The Family Office

Milan Topolovec I am sure that you have heard about the concept of a family office and thought of this being only for the very rich.

Let us first examine why a family office can be beneficial and not only for the rich. When it comes to you and your estate plan these may be your reasons why you and many others have not completed the process.

You may feel this is for the ultra-rich and that is not me.

You may not want to think of being sick or even dying.

• You may feel that dealing with family dynamics, especially blended families, is a nightmare waiting to happen where you hope it will disappear without you having to do anything.

A family office may perform functions such as: tax advisory, family business advising, investment counsel, financial planning, insurance planning, estate planning, dealing with wealth transfers or dealing with the media.

There are three ways to have a family office offering. Two are more familiar, while the third one is the one we will explain how you can create for yourself.

There is a single-family office that is owned by a family and it serves the needs of that particular family. This group is often comprised of accountants, lawyers, investment advisors, administrative staff and others. These are found in Canada, and are more prevalent in the United States. It is true the families who own their own family office are dealing with complexities the rest of us do not and they are in that ultra-wealthy category. A private family would be providing things to the children of their families, like teaching them about money, teaching them about what they should be doing when in the public and, if they get in trouble, the family office steps in to work towards repairing the damage created, often even dealing with the media.

The second type of family office services to a number of families with some of the same type of services, and clients’ wealth does not need to be into multiple millions.

While these family offices may not offer all the services that a complete private office does, they do provide all the ones you would require and can certainly point you in the right direction when outside services such as insurance planning are needed.

If I were to tell you that you can create your own family office without having to be a multimillionaire and receive some of the same benefits they receive would you want to know more?

To begin with let’s discuss why you will benefit from building your own family office.

Let’s visualize a large box of puzzle pieces which you must put together without a picture of the result. How difficult would this be to complete? There has to be an advisor or a group of advisors who will assist you in creating the big picture first and only then bring together all the necessary puzzle pieces.

To create a team of advisors that will form your own family office let’s discuss how most people engage with their existing advisors.

When was the last time that you managed to have two advisors such as your accountant and lawyer in joint meetings, focusing on building your plan? When I pose this question to my client they say: “They were together when we bought….” And this is not what I was referring to as this was a business transaction not a planning exercise.

Often people make singular decisions rather than having their advisors informed which is where mistakes are made. Working in a silo environment is not efficient.

A client of ours was buying a business condominium for one of his companies when I asked him if his operating company, holding company or family trust should buy it? He was going to go forward without consulting with his accountant, lawyer, estate planner, wealth advisor or anyone else. I was able to advise him who he needs to consult with before the purchase of this business condominium.

Before you begin to create your own family office, here are several things you need to consider.

Your family office “team” will be comprised of your current advisors who are able to draw out all the things you wish to accomplish and find other specialists who may be required to add to your family office team.

In order for the family office concept to work you need to have an advisor who is able to bring everyone together. The advisor will lead the planning process to make sure the progress continues and as one accountant said to me in a positive way “you kept the fire under my feet, and we got things done”.

One of the challenges your lead advisor may have is to keep people’s egos in check. However, the best way is to have everyone in the room outline their client is the most important person in this process. Clearly one individual will not have all the answers so advisors having mutual respect and being “team players not a lone wolf” is of paramount importance.

I am sure you will agree having all the advisors in the same meetings will not only reduce your cost but also yield desired results.

Unfortunately, we have seen situations where certain professionals want to build a wall around their client by not engaging other professionals when clearly it is prudent to do so.

We have seen where accountants engage in creating trusts and wills on their own from boiler-plated documents explaining to clients they will save them money on fees.

I met a new potential client and when we were discussing what we do in our family office planning I raised the question about their wills. The husband responded “Oh our real estate lawyer is going to get us one.” What are the chances that lawyer, first of all, was an expert in wills and secondly, would know how to do this for a U.S. citizen living in Canada?

Your family office advisors must know where their advice is prudent and where their expertise stops.

As already mentioned in creating your own family office, choose one advisor to begin the process, create the team, ensure all advisors stay focused and very importantly keep everyone on a tight schedule, even arranging all appointments for everyone to attend.

Think of this lead advisor as a head football coach of Super Bowl champions where that individual is able to see the big picture, anticipate changing needs, make sure everyone is in sync and everyone has the same objectives, giving all of themselves to win.

As you can see that being a multimillionaire is not a necessity to having a family office experience.

Who should be part of this family office team? Here is a short list:

Accountant
Lawyer
Insurance Planner
Investment Advisor
Banker
Business Coach for professional and business owners
Financial Planner

Work with your existing professionals and bring in specialists when required to build your family office team. Choose a leader that will keep everyone accountable and drive the planning process. Remember you do not need to be a millionaire to have your own family office.

Milan Topolovec, BA, TEP, CLU, CHS, RCIS President & CEO, TK Financial Group Inc. milan@tkfg.ca, TKFG.ca