By Sydney Eckley
Fiduciary Advisor
The traditional concept of a “Family Office” has predominantly been reserved for casual corporate conversation in distinguished company, over chilled champagne, and crisp caviar cocktails. If the latter is even a real thing. You’ll have to pardon me. I attempted to harness the dramatic effect that only alliteration can truly bring about.
These Family Offices are entities or organisations, formally established and utilised by many high-net-worth families, to exclusively manage and oversee their long-term wealth preservation and generational sustainability needs. They often take the shape of actual companies, incorporated, and staffed by dedicated salaried experts who guide the family through the many pitfalls involved in financial-, investment-, estate- and succession planning. They serve as a centralised and integrated team at the beck and call of the family, assisting in constructing a lasting legacy for the family.
If tradition holds true, then why might it be that you have recently started hearing about a Family Office at your neighbour’s monthly Woolies braai, that you reluctantly agreed to for the umpteenth time. You don’t really know John, and sure he drives a brand-new Fortuner and owns a few properties, but it’s most definitely no Rolls that he’s driving through his own family business empire with. What possible reason could John have for singing the praises of his new Family Office? On the way home, you wonder to yourself: “Could it be, that this thing could actually hold any value for my setup?”.
Luckily, tradition stands to be challenged and it is subject to change over time. Which makes the answer to your question in the last sentence of the previous paragraph, a resounding, yes, provided the modern variation thereof is understood and utilised.
The variation is rather simple. Just as a company can have its own company secretary, or outsource some of its secretarial needs, so can a family have its own Family Office, or outsource some of its Family Office needs.
Now, before I proceed, I must disclaim and make it abundantly clear that the “traditional family office” of course still has its place and value. My intention herein is not to disparage or place anyone or any type of family in a negative or stereotypical light. This proposed spin-off is not a replacement for the real thing but should rather be seen as a sub-categorical take on an age-old structure, aimed at providing similar benefit to a different demographic. The “real thing” is not always suitable for or even remotely attainable by everyone. A revised take thereon, however, proves quite useful to some. Calling a spade, a spade. Some amount of financial wealth is still absolutely a prerequisite to benefit from such an arrangement but is not exclusively for families with “unfathomable amounts of money”.
Let’s carry on. The idea, broadly speaking, is to approach one extremely specialised service provider, capable of rendering the majority of the Family Office services that a family might require. They not only then render such services, but also fulfil the role of a conductor in the family orchestra which comprises of them, as well as other carefully selected providers like legal practitioners and accountants. The so-called conductor ensures that all service providers work holistically and not in isolation, as the conduct or advice of one might greatly affect the planning of another, resulting in fragmented decision-making and planning by the family or its individual members, and ultimately in structures that over time and generations, become utterly untenable.
We’ve all seen it. It goes like this. The first generation approaches their advisors. Set up a trust or six. Draft some wills. Propose some buy and sell agreements. Create usufructs here and a fideicommissum there. Resolutions are kept, or not. Income distributed. Dividends paid. Investments made, Financials drawn, and legal steps pursued. Upon the maturity of the next generation, head or tails eludes them. What lawyer did what and when? Why did does this loan account exist? Was this amendment to that deed even legal? They, or even worse, only some of them, approach a whole new set of advisors. Note the plural use of advisor. Purportedly more sleek, more modern. They are promised the moon and the brightest stars. One contradicts the other. Amendments are made. More contracts drawn. And so, the cycle continues. Lather, rinse, repeat. Spiralling further and further into oblivion with each successive generation.
The solution? One trusted provider, to not only service but also to orchestrate the services of all others. A provider with the ability to broadly comprehend the effect of every decision on the whole of the plan. Transferring the values and vision of each preceding generation of both client and provider to the next. Growing and building together. A marriage, not a fling.
Take a moment and create the following picture in your mind:
A relationship where the service provider gets to know not only the viable client that walks through the door, but his/her entire family. Gaining an understanding of the entire family- and business structure and all supporting entities and persons. They then approach this “big-picture” with the knowledge of their entire team. They think of the present and the future. Inter-generationally. They filter this “big-picture” through tax, wealth, risk, compliance, succession, finance, governance and everything they know or ought to know. From there, this “big-picture” is always viewed as a COHESIVE ENTITY, much more than just the sum of its parts. Tailor-made solutions are generated to streamline and manage the COHESIVE ENTITY. A constitution is drafted for the COHESIVE ENTITY. A guideline to ensure that everyone and everything that forms part of this COHESIVE ENTITY knows its place and knows what to do when certain things happen. A document which gives clarity and comfort to all involved. Finally, they continually administer this COHESIVE ENTITY. They make sure the paperwork is done and deadlines are met. They are the indispensable first line of approach on all important decisions. They work closely with other advisers of the COHESIVE ENTITY when they need to. Regular reviews are set where everyone sits around the table, if need be, and make sure that this COHESIVE ENTITY makes the best possible decisions. This way, a COHESIVE ENTITY such as this, might not only exist, but flourish, indefinitely.”
With all the humility I can muster, it must be said that it does take a very qualified and specific professional to fulfil this role. Some kind of generalist hybrid between a corporate-, estate-, tax- and family lawyer, a financial planner proficient in risk and wealth, a professional fiduciary, an accountant, and a mediator. It must be a service provider who, even though they for example don’t draft the contract, can interpret its content, validity, and impact. The same, at the very least, goes for financial records and financial planning solutions.
Approached in this way, this varied take on a Family Office holds potential to also be immensely beneficial to many bier-, biltong-, braaibroodjie- and Bokke families who have yet to develop, have lost or never had, any taste for caviar. If nothing else, it simply provides a much cheaper way for all, to reap some of the benefits provided by a traditional Family Office.
We at Trustees for the Future, in collaboration with our sister company, The Family Constitution Company, possess the necessary expertise and this type of outsourced Family Office, stands as one of the four core pillars of our offering. Give us a call after your next braai and we can discuss what John told you.
