How can family offices -- and financial advisors -- help wealthy families maintain their fortunes?

The Chicago-based Family Office Exchange's newly published Guide to the Professional Family Office is a good place to start. The guide spells out a set of valuable lessons for wealth owners -- rules that it says have "stood the test of time." Here are four of the key issues the organization (more commonly known as FOX) highlights for its member practices.


Wealthy families face a fundamental question, explains Sara Hamilton, founder and chief executive of FOX: "Can they see and articulate a bigger future by staying together than [the members] might be able to attain by themselves?"

Families who are merely content to "consume the benefits of their situation" aren't going to accomplish anything, Hamilton warns.

The FOX guide urges families to identify and communicate the benefits of working together, develop a common vision and agree on a set of goals. The family office should be viewed as an investment in the future owners of the family, and a process should be established for making decisions that can be revised as needed.

Also critical, the guide says, will be teaching young family members "the meaning of stewardship."


The benefit of a family office, Hamilton says, " is really about scale ... You want to be viewed as an institutional player, and you want to be savvy, so you're not going to be taken advantage of by the sell side."

Use the buying power of the family group to get access to best-in-class resources, invest in the best available technology and investigate the cost of outsourcing services, the FOX Guide recommends.

Family offices now have more opportunities than ever, says Hamilton, to use their purchasing power to buy from multiple providers. For example, over the past year family offices have been more easily able to access different vendors for investment strategy, manager selection and performance analytics services.

A major "trend shift" of 2013 saw single-family offices buying more strategic services from multifamily offices, Hamilton adds. "It's beneficial for both," she says. "Families get the benefit of scale; they can talk to different money managers and get strategic insight from a variety of sources."


Succession planning isn't just a problem for individual advisors, Hamilton notes. "In the United States today, the greatest need we're seeing is for a leadership succession process," she says. "I get two to three calls a month from 75- to 80-year-olds who are just realizing they are not going to live forever and are not able to pass on their business because of structural problems or lack of interest from their children."

Additionally, the FOX Guide emphasizes the need to develop written leadership succession plans for the family office and select leaders who are excellent communicators, educators and consensus builders. Families need to bring in non-family professionals to provide management objectivity; educate family members about financial affairs in a meaningful way; and train future leaders and managers to ensure continuity.

Wealthy families should be prepared to spend over $100,000 to develop an effective governance system, Hamilton says.

But the investment is worth it, she adds. "We've seen a shift in the last few years -- more families are recognizing they need formal education about being an owner, versus being a manager."


Families need to document the most important risks they face, according to the FOX guide. They should discuss family risks openly with family leaders and survey all wealthy owners to get their views on the most critical risks.

"Since the financial crisis, we've seen families have a much greater awareness of where the risks are and have a willingness to spend money to mitigate some of those risks," Hamilton says.

Also on the to-do list: Develop action plans to mitigate the risks recognized by the family; evaluate the success of risk mitigation plans on an annual basis; and educate owners about potential risks and how to avoid or control them as much as possible.

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