Family Office: Family Businesses, Wealth and the Economy

Regarding family businesses, family wealth, and the economy: What are the drivers of risk management we should all be paying attention to during the current turbulence?

One of the central factors family businesses must contend with, especially during a period of economic uncertainty and volatility, is the successful management of risk. Family businesses and families of wealth are seeking the most effective methods for accurately accessing and effectively responding to all sorts of risk – whether it impacts business operations and productivity, governance, maintaining adequate liquidity, human capital utilization, returns on R&D, protecting brand equity, determining M&A options, or the security of personal assets.

Right now, the family enterprise is challenged to employ the most effective strategies for sustaining its competitive viability while world economies wrestle with the fallout of contraction and issues of globalization. This year, therefore it is imperative that your Financial Advisor is focusing on the nature, function, and management of risk - and it is critical to the family enterprise with its complex mix of tradition and innovation.

One could consider these questions:

What is the most critical risk issue my portfolio faces in this current environment?
How is this issue playing out within the unique context of the family enterprise that may be different than another private or publicly-held organization?
What is the most important macro concern family businesses need to be aware of when the turbulence has finally settled?

Family Offices: What are they?

Family offices are exclusive wealth management firms that usually only accept clients with at least $10-$25M of investible securities. They typically have less total clients; however, spend more time with each client often assisting with tax, estate planning, charitable giving, foundation, and even budget issues in addition to traditional wealth management services. The costs are typically a little higher than a traditional wealth management office but you get more personal comprehensive service and usually a more sophisticated view of portfolio construction with access to alternative investments.

Family office professionals will take the time to ensure your separately managed account investments and Hedge Funds are balanced and in line with your 401k or IRA investments. Their employees are often experienced and sophisticated enough to understand unified managed accounts (umas), and will be able to explain them to clientele so they may be employed where appropriate. While many family offices use hedge fund of funds, family office professionals will often find an individual hedge fund manager that fits you best if they do not already have one that they work with, and ultimately they are known for working harder to make you happy because they only work with a smaller group of core clients. Many high net worth individuals belong to health groups where doctors will take the time to set down with you for a couple hours each quarter or year and talk about your health and habits. This type of highly personal attention is equivalent to what you get in a financial sense at the best family offices.