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William A. Walker, president and CEO, Legacy Trust William A. Walker, president and CEO, Legacy Trust COURTESY PHOTO

Sponsored Content: Is it time for a family office?

BY Legacy Trust Friday, September 09, 2016 10:14pm

How do you know when it’s time to consider establishing a family office? Consider:

  • You have just sold the family business and find yourself without your longtime administrative assistant or other corporate resources who have traditionally helped with family matters.
  • Your family business is growing and your internal team no longer has the time – nor the skill set – to deal with the more complex issues that you and your family need to address.
  • You are spending as much time running the business of your family as you are running your family business.
  • You are looking at the retirement or departure of a longtime trusted confidant and need to prepare for a formal transition – not only for you and your immediate needs, but for those of the next generation of your business.

If you find yourself answering yes – or even a strong maybe – to any of the above, now is the time to start thinking about a family office.

“Family offices come in many shapes and sizes,” says William A. Walker, president and CEO of Legacy Trust, a Grand Rapids-based wealth management company that provides family office services. “In fact, we like to say, ‘If you have seen one family office, you have seen one family office.’ There is no one right way to develop a family office – each is as unique as the family behind it.

“In a general sense, a family office provides a trusted resource that a family can utilize to provide services, solve family-related issues or guide bigger-picture decisions, such as wealth management, estate planning or philanthropic giving. They may require their own team or be part of a small ensemble that provides services to several families through a multi-family office platform.

“Whatever the shape, the question of ‘Is it time?’ often coalesces once family business owners reach a crossroads. They may need a safe space to share challenges or want greater distance between their personal affairs and their business affairs. They may want more internal controls and greater safeguards or they may just have outgrown their current advisors and need to build a deeper bench.”

Services, education and platforms

The list of services provided by family offices, whether single family or multi-family, can vary widely but often include:

  • Investment management and oversight
  • Family-centered services, such as trust administration, estate planning or education
  • Financial services, including accounting, tax preparation and bill payment
  • Fiduciary services, including individual and corporate trustees Philanthropic, from mission and strategy development to the administration of giving all the way to  outcome evaluation and more
  • Education, including financial literacy for the NextGen leadership, preparation for board responsibilities, leadership training and more
  • Social services, including mentoring, providing counsel and occasionally serving as a surrogate parent – or spare grownup
  • Concierge services, such as purchasing vehicles, managing second or third properties, making travel plans and more

“Education is increasingly important for family business owners who want to ensure their children are prepared,” Walker explains. “Every family is different as to how much it wants to share in advance, but wise families are making preparations early to provide financial education, mentoring, meaningful business experience to members of Gen2 or Gen 3.

“It can be difficult to have executives in the company who are working for the parents also teaching the children. A family office can provide a safe and secure place to work through tough issues without having the eyes of the entire company on you.”

What platform is right for a particular family?

“Everyone ideally would love to have a single family office,” Walker notes. “But it can be economically challenging to have the depth and expertise you want, in addition to the financial and administrative burdens of hiring, managing, providing salary and benefits, leasing space, developing secure infrastructure and all the rest that comes with a family office at a reasonable price.

“While some families can afford – and want to dedicate resources to – a single family office, many prefer a multi-family platform that may have the same attributes and services but allows for the sharing of expenses with other families.”

Walker said it can often come down to how much of a family’s wealth it wants to spend to have which of those services. He estimated that $20 million in assets is the floor for a multi-family office, while families with $100 million or more in assets could look at a single office platform.

10 issues to consider

So what should you look for if you are considering a family office? Walker offers a 10-point checklist that includes:

  • Qualifications: What are the credentials of the key advisors? What type of experience and expertise do they bring to the table? How much depth does the team have as a whole? Who else is on the team and what experience do they have?
  • Longevity: How long has the team been together? How long have the key advisors been in the profession? What other clients have they served? What type of access will you have to the team?
  • Governance: What type of governance structure is in place – a partnership? LLC? institutional platform? Bank? Do they have the financial resources to support the operations of the family? What type of liability insurance do they have?
  • Trustworthiness: What is their reputation? Who is saying what about them – and is any of it true? What reputation do their key advisors have? What polices are in place to govern decision making? What types of checks and balances are in place?
  • Technology: What type of investment have they made in technology? What type of computer system is used? Who has access to it? What role does encryption play? What backup plans are in place if data is breached or lost? What policies are in place for document handling and retention?
  • Compliance: What type of regulatory oversight is in place? How often are audits done? Are audits conducted internally or externally – or both? How are policies and procedures documented? implemented? enforced? What type of compliance track record do they have?
  • Confidentiality: What safeguards are in place to ensure confidentiality? What type of reputation do they have for maintaining secrets? How discreetly can they deal with a potentially embarrassing issue for the family?
  • Independence: Do they sell their own products or services? How objective are their recommendations? How do they deal with potential conflicts of interest? How can you be sure their recommendations are in your best interest?
  • Accessibility: Are they local or at least in the same time zone? Can your advisor reach you in a few minutes if an emergency arises – or will it takes hours and a plane trip? Are they available 24-7? Do they have a team member who is?
  • Empathy: Can your team relate to you? Your children? Your parents? How do they go about building a relationship with you? Do they have the ability to transcend generations?
  • Costs: What are the costs and how are they determined? How transparent are fees? What types of add-on charges can you anticipate?

“Legacy Trust is one of a small handful of West Michigan-grown wealth management providers with deep expertise in family office who can offer all these things,” Walker explains.  “Our organizational structure allows for a company of our size to remove any advantages of ‘bigness’ by bringing best-in-class services and the flexibility to design and staff service programs that meet the needs of each family.

“The culture of Legacy Trust is truly service first. I learned that during my time at Old Kent Bank, where I was a co-founder of its private wealth management division. I saw firsthand the power that excellent client service provides, and I carried that lesson with me when I first opened the doors to Legacy Trust more than a dozen years ago.

“We are addressing a real need for family office services in West Michigan. Successful family businesses are confronting the kinds of issues, from the succession of longtime family advisors to educating NextGen leaders, that Legacy Trust is perfectly positioned to address.

“West Michigan family business owners often want to do business with the people they know. Legacy Trust is based here – my team and I live here, work here, raise our families here and support our local communities. Our key decision makers and advisors are right here in our hometown market, allowing great access without sacrificing quality.”

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