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Long-term family wealth planning
Ultra wealthy families looking to extend their wealth beyond the third generation often employ a family office, which is set up when an entrepreneur has generated significant private wealth. It is usually structured as an independent administrative hub using external investment advisors. In these small family offices, in-house staff are employed to provide some level of bookkeeping, tax, or administrative services. An asset base beginning at Ä250 million is required for this type of structure. Family office evolution A family office can be categorised by its position in the family office lifecycle. Such solutions should be monitored as they move from one stage of development to the next, since there are different structures and levels of in-house and external services that can optimise the family office during its lifecycle. As the assets grow and/or when the family becomes multi-generational, the beneficial owner of the family office can decide to separate the management of the personal wealth from the management of assets allocated to business. At this stage, the middle family office keeps functions strategic to the family’s objectives in-house and outsources other functions. Families using such a template typically have an asset base of €750 million. The comprehensive family office is designed to provide services for families who desire the maximum degree of control, security and privacy. In-house employees provide all functions, including administrative, tax, legal, risk management and core investment management. Specialised investment management activities, such as hedge funds, venture capital, private equity or emerging market investments, may be sourced externally. Families using a comprehensive template have assets greater than €1.5 billion. Once the family office has developed a professional investment track record, it can open to other families and move from a Single Family Office to a Multi Family Office, which requires, for example, legal separation of the family assets and third parties assets. Common requirements The purpose of a family office is the efficient coordination of the various aspects of administrative services and financial asset management. Adapted reporting facilities and processes enable an accurate overview of the assets. |
The Credit Suisse Solution Partners Family Office/Investment Solutions team has experts to support family offices in structure check-ups and transformation processes. The team also specialises in the implementation of wealth management structures. These analytical and structuring competences help the family office to obtain a reliable overview of the assets. One tool used to give an overview in global reporting is the global custody approach. Assembling the assets in one custodian bank offers numerous advantages: it allows integrated and standardised reporting, a simple and intelligible overview of the overall assets and enhanced risk management. Furthermore, it is an open-platform-based solution, offering a choice of best-in-class partners. Another tool used to increase the professionalisation of the asset management is the private label fund (PLF). The PLF is a dedicated customised investment company designed to manage sizeable (more than $50 million) and complex investments portfolios. This structure enables a dissociation of the legal and beneficiary ownership. In addition to the advantages of the global custody approach, the PLF enhances asset protection and privacy and allows opening of investment ideas to third parties. The PLF also increases flexibility in choosing the investment manager and in implementing individual investment objectives and offers, in many situations, significant tax advantages. Further information: |
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Finally, family offices must maintain an acceptable operating cost structure in spite of increasing complexity with regards to family structure and asset base. In order to meet an efficient cost structure, the internal processes and the structure of the family office in its entirety require optimisation. |
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