 0 % commonly ow ned.
F oreign tax credits can be claimed by a N ew
Z ealand resident. T his credit is limited to
the low er of the amount of tax paid or the
N ew Z ealand tax payable on income.
ere is no capital ta regime owever,
certain transactions are specifically ta a le,
including property acq uired for resale,
or part of business dealings. Recently,
legislation w as enacted to ensure that all
residential property bought and sold w ithin
a tw o- year period is taxable, w ith limited
exclusions.
T rustee tax
I n H ong K ong, advising on securities and
asset management are regulated activities
governed by the Securities and F utures
Ordinance f t e family office is operating
as a business, it has to be a corporation
licensed for “ asset management” ( type
license epending on t e e act scope
of service to be provided to clients, the
family office may need additional licenses
for “ dealing in securities” ( type 1 license) ,
“ advising on securities” ( type 4 license)
or other licenses issued by the Securities
and F utures Commission, a statutory
commission vested w ith policy- mak ing,
investigatory and enforcement pow ers.
rt ermore, if t e family office is an M O
and is tak ing deposits from multiple high
net wort families, s c an office will e
regarded as a “ restricted license bank ”
or a “ deposit tak ing company” under the
Bank ing O rdinance and subject to the
regulations of the H ong K ong M onetary
Authority. H ong K ong offers a w elldeveloped common law system providing a
stable legal environment for the prolonged
settlement of a family office
T rustee income is taxed at 3 3 % and
eneficiary income is ta ed at t e
eneficiary’s marginal ta rate
ere is
an exception to this rule called the minor
eneficiary r le, w ere y distri tions
made to eneficiaries nder
years old
are taxed at 3 3 % .
T he tax treatment of distributions from
tr sts depends on t e classification of t e
trust and the nature of the distribution.
P artnerships
Partnerships are, themselves, not taxed.
T heir income is allocated to the partners in
accordance w ith the partnership interest
held, and is taxed at the partner’ s marginal
tax rate. M arginal tax rates for individuals
range from 1 0 . 5 % to 3 3 % .
on
L imitation of liab ility
on
T he popular types of corporate registration
ve icle for setting p a family office in ong
ong are
• Private company limited by shares
( a subsidiary company)
R egulatory env ironment
family office in ong ong normally e ists
to provide comprehensive services to the
high net w orth individuals ( H N W I s) and
their family members — be it purely ow ning
family assets and businesses, providing
administrative support or conducting
investment management activity. Such
functions or activities are normally run
by the family members or their trusted
employees, w ith the support of professional
service providers, namely, independent
trustees and legal and tax advisors.
T he law s governing the setup and operation
of a family office can vary vastly, depending
on its structure and business model. A
family office s ally ta es t e form of a
private company, managed by trusted
individuals or another company providing
professional services.
amily Office
•
ranc office of a corporation
incorporated outside H ong K ong
Also possible, but less common, are
sole proprietorships, partnerships and
limited partnerships, because they are
not a separate legal entity w hereby all
debts and liabilities w ould be the personal
responsibility of the sole proprietor or
partner, no legal firewall etween t em and
the business exists. F urther, they do not
have continual existence.
M any H N W I s, especially those from
China, w ould w ant to use H ong K ong as
an investment platform for their private
investments overseas, and set up a family
office in ong ong to manage t eir
assets and businesses centrally. Such an
arrangement tak es advantage of H ong
K ong’ s close proximity to Chinese mark ets,
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5 5
its ease of business formation, its sound
legal and bank ing system w ithout foreign
exchange controls, as w ell as its low and
simple ta regime, nder w ic profits
earned outside of H ong K ong, dividends
and capital gains are not taxable.
C ompany law and tax issues
Given the general limited restrictions on
setting p family offices in ong ong,
coupled w ith the low rate of taxation and
offs ore profits ta e emption regime,
H ong K ong is felt to be a favorable place for
H N W I s to consolidate and manage their ow n
assets and businesses.
I n H ong K ong, there are no special legal
provisions relating to the setting up of
family offices and t e following str ct res
are normally sed
P riv ate company limited b y shares
( a sub sidiary company)
A subsidiary company is a common type
of ve icle for setting p a family office
in H ong K ong. T he minimum number of
directors and members is one. T here is no
limitation on the nationality of directors and
members. Both corporates and individuals
can act as members. T hat said, at least
one natural person must be appointed as a
director. Accordingly, overseas corporates
and individuals are free to set up their ow n
family office in ong ong wit few legal
req uirements.
ranch o fice
I f the H N W I is uncertain about the H ong
ong mar et, or t e family office’s
operation in H ong K ong is relatively small
at the initial stage, they can choose to
set p a ong ong ranc office of t eir
foreign corporations. U nder H ong K ong law ,
there is no distinction betw een the foreign
corporation itself and its H ong K ong branch,
and the branch is only an address at w hich
the corporation carries on a business.
Maintaining a ranc office can e simpler
( e. g. , a separate audit is not req uired) .
Also, the business operation of a branch
office can e terminated relatively easily
by notifying the Companies Registry that
it ceases to have a place of business in
5 6
amily Office
H ong K ong, w hereas a subsidiary company
can only be terminated by liq uidation or
deregistration, either of w hich can be a
lengthy and cumbersome process.
L imited company
A limited company is an entity incorporated
under the Company O rdinance of H ong
K ong limited by shares. F amily members
can act as the only shareholders in an
L L C, ow ning the family assets through
ow ning the L L C, and appoint non- family
professional individuals or corporate
bodies as directors to manage the L L C as
a family office
w hich may include businesses, are held
and managed y tr stees for t e enefit
of t e tr st’s eneficiaries
e tr stee can
be a non- family professional individual or
company managing the family assets for
t e eneficiaries, pres ma ly t e family
members. T rustees w ill manage the trust
according to a trust deed, detailing w hat
can and cannot be done by the trustees, the
distri tion of interest and profit, and t e
purpose of the trust.
W ithout setting up a new entity or engaging
a trust, families may employ individuals or
a professional service provider directly to
provide t em wit family office services
L imited partnerships
Hong Kong tax structure
partners ip is defined nder t e
Company O rdinance as tw o or more
persons carrying on a business w ith a
view to profit
ere are two inds of
partnerships, regular partnership and
limited partnership. Partners in a regular
partnership do not enjoy limited liability. I n
a limited partnership, there are tw o k inds
of partners, limited partner and general
partner. W hile both types of partner
are entitled to t e profit generated y
the partnership, only a general partner
has the right and pow er to manage the
partnership. T he trade- off of such pow er
is that a general partner does not enjoy
limited liability. W hile limited partners
cannot tak e part directly or indirectly in
the management of the partnership, they
enjoy limited liability. T herefore, limited
partners ip can e sed as a family office
vehicle to pass dow n a family’ s w ealth
through the generations by having family
members appointed as limited partners,
w hile non- family professional individuals
or corporate bodies can be appointed
as general partners in charge of the
partnership, being remunerated instead
of aving a significant s are of t e profits
generated by the partnership.
H ong K ong’ s simple tax system and low tax
rates are alw ays w elcomed by the many
s w o set p t eir family offices in
H ong K ong.
T rust
Ot er t an owning t e family office in
H ong K ong, directly or through their
overseas corporates, H N W I s can also
consider using a trust structure. A trust is
an arrangement under w hich trust assets,
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
Regardless of w hether a subsidiary
company or a ranc office is sed to
operate the family business, they are
subject to the same tax conseq uences in
H ong K ong.
rofits ta
H ong K ong adopts a territorial concept of
taxation w hereby only persons that carry
on a business in H ong K ong and derive
ong ong so rced profits from t at
business w ould be chargeable to H ong K ong
profits ta
e c rrent corporate profits
tax rate is 1 6 . 5 % .
person defined to incl de a limited
company, a partnership or a trustee)
carrying on a trade, profession or business
in ong ong is s ect to profits ta
on profits arising in or derived from
H ong K ong. Gains of a capital nature are
specifically e empt from profits ta
Partnerships in H ong K ong are not treated
as transparent for tax purposes. Except in
certain circ mstances, profits derived y
a partnership are generally subject to tax
in the name of the partnership. W hile the
definition of a person does not incl de a
tr st, in practice, esides its own profits, a
trustee is also subject to tax on behalf of
t e tr st in respect of t e latter’s profits
D ividends and distributions paid by
companies, partnerships and trusts from
after ta profits in ong ong are not
subject to any further tax in H ong K ong,
either by w ay of w ithholding or otherw ise.
F urther to the above, under the “ source of
profits r le, an entity will not e s ect
to ong ong profits ta even if it carries
on a business in H ong K ong but derives
profits t at are arising or derived o tside of
H ong K ong.
T hat said, the q uestion of locality or source
of profits is a ard, practical matter of
fact. Case law indicates that, as a broad
guiding principle, “ one look s to see w hat
t e ta payer as done to earn t e profits
in q uestion and w here he has done it. ” I t
is necessary to appreciate the reality of
each case, focusing on effective courses for
earning t e profits wit o t eing distracted
by antecedent or incidental matters.
Pursuant to the D epartmental
I nterpretation and Practice N otes ( D I PN )
N o. 2 1 ( revised) , the H ong K ong tax
authorities’ view on certain major types of
income that family business could generate
is as follows
•
rading profits t e place w ere t e
contracts of purchase and sale are
effected”
•
ervice income t e place w ere t e
services are rendered
• Profits from listed s ares location of
the stock exchange w here the shares or
securities in q uestion are traded
• Profits from nlisted s ares t e place
w here the contracts of purchase and sale
are effected
or eac ind of profit, if t e
aforementioned activities are performed
o tside ong ong, t e profits derived
therefrom w ill be offshore sourced and
not s ect to ong ong profits ta
O n the contrary, if any of such activities
are cond cted in ong ong, t e profits
derived therefrom w ill be onshore sourced
and s ect to ong ong profits ta
Also note that apportionment of onshore
and offs ore profits is possi le for service
income derived from activities carried out
partially in and outside of H ong K ong.
O ther merits of the H ong K ong tax system
include the follow ing, H ong K ong does not
tax on capital gains earned by companies
and individuals, and does not impose
w ithholding tax on dividends and interest
received by a foreign entity from a H ong
K ong taxpayer.
astly, ong ong profits ta compliance
procedures are relatively simple and
straightforw ard, an entity is only req uired
to file its profits ta ret rn once a year
toget er wit t e a dited financial
statements.
I ndirect tax
T here is no goods and services tax or valueadded tax in H ong K ong.
Estate duty and gif t tax
T here is no estate duty and gift tax in
H ong K ong.
T axation on trust
T he H ong K ong tax law does not contain a
code, or a set of provisions that deal w ith
the taxation of trusts. I n other w ords, a
trust w ould in practice be taxed in the same
manner as a subsidiary company or branch
office w ere y it wo ld e c argea le to
ong ong profits ta if it carries on a
business in H ong K ong and derives H ong
ong so rced profits
e general practice
is that if a trust is chargeable to tax in H ong
K ong, it w ould be charged in the name of
the trustee.
in a o e
imitation regar ing financial
activ ities
Activities pertaining to securities, futures
and funds management are governed under
t e ec rities and t res ct, apter
( SF A) . T he SF A puts in place the rules and
regulations concerning mark ets, mark et
operators, clearing facilities, intermediaries
and representatives. Regulated activities
include dealing in securities, advising on
corporate finance, f nd management, and
sec rities financing, among ot ers o w at
extent the regulatory req uirements and
restrictions apply depends on the structure
and t e specific tas s of t e family office
amily Office
f t e family office is str ct red as a
company that holds the family’ s w ealth
( w ith the family members as shareholders
and directors and t e family office enters
into investments on its ow n account, such a
company could be view ed as an investmentholding company and therefore w ill not be
regulated under the SF A. Such a company
w ill be subject to Singapore’ s normal tax
rules, and an applicable income tax rate of
1 7 % applies on income that it derives.
On t e ot er and, if t e family office acts
as an investment advisor or manager to
the family’ s asset- ow ning vehicle( s) , such
investment management activities may be
regulated under the SF A. U nder the SF A,
among ot er re irements, t e family office
w ill have to register as a Registered F und
M anagement Company ( RF M C) or apply for
a Capital M ark ets Services ( CM S) license
for fund management w ith the M onetary
Authority of Singapore if there are thirdparty assets under management ( AU M ) . I f
the AU M belongs solely to the family, there
may be an exemption from registering as
an RF M C or holding a CM S license for fund
management. W here the asset- ow ning
vehicle( s) are managed by such a family
office i e , e empt, registered as an M
or licensed under the SF A) , the assetow ning vehicle( s) may be able to enjoy tax
exemption on prescribed q ualifying income.
L imitations regarding legal and
tax adv ice
U nder Singapore law , legal advice may
only be offered by law yers. I f a company
performs such professional services, it
as to e registered as a law firm, wit
Singapore registered practicing law yers.
T here are currently no regulations
specifying that tax advice can only
e rendered y certified ta advisors
in Singapore. H ow ever, there is a tax
accreditation body in Singapore — the
Singapore I nstitute of Accredited T ax
Professionals ( SI AT P) — to w hich tax
professionals can apply to become
accredited tax advisors or practitioners.
T hus, the provision of such professional
services y a family office is possi le if
the company meets the aforementioned
req uirements, hires personnel w ith the
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5 7
relevant tax expertise and accreditation, or
arranges for the provision of such services
through trusted advisors only.
same w ay as a partnership, w hile affording
limited liability to its members in view of its
separate legal status.
L imitation of liab ility
T rusts
T he extent of possible liability for
professional mistak es depends on the
structure of the legal form of the family
office and on t e nat re of its services
A trust is an arrangement w hereby assets
are eld y tr stees for t e enefit of t e
tr st’s eneficiaries
e tr st is generally
governed by a trust deed.
f t e family office act ally olds t e family
w ealth ( as the legal ow ner) , it is only
accountable w ithin the limits of its directors’
and officers’ lia ility inancial losses are
losses of t e family office itself and cannot
be claimed as damages by the family
directly.
f t e family office acts as an investment
advisor or manager to the family’ s companies
or the family members themselves, any
shortcomings in the q uality of the advice
t at res lts in financial losses may e
claimed as damages. N ormally, the liability
is limited by contractual agreement to gross
negligence and capped at a certain amount.
L egal structures
amily offices in ingapore are typically
structured as a limited company. T he use
of partnerships is not commonly seen
( although it is possible) in view of the
unlimited personal liability of at least one
partner. T here are also structures involving
the use of a trust.
L imited company
A limited company is a corporate entity
limited by shares. T he family may be
the shareholders and possibly also act
as directors, w ith or w ithout non- family
professionals in t e family office
company is a separate legal entity distinct
from the directors and shareholders.
P artnerships
A partnership is tw o or more persons
carrying on a siness wit a view to profit
I t is effectively transparent for tax purposes
( i. e. , the partners are taxed on their share
of the income and gains of the partnership) .
A limited partnership must consist of at
least one general partner w ho has unlimited
liability and one limited partner w ho enjoys
limited liability. An L L P is taxed in the
5 8
amily Office
T ax structures
Singapore has adopted a territorial and
remittance- based tax system. T ax is only
imposed on income accruing in or derived
from Singapore, or received in Singapore
from outside, unless otherw ise exempt.
Companies are subject to corporate income
ta on t eir profits at a prevailing rate of
1 7 % ) , w ith certain partial tax exemptions on
chargeable income.
f a family office is set p as a company
in Singapore and holds the family assets,
certain parts of t e family office’s income
( e. g. , Singapore one- tier exempt dividends
and capital gains from the sale of shares in
corporations or other capital assets) w ill be
tax- exempt.
individual, or corporate tax rate if the
partner is a company.
T he taxable income of a trust may be
assessed to tax on the trustee ( in general,
a limited company or t e eneficiaries or
both) depending on the circumstances.
ere ta is assessed on t e eneficiaries,
this is commonly referred to as the “ tax
transparency treatment. ”
W here the taxable income of a trust ( or
part thereof) is to be assessed to tax on the
trustee, such income w ill be subject to tax
at the prevailing corporate income tax rate
( currently 1 7 % ) . T he tax at the trustee level
will e a final ta
I f tax transparency treatment is accorded,
no tax w ill be imposed at the trustee level
on t at eneficiary’s s are of ta a le
income and t at eneficiary will e s ect
to tax on the income distributions received
at his or her ow n individual tax rates. T hat
eneficiary will also e entitled to t e same
concessions, exemptions and foreign tax
credits as if he or she had received the
income directly.
e ico
f t e family office is a ingapore ta
resident company, certain foreignsourced income earned ( e. g. , foreign
dividends) may q ualify for tax exemption,
subject to conditions being met. T he tax
resident family office wo ld also ave
access to Singapore’ s netw ork of over 7 0
comprehensive double taxation agreements
w ith other countries, w hich may offer
certain double taxation reliefs and reduced
w ithholding tax rates.
L egal setup and regulatory
env ironment
e profits of t e family office in t e legal
form of a Singapore tax resident company) ,
w hen distributed to its shareholders as onetier exempt dividend income, w ill be taxexempt in the hands of the shareholders.
W ithholding tax is not applicable on
dividends made y t e family office
amily offices offer a wide range of services,
primarily classified into t ree categories
i legal and oo eeping ii ta
compliance and iii investment advice
L egal services vary, depending on the
specific asset and family str ct re, t
typically involve legal advice w ith respect
to contracted obligations and succession
planning, as w ell as book k eeping and the
maintenance of legal documentation. T ax
services are also determined y t e specific
needs of the family, but normally consist of
t e preparation and filing of ta ret rns and
notices, and the compliance of other tax
Partnerships, limited partnerships and L L Ps
are generally transparent for tax purposes,
and the partners are taxed directly on their
share of the income and gains — at the
prevailing progressive tax rates ( currently
up to 2 0 % or up to 2 2 % for the basis period
from 2 0 1 6 onw ard) if the partner is an
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
amily offices are not specifically reg lated
by law in M exico. H ow ever, it is not
uncommon for w ealthy families to set up a
family office to manage t eir estates ome
families have an SF O to ensure the value
of their assets, w hile others rely on the
services of an M F O or choose to outsource
the services needed through a virtual
family office
obligations arising from the transactions
carried out by the family members directly
or through their investment structures. I n
general terms, legal and tax services do not
have restrictions under M exican law .
H ow ever, some relevant regulations
for investment advice services w ere
introduced recently through the M exican
Stock Exchange L aw ( L ey del M ercado de
V alores — L M V ) and the new ly enacted
M exican Anti- M oney L aundering L aw ( L ey
ederal para la Prevenci n e dentificaci n
de O peraciones con Recursos de
Procedencia I lí cita — L F PI O RPI ) .
I n terms of the L M V , individuals and entities
that provide services for stock portfolio
management or personal investment
advice, w ill be considered investment
advisors and w ill be subject to the
supervision of the N ational Bank ing and
Securities Commission ( Comisió n N acional
Bancaria y de V alores — CN BV ) . T heir
obligations include registering w ith the
, and periodically filing information
w ith the CN BV about their clients and
operations.
I n order to be registered by the CN BV ,
individual investment advisors must, among
ot er re irements, e properly certified,
and have a sound reputation and credit
history. Entities operating as investment
advisors also ave to e properly certified
and ave a good financial rep tation and
credit history, among other things. T hey
s o ld also ave a p ysical office w ere t e
services will e provided, file information
about their shareholders, and provide a
manual that sets out standards and policies
to resolve con icts of interest
I t is important to consider that investment
advisors may not be req uired registration
before the CN BV if, among others,
( i) services are provided exclusively for
t e enefit of a family gro p i e , O
and the services are not promoted in
Me ico ii t e investment advisor is non
resident in M exico, the services are not
promoted in M exico, there is no physical
office availa le in Me ico, and t ere are no
agents, commissioners, or any other type of
representatives of the investment advisor
in M exico.
n terms of t e P O P , family offices
q ualifying as investment advisor also
have obligations relating to anti- money
laundering, including the proper
identification of t eir clients t ro g
now
your customer” procedures, maintenance
of documentation related to the operations
carried out on behalf of their clients,
and the appointment of a compliance
representative before the CN BV .
L imitation of liab ility
I n general terms, investment advisors w ill
be liable for damages from their clients if
they do not comply w ith the restrictions
established by the L M V in rendering their
services. T he L M V does not allow them
to accept any k ind of remuneration for
the promotion of certain securities or
intermediaries accept f nds or sec rities
from their clients ( unless as a remuneration
for t eir services offer g aranteed yields
or act against t eir client’s interest or
act as co- ow ner of their client’ s securities
intermediary contracts, among other
restrictions.
I nvestment advisors are also bound by
the terms of the service contract w ith
the client.
e a st ct es
t is possi le to set p a family office
in M exico using any of the follow ing
str ct res
L egal v ehicles
T he tw o main types of commercial entities
are the limited liability company ( SRL ) and
t e stoc corporation
civil entities
may be used, principally the civil law
corporation ( SC) .
A stock corporation is established by
shareholders w ho are liable only for a
payment of the value of their subscribed
shares. T here must be a minimum of
tw o shareholders and each one must
s scri e to at least one s are t ere is no
maximum number of shareholders. T he
social contract must set up the minimum
amount of capital stock , w hich must be fully
subscribed. T he administration w ill be held
by one or several directors.
A civil law company is established by the
partners for a common purpose that is
primarily economic, but must not constitute
commercial speculation. T he partners
are only liable for the payment of their
contributions. T here must be a minimum of
two partners t ere is no ma im m n m er
of partners. T he social contract must set
up the minimum amount of capital and the
share of each partner. T he administration of
the partnership may be held by one or more
partners.
T ax issues
Corporations ( either commercial or civil)
that are resident in M exico for taxable
purposes w ill be taxable on their w orldw ide
income. Corporations are considered to be
resident in M exico if they have established
their principal place of management,
or their effective management center,
in M exico.
Corporations are subject to federal
corporate income tax at a rate of 3 0 % on
t eir ta a le profit
en a corporation
mak es a distribution of dividends to its
shareholders, it w ill be subject to an
additional 1 0 % w ithholding tax. H ow ever,
in some cases, w hen a civil law corporation
mak es a distribution of yields to its partners
there w ill be no additional w ithholding tax.
A limited liability company is established
by partners w ho are only obligated to pay
their contributions. T here must alw ays be a
minimum of tw o partners and a maximum
of 5 0 partners. T he administration of
limited liability companies w ill be held
by one or more managers w ho may be
partners or third parties to the company,
appointed temporarily or indefinitely
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
5 9
Appendix
2
US regulatory and tax
considerations
T he comments in this section are intended
as a general overview of t e financial and
tax regulatory environment applicable to
family offices operating in t e
ny
tax advice contained herein is not intended
or w ritten to be used, and cannot be used,
for the purpose of avoiding penalties
that may be imposed under the I nternal
Revenue Code, applicable state or local tax
law provisions. EY does not offer advice
regarding non- tax related legal matters in
the U S. D ue to the complexity of U S federal
and state financial laws and reg lations,
legal counsel should be sought regarding
the establishment or operation of a family
office in t e
R egulatory env ironment
amily offices in t e
generally provide
a broad range of services to the families
they serve. Some services provided may
be regulated or subject to governmental
oversight. O ne important exception is
legal services
ile family offices may
provide consulting services, they are
generally unable to practice law due to
statutes that prohibit the practice of law by
non- licensed attorneys and rules limiting
certain associations betw een law yers and
non- law yers w here the practice of law is
involved.
s a siness, a family office may e
subject to general business regulations,
including, for example, the Eq ual
Employment O pportunity Commission, the
Americans w ith D isabilities Act, and the
Patient Protection and Affordable Care Act.
I t is important to remember that each of
the 5 0 states, as w ell as the D istrict of
Columbia and individual U S territories,
6 0
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
has its ow n law s and regulations that may
apply to family offices
ese incl de r les
concerning business licenses, franchise
taxes, and registration req uirements for
businesses conducted in certain forms.
regulation o amily o fices
Pursuant to the I nvestment Advisers Act
of
dvisers ct , t e ec rities
Exchange Commission ( SEC) generally has
regulatory authority over all professionals
and businesses that offer investment
advice for a fee, nless specifically e empt
s noted elow, family offices may e
subject to registration, SEC oversight and
information reporting under the Advisers
Act, unless they q ualify for an exemption.
I nv estment adv isor registration, 2 0 1 1
and thereaf ter
I n 2 0 1 0 , Congress passed the D oddF rank W all Street Reform and Consumer
Protection Act ( D odd- F rank ) . D odd- F rank
removed the private advisor exemption,
effective from
ly
owever,
D odd- F rank also instituted several new
exemptions from registration and directed
t e
to write a specific family office
exclusion ( the exclusion) .
U nder this direction, the SEC issued Rule
2 0 2 ( a) ( 1 1 ) ( G) 1 ( Rule 2 0 2 ) . U nder Rule
, a family office is e cl ded from t e
definition of investment advisor for t e
purposes of D odd- F rank if it meets the
following re irements
• I t only serves clients that are considered
“ family clients” .
• I t does not hold itself out to the public as
an investment advisor.
On
an ary
,t e
granted
an e emptive order for a family office
that advised a former sister- in- law ( sister
of family member’ s spouse) for 2 6 years
nder t e prior family office r les
e
accepted the assertion that the former
sister- in- law w as an important part of the
family, her assets had been managed by the
family office for more t an
years, and
the familial, non- commercial relationship
s o ld allow t e family office to contin e to
advise er w ile relying on t e family office
exemption. Similar relief has been granted
to ot er family offices owever, it s o ld e
noted that the req uests granted have been
s mitted y advisors t at filed applications
w ith the SEC after the rules relating to inlaw s changed in 2 0 1 1 .
amily mem ers are t en defined as
the lineal descendants of this common
ancestor, as w ell as the spouses and spousal
eq uivalents ( and former spouses and
spousal eq uivalents) of such descendants.
T o account for the realities of modern
families, the phrase “ lineal descendants” is
expanded to include stepchildren, adopted
children, foster children, and certain other
children for w hom a lineal descendant
became legal guardian w hile the child w as
still a minor.
e term
amily clients incl de
ertain ey employees of t e family office
and, under certain circumstances, former
employees
• Charities funded exclusively by family
clients
• T he estate of a current or former family
member or k ey employee
• T rusts existing for the sole current
enefit of family clients, nless f nded
by a family client and also for the
enefit of c arita le and not for profit
organizations
n e ec tive officer, director, tr stee,
general partner, or person serving in a
similar capacity at t e family office
•
ny ot er employee of t e family office
w ho, in connection w ith his or her
regular functions or duties, participates
in investment activities, provided such
an employee has been performing
such services or substantially similar
functions for at least 1 2 months in a
family office setting, nless t e employee
performs solely clerical, secretarial or
administrative functions
• Companies w holly ow ned by, and
operated for, t e sole enefit of
family clients
I n their commentary on Rule 2 0 2 , the
specifically pro i its ey employees,
their trusts and their personally controlled
entities from mak ing additional investments
t ro g t e family office after t eir
employment ends. T hey may, how ever,
continue to hold their existing investments
t ro g t e family office wit o t
jeopardizing the exclusion.
Recently, the SEC has granted exemptive
orders for advisors seek ing to include inlaws and in laws’ relatives in t e definition
T he rule does ack now ledge that involuntary
transfers to non- family clients may
accidentally occur and should not cause
• Revocable trusts funded solely by family
clients
• Certain k ey employee trusts
I t is important to note that the SEC
specifically e cl des certain ot er parties
from t e definition of family clients
Providing services under the Advisers
Act to these individuals w ould violate the
exclusion.
ese e cl sions incl de
• Spouses or other immediate family
members of k ey employees, except w ith
respect to spousal joint property w ith the
k ey employee
• K ey employees of family entities w ho are
not also employees of t e family office,
such as employees of related familyow ned operating companies
• Certain k ey employees w ho do not meet
the 1 2 - month experience req uirement,
and other long- term employees
of the family w ho do not meet the
“ k now ledgeable employee standard”
ey employees incl des
•
• Current and former family members
•
t e family office to fail t e e cl sion
An example referenced in Rule 2 0 2 is a
beq uest from the estate of a family client
to a non- family client. Rule 2 0 2 therefore
provides a transition period of up to one
year to transfer those client investments to
another investment advisor, or to otherw ise
restructure to comply w ith D odd- F rank .
of “ family member. ” T he term “ in- law s”
does not refer to a spouse of a family
member ( w hich is considered a family
mem er , t is more acc rately re ected
by an individual w ho is a member of the
extended family, such as the sister of a
family member’ s spouse.
T o understand how the exclusion may
e applica le, it is important, first of
all, to nderstand t e definitions of t e
terms “ family clients, ” “ family members”
and family entities o confirm t ese
definitions nder le
, eac family
office m st first of all designate a common
ancestor t at defines t e family nit
served. T he common ancestor may be living
or deceased, but may not be more than 1 0
generations removed from the youngest
generation served y t e family office
e family office may redefine t e role of
common ancestor in the future.
amily Office
• T rusts formed by k ey employees for
t e enefit of ot er non spo sal family
members of that employee
•
• I rrevocable trusts w ho provide for
a c rrent eneficiary t at is not a
family client, as w ell as trusts w here a
contingent eneficiary t at is not a family
client ecomes a c rrent eneficiary,
unless the involuntary transfer rules are
follow ed
arita le or not for profit organi ations
that have accepted any funding from
non- family clients, including the general
public, unless restructured appropriately
by 3 1 D ecember 2 0 1 3
ese distinctions concerning w ic specific
employees may receive investment services
are very complicated and may prompt the
family office to implement detailed policies
preventing unintended conseq uences.
e
noted t at in narrowly defining
the term “ k ey employees, ” they sought to
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
6 1
allow participation only by those individuals
w o co ld e pres med to ave s fficient
financial sop istication, e perience, and
k now ledge to evaluate investment risk s and
to tak e steps to protect themselves. ”
As regards ow nership and control of the
family office, le
ma es clear t at in
order to q ualify for the exclusion, ow nership
must reside w holly in the hands of family
clients, but control must remain either
directly or indirectly in the hands of family
members and family entities. T he result is
that control is a more exclusive test than
ow nership. Special care must be tak en
w en eval ating a family office’s oard of
directors, to the extent that the board could
exercise control and includes non- family
members.
e
confirmed t eir position t at family
members retaining the right to appoint,
terminate, or replace the directors does not
cure this issue if the board is controlled by
non- family members. By 2 0 M arch 2 0 1 2 ,
family offices were re ired to register
w ith the SEC under D odd- F rank , meet the
terms of the exclusion, or receive a formal
exemption order.
T he SEC decided against rescinding
previously issued exemption order, such
t at family offices in receipt of e isting
exemption order w ould continue to be
exempt from registering as an investment
advisor even if they did not meet the terms
of t e e cl sion amily offices alifying
for the exclusion are not req uired to notify
the SEC of their status. Advisors subject
to D odd- F rank must register w ith the SEC
and file ann al data forms and operating
reports.
Rule 2 0 2 and the exclusion have provided
greater clarity on the registration
re irements for family offices
t
uncertainty still exists on certain k ey
iss es, especially w en t e family office is
a division of an operating business entity
rather than a separate legal entity. Such
a structure mak es distinctions betw een
ow nership, control, employees, and clients
even more challenging to apply. Some
published reports indicate that certain
family offices ave transferred t eir
investment advisor function to a nonemployee, “ outsourced chief investment
6 2
amily Office
officer model to avoid registration
c family offices appear to e ta ing
t e position t at resid al family office
investment services cas ow modeling,
etc. ) either do not constitute “ investment
advice” under the Advisers Act or are
“ solely incidental” to their general
obligations.
F orming a private trust company may
similarly render the investment services as
solely incidental to the trustee function. I f
t is is t e case, t e family office may not
be subject to D odd- F rank . H ow ever, these
approac es are not specifically sanctioned,
and the only certain w ay for a new family
office to avoid registration at t is time is to
either meet the terms of the exclusion or
apply for an exemption order.
I nternal R ev enue Serv ice ( I R S)
ov ersight
T he I RS has no direct oversight of
family offices owever, t e
reas ry
D epartment publishes Circular 2 3 0 , w hich
presents the regulations applicable to
those professionals w ho practice before
the I RS. Circular 2 3 0 also contains
rules of professional conduct and lists
req uirements for providing tax advice.
T ax advisors w ho violate Circular 2 3 0
may e sanctioned, fined, or s spended
from practicing before the I RS. T herefore,
w ile t e family office itself mig t not e
subject to oversight by the I RS, employees
involved in the tax function may be subject
to Circular 2 3 0 .
Generally, the ability to practice before the
as een limited to specific classes of
professionals, incl ding certified p lic
accountants, attorneys, and enrolled
agents. Prior to 2 0 1 1 , how ever, the I RS
did not attempt to regulate preparers of
tax returns. I n that year, the I RS began
a program to regulate all tax return
preparers w ho are compensated for their
services, req uiring annual registration
and payment of an annual fee, as w ell as
ongoing continuing education and testing
req uirements. T he I RS registration process
resulted in registered preparers being
assigned a Preparer a dentification
N umber ( PT I N ) , to be reported on all
returns signed by the preparer.
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
T he concept of “ paid preparers” is also
important in t e family office w en
considering the potential for I RS penalties
that may be applicable to tax return
positions that are not ultimately sustained.
ection
a
defines a ret rn
preparer as any person w ho prepares a
tax return for compensation, w ith limited
e ceptions
ection
o tlines
the monetary penalties that may apply to
return preparers w ho prepare tax returns
containing unsustained positions.
T he rules are complex and beyond the
scope of this report, but generally a paid
preparer may e s ect to significant
monetary penalties for an unsustained tax
ret rn position, nless t e position
meets at least the “ reasonable basis” test
and is disclosed appropriately on the tax
ret rn or
as s stantial a t ority
H ow ever, a tax shelter or reportable
transaction must at least meet a “ more
lik ely than not” standard and may also be
subject to other disclosure req uirements.
ese terms are defined in reas ry
Regulations to the I nternal Revenue Code.
I t is important to note that these rules apply
not only to the person w ho signs the tax
return as preparer, but also to any other
person w ho prepares a substantial portion
of the return and any person w ho provides
advice on a substantial portion of a return
entry. A tax return may have multiple
preparers for these purposes, and the
penalty standards are applied on a positionby- position basis.
O ne of the limited exceptions to Section
7 7 0 1 ( a) ( 3 6 ) is a person w ho “ prepares a
return or claim for refund of the employer
or of an officer or employee of t e
employer) by w hom he is regularly and
continuously employed. ” I t is uncertain
w et er t is e ception is s fficient to
e cept family office employees from
paid preparer status w ith respect to all
tax returns that they might prepare. I t is
also unclear w hether the req uirement of
compensation applies in situations w here
family offices t at prepare ta ret rns may
not bill their family clients directly for such
services. T herefore, it is unk now n how these
preparer penalty rules w ill be interpreted
yt e
in a family office setting w ere
employees sign returns, prepare portions of
returns signed by others, or provide advice
on tax return positions.
Any person engaged in the business of
preparing U S tax returns, or providing
services in connection w ith the preparation
of
ta ret rns, is s ect to financial and
criminal penalties if that person k now ingly,
or reck lessly, discloses any information
furnished to him or her in the tax return
preparation process to another person or
uses such information for any purposes
other than preparing or assisting in the
preparation of such a return.
US legal structures
I n general, a k ey consideration for most
family office organi ers is selecting an
entity structure that provides some
degree of liability protection to the
ow ners. T his includes forming the legal
entity as a corporation, a general or
limited partnership, or a limited liability
company ( L L C) .
W hile partnerships and L L Cs are often taxed
identically, the fact that all the members
of an
can enefit from t e protection
of limited liability has generally decreased
the use of general partnerships or limited
partnerships in entity selection. T his is
because, in either partnership structure,
the general partners retain joint and several
liability for the debts of the entity. As w ith
L L Cs, corporations provide limited liability
to their ow ners.
T he creation and operation of these
structures are governed by U S state law . U S
state law w ill also determine the limitations
on liability and legal life of these structures.
en creating a family office, t e legal
entity is not req uired to be formed in the
state of the family’ s general residence.
•
a considerations play a significant role in
the determination of the appropriate legal
entity stat s for t e family office eca se
of the numerous differences betw een the
taxation of corporations and partners in a
partners ip, it is diffic lt to compare t e
net tax effect of both structures w ithout
a thorough understanding, among other
factors, of
e nat re of t e family office operations
• T he capital funding structure and expense
funding mechanism
trade, business investment management
may be allocated appropriately.
•
T he active management of a family
investment portfolio, and the management
of family enterprises conducted through
the corporate format, may not be view ed
as a trade or business, despite the time
and expense typically incurred in such
an operation
nless t e family office
charges for its services and operates as
more than a mere cost center for the
family members. T hus, as noted below ,
the deductibility of these expenses may
be substantially limited.
e specific nderlying investments and
operating businesses
• T he use of partnership structures for
underlying investment pooling
• T he designs for succession and future
ow nership
T he points below highlight some of the
k ey tax considerations that need to be
tak en into account w hen selecting the legal
structure.
C ost allocations and treatment of
expenses
Regardless of the type of entity selected
for str ct ring a family office, t e entity
may incur expenses related to a number
of different activities, including managing
and accounting for family- ow ned business
entities, portfolio investments, real estate,
and personal activities of family members.
e costs of operating t e family office
must be allocated to the family’ s business
ventures, investment activities, and
philanthropic affairs, as w ell as the personal
services provided, based on a reasonable
allocation methodology.
ome items may e specifically allocated
if they represent the direct costs of a
partic lar area of operation ot ers may e
allocated ased on sage of family office
resources on a time and materials basis. A
family office m st ta e care in classifying
and reporting its expenditures due to the
differing tax treatment afforded to each.
M ak ing matters more complicated, the
extent of the deductibility of these items w ill
differ ased on t e entity classification of
t e family office
Expenses related to a trade or business
and real estate rental activity are generally
treated more favorably under U S tax law —
they are currently deductible or deferred
and deductible in later years — than are
expenses related to the management of
investment assets, for w hich deductions
are limited. Personal expenses of the family
mem ers inc rred y t e family office
are generally not deductible under any
entity classification, t o g costs t at are
partially personal and partially related to a
amily Office
Many family offices assist in coordinating
philanthropic activities for family members.
I RS rules on “ self- dealing” prohibit certain
relationships betw een charities and their
related parties, though exceptions may
apply for certain expense reimbursements
for professional services rendered. T he
self- dealing rules are highly complicated
and warrant specific attention from family
offices t at andle c arita le affairs for
their family members.
US taxation of indiv iduals
and trusts
T he taxable income of U S citizens, tax
residents and domestic trusts is subject
to a graduated rate schedule. T he top
marginal tax rate on the ordinary income
of individ als and tr sts is
ong
term capital gains and alified dividends
are taxed at a top income tax rate of 2 0 % .
An additional 3 . 8 % tax generally applies
to net investment income recognized by
an individual or trust w ith overall income
above certain thresholds. T his additional
tax applies to net income from interest,
dividends, rents, royalties and passive
business income, and non- business
capital gains received or recognized by an
individual or trust.
I n some cases, the Alternative M inimum
T ax ( AM T ) may apply. T he AM T has a top
marginal rate of 2 8 % and applies w hen
it exceeds the regular income tax of an
individ al or tr st Many ta enefits e g ,
accelerated depreciation) and certain
deductions ( e. g. , state and local income
taxes and investment expenses) that are
allow ed under the regular tax do not apply
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
6 3
for AM T purposes. F or that reason the AM T ,
w ith its 2 8 % rate, may exceed the regular
income ta , even at its top rate of
U S tax law applies numerous limits to
the deductibility of expenses that are
not related to the conduct of a trade or
business, such as investment expenses,
interest, charitable contributions, medical
expenses and certain types of taxes. N et
losses from business activities reported by
an individual or trust in w hich the individual
or trust is not a material participant in the
management of the enterprise on a regular,
continuous and substantial basis ( commonly
referred to as “ passive activities” ) are
generally deductible only against income
from other passive business activities.
T he practical effect of the limitation on
the deductibility of “ passive losses” is that
these losses are only allow ed w hen the
individual ( or trust) has positive net income
from other passive business activities or the
passive activity is completely disposed of in
a taxable transaction. N ote that portfoliotype income ( interest, dividends and gains
from the sale of investments) is not income
from a passive business activity for these
purposes. A detailed discussion of the limits
on the deductibility of losses and expenses
is beyond the scope of this guide.
D eductions incurred in the course of a trade
or business are generally deductible to
individuals and trusts w ithout limit, unless
from a passive activity. H ow ever, expenses
incurred in the production of portfolio
income are subject to substantial limitations
on their deductibility. I nvestment expenses
are generally only deductible to the extent
that they exceed 2 % of an individual or
trust’ s adjusted gross income, and are
not deductible for purposes of computing
AM T . As noted below , these limitations on
investment expenses generally do not apply
to activities engaged in by corporations.
US taxation of partnerships
Partnerships are not subject to federal
taxation at the entity level. I nstead, the
partnership allocates its items of income,
deduction and credit to its partners.
Allocations of items of taxable income
and deduction may be in accordance w ith
capital ow nership percentages but need
6 4
amily Office
not e so partners ip ta ation generally
offers e i ility in allocations so long as t e
allocations are specified in t e operating
agreement and re ect t e partners’
economic interests in the partnership.
L L Cs w ith more than one member are
generally treated as partnerships for
income tax purposes, unless the organizers
file an election to treat t e
as a
corporation. L L Cs w ith only one member,
or single member L L Cs, are generally
disregarded for income tax purposes
i e , t ey are fiscally transparent for
tax purposes and the ow ner of the L L C is
treated as the ow ner of the L L C’ s assets) .
F or the purpose of the discussion below ,
the term “ partnership” refers to any entity
taxed as a partnership under U S tax law ,
and the term “ partner” includes any ow ner
of such an entity.
partners ip m st file an ann al ta ret rn
w ith the I RS to report its total income,
deductions and credits. Additionally, the
partnership must provide its ow ners w ith
Schedule K - 1 , partner’ s share of income,
deductions, credits, etc. , w hich reports
each partner’ s share of these items. T hese
items are then reported on the partners’
ow n income tax returns to compute
their income tax accordingly. T his may
allow partners to offset income from the
partnership w ith items of deduction or loss
from ot er so rces
c specific treatment
may differ, depending on w hether the
partner is an individual, trust, or other
type of taxpayer and the character of the
partner’ s income and deductions.
I ndividuals and trusts pay a top federal
income ta rate of
on ordinary
income, including the income from
family office operations ncome from
a partnership retains its “ character” as
it is reported to the ow ners. T herefore,
preferential ta rates on alified dividends
or long- term capital gains apply to such
items allocated to a partner from a
partnership. Conseq uently, items of income
or loss owing t ro g from a family office
taxed as a partnership w ill retain their
character w hen allocated to the partners.
D eductions incurred in the course of a
trade or business are reported separately
from deductions incurred in the production
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
of portfolio income. I t is important to
recall that limitations may exist on the
ability of individuals and trusts to deduct
their investment expenses and that
these limitations on investment expenses
generally do not apply to corporations.
T he distribution of cash ( or property) from
a partnership to the partners typically does
not result in the recognition of income
( although there are many exceptions to this
general rule) , so long as the partner has
s fficient asis in t e investment
e
basis rules are complex, but usually seek to
ensure that previously taxed income can be
distributed w ithout incurring an additional
layer of tax.
US taxation of corporations
Corporations, other than S corporations
( described on follow ing page) , are generally
subject to U S income tax at the entity
level on their w orldw ide income, w ith a
credit allow able for certain taxes paid to
foreign jurisdictions. T he maximum federal
corporate tax rate is currently 3 5 % . T here
are no preferential rates for long- term
capital gains recognized by a corporation
as there are for individuals. Additionally,
the 3 . 8 % net investment income tax does
not apply to corporations. Corporations
may deduct a portion of their dividends
received, and the corporate AM T is more
punitive in its treatment of municipal bond
income than for individuals.
D ividends of cash or property paid by the
domestic U S corporation ( and certain
non- U S corporations) to the shareholders
are generally taxed to the shareholder at a
maximum individual income tax rate of 2 0 % ,
though additional complexities may apply
on distributions of appreciated property. At
higher income levels, individuals and trusts
are also subject to the 3 . 8 % net investment
income tax applicable to dividends.
T he corporation receives no deduction
for its dividend distributions. F or this
reason, shareholders in U S corporations
are often said to be subject to “ tw o levels
of taxation” — earnings are taxed annually
at t e entity level and acc m lated profits
are taxable to the shareholders w hen
distributed. H ow ever, at low er income levels
the overall rate of corporate income may
be less, depending on the mix of income
received and tax paid by the corporation,
compared to such income in the hands of a
partner in a partnership.
W hen analyzing the deductibility of
expenses, corporations are generally
not subject to the same restrictions
as individuals on expenses related
to producing portfolio income ( i. e. ,
investment expenses) . I f the family
office itself represents a profit ma ing
activity, then expenses w ill generally
be fully deductible to the corporation
unless they represent personal expenses
of the shareholders. T hus, the lack of
preferential tax rates for certain income
at the corporate level may be offset by
more favorable treatment of deductions,
especially w hen considering AM T .
Additional complications may apply if the
corporation is treated as a personal holding
company ( a corporation w hose gross
income consists principally of portfolio
income or rents and royalties) or a personal
service corporation. Proper consideration
should be given at formation to addressing
these issues.
S corporations
Certain corporations may elect to be
taxed under subchapter S of the I nternal
Revenue Code as a hybrid entity, called an
S corporation, or “ S corp” , w hich allow s
for many
t not all of t e enefits of t e
ow t ro g nat re of partners ips
is
may allow an entity to be a corporation
in legal entity form, but avoid the double
taxation of corporations.
H ow ever, the eligibility req uirements are
very restrictive, especially if the entity
is ow ned by trusts. T he complicated
rules concerning trust ow nership must
be analyzed before formation in a family
office str ct re, d e to t e ig li eli ood
that a trust w ill ultimately be an ow ner
of t e family office rt ermore, t e
eligibility req uirements prohibit any foreign
ow nership of the corporate stock , w hich
may limit the applicability of S corp status in
a glo al family office conte t
W ith the exception of certain distributions
of appreciated property, S corporations are
generally not subject to federal tax at the
entity level, unless the legal entity existed
as a non- electing S corporation prior to
electing S corp status. S corporations may
also be subject to entity- level tax on the
disposition of certain appreciated property
that w as held by the entity upon conversion
from traditional corporation status.
company presents numerous additional
tax issues for consideration. Also, from
a non- tax standpoint, housing a family
office wit in a private company can
create additional privacy and governance
concerns, especially if significant
management operations are handled by
non- family members, or if family members
have varying degrees of involvement in the
operating company.
L ik e a partnership, an S corporation
passes through all items of income and
deduction to its ow ners, and such items
retain their character w hen reported
by the shareholder. D istributions of
previously taxed income are generally
not taxed as income to the shareholder
if the shareholder has basis in their
stock . H ow ever, if an S corporation w as
previously a traditional corporation and had
undistributed accumulated earnings and
profits at t e election date, t e distri tions
could be taxable. Because the income and
deductions of an S corporation retain their
character, the treatment of investment
expenses is similar to that of a partnership,
and thus less advantageous than the
treatment of a traditional corporation.
family office t at is not ade ately
compensated for its services by the family
members it serves may be thought to have
made a distribution to its shareholders,
to the extent that the value of services
rendered is deemed to exceed the value
paid for such services. T his consideration
may not be material in a stand- alone family
office str ct re especially t ose ta ed as
partnerships) but may be very material
w ithin a private operating company. T he
issue is heightened for S corporations,
w here a deemed distribution could
terminate the entity’ s S election if not
proportionate to all shareholders.
U nlik e partnerships, S corporations do
not allow for e i ility in allocations
among shareholders. All income and
deductions must be allocated pro rata to
the shareholders on a per- share, per- day
basis. S corporations may only have one
class of stock , unless the only difference is
w ith respect to voting rights. T his prohibits
S corporations from allow ing any action
that could be view ed as creating a second
class of stock , including disproportionate
distributions.
amily o fices house
ithin
priv ate operating companies
Many family offices egin t eir life cycle
w ithin the structure of a private operating
business, providing services to the family
siness owners
ese family offices
are not segregated into a separate legal
entity, but rather exist as a division of
the operating company itself. O perating
a family office wit in a private operating
amily Office
Also, as noted earlier, the SEC registration
re irements for family offices may e
more diffic lt to navigate and manage
wit in t e confines of a private company
structure, especially if the company has
any degree of employee or non- family
ow nership. F or these and other reasons,
many families have chosen to relocate
t eir family office from wit in t eir
private operating company to a separate
legal entity.
P riv ate trust companies
amily offices often consider w et er
t ey s o ld provide professional fid ciary
( trustee) services to the family members
they serve, or w hether such services are
best purchased from external sources.
ose offices wanting to provide fid ciary
services may consider setting themselves
up as private trust companies in order to
ndle fid ciary services wit traditional
family office services
e n m er of
private trust companies remains a small
percentage of the overall number of U S
family offices
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
6 5
Contri
E Y
P eter Brock
P eter Englisch
J ö rgchristian Klette
D r. C hristian R eiter
Astrid W immer
J ohannes V olpini
R oland Suter
C hristian W asser- P etrnousek
J v o Grundler
D irk v an Beelen
W outer C oppens
J ohn C ooney
D av id Kilshaw
Adib R ashid
Stij n J anssen
R ob ert ( Bob b y) A. Stov er, J r.
C harlie J . C arr
J oseph T . C arroll
J ustin R ansome
J ef f Brodsk y
Melinda R . R ochelle
C harlie L . R atner
Marianne R . Kayan
Gary Mills
Bo P owell
Elias Adam Bitar
D aniela P enalv a T ron
J acob D ab doub Hernandez
R ichard Boyce
P aul Ho
Simon W ang
Siow Hui Goh
6 6
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
ec tive irector, amily Office ervices eader, ermany
Partner, Global F amily Business L eader, Germany
Executive D irector, Private Client Services, Germany
Senior M anager, Private Client Services, Germany
Partner, F amily Business L eader, Austria
Partner, I nternational and Private T ax Services, Austria
Executive D irector, I nternational T ax and Private Client Services,
Sw itzerland
Executive D irector, I nternational T ax and Private Client Services,
Sw itzerland
M anaging Partner, L egal Services, Sw itzerland
Executive D irector, Private Client Services, N etherlands
Partner, Private Client Services, Belgium
Partner, F amily Business L eader, U K
Partner, Private Client Services, U K
D irector, M EN A F amily Business L eader, U AE
Partner, I nternational T ax Services, U AE
Partner, mericas amily Office ervices eader,
ec tive irector, Private lient ervices, amily Office dvisory,
ec tive irector, Private lient ervices, amily Office dvisory,
Partner, Private Client Services, U S
Principal, Private Client Services, U S
Executive D irector, Private Client Services, U S
Executive D irector, Private Client Services, U S
Senior M anager, Private Client Services, U S
Senior M anager, F inancial Services, U S
Senior M anaging D irector, Ernst and Young Capital Advisers,
L L C, U S
Partner, I nternational T ax Services, M exico
Senior M anager, I nternational T ax Services, M exico
Senior, I nternational T ax Services, M exico
Partner, amily Office ervices eader Oceania, stralia
Partner, inancial ervices a , sia Pacific, ong ong
Partner, Greater China Private Client Services, H ong K ong
Partner, T ax Services, Singapore
butors
edit
isse
Bé atrice F ischer
C é dric D aetwyler
Y v onne Suter
D aniela D ü b lin
Michael O ’ Sulliv an
Mark us Stierli
Antonios Koutsouk is
Senior Philanthropy Advisor
H ead Competence Center Philanthropy Services and Responsible
I nvestment
Competence Center Philanthropy Services and Responsible
I nvestment
egional
ief nvestment Officer, Private an ing
M
H ead of F undamental M icro T hemes, Private Bank ing and W ealth
M anagement, I nvestment Strategy and Research
F undamental M icro T hemes, Private Bank ing and W ealth
M anagement, I nvestment Strategy and Research
P ascal R ohner
enior amily Office dvisor, Private an ing M
W estern Europe
F ranco D orizzi
ead ingle amily Office eam ric and astern wit erland,
Premium Clients Sw itzerland and Global External Asset M anagers
Bernard F ung
Gerold R eiser
J anina v on Grü nigen
L ucia Moreno
ni e sit o
H ead Philanthropy Service and Responsible I nvestment
t
and
ead of amily Office ervices and P ilant ropy dvisory
sia Pacific
H ead of Segment and Sales M anagement, Private Bank ing EM EA
Segment and Sales M anagement, Private Bank ing EM EA
Business D evelopment, Private Bank ing Americas
a en
Michael Gask a, M. Sc.
T homas Zellweger, P rof . D r.
Research Assistant and PhD student
Chair of F amily Business
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
6 7
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6 8
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
C ontact
us
o a
ete n isc
Global L eader
EY F amily Business Center of Excellence
peter. englisch@ de. ey. com
and
ete
ock
amily Office ervices eader
peter. brock @ de. ey. com
anada
ent a and o t
e ica
Ro e t o
to e
amily Office ervices eader
bobby. stover@ ey. com
sia acific
Ric a d o ce
amily Office ervices eader
richard. boyce@ au. ey. com
V isit us at
e co
a i o fice
amily Office
ide P a th w a y to s u c c es s f u l f a m ily a nd w ea lth m a na g em ent
6 9
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