In today’s world of economic uncertainty, managing your finances can seem like a daunting task. Shifts in the market and inflation are making it harder to make ends meet for millions of people. Heck, even buying eggs has become financially complicated this year.
Being in charge of a business during this time takes a team of people to be successful. Over the course of every entrepreneur’s lifetime, they hire the following: an accountant, an attorney, insurance agents (both personal and business), a banker, an investment adviser, etc. The list goes on. What’s more, finding the right people that you can trust is a job all its own.
What Is a Family Office?
Billionaires have had a century-long secret advantage when it comes to building and sustaining wealth. It’s called the family office. Before deciding if a family office is right for you, it’s necessary to fully understand what it is. This structure is what virtually everyone in the “billionaire’s club” creates when they get seriously wealthy.To build a family office, a billionaire will hire all the necessary professionals as full-time employees. Specifically, these new hires will work for that one billionaire and his or her family. Think along the lines of tax, legal, insurance, and investment experts–along with attorneys and accountants. Needless to say, a traditional family office is expensive to build and run.
Connections Every Family Needs
To better understand how a family office operates, we’ll review a few key things. This includes each position typically hired, how they communicate, and how they benefit each other. It’s worth noting that positions and components can be adapted to your business and lifestyle needs. For instance, you may find that you don’t need a full-time CFO, and instead could have a coordinated effort on financial analysis by using an outsourced part-time CFO in cooperation with an accountant and bookkeeper. You might also find an estate attorney who specializes in asset protection structures.Accountants
As a business owner, you likely already engage with at least one trusted accountant. If not, it would be wise to consider doing so. This trusted accountant is a tax expert who keeps track of your bookkeeping–or works with your bookkeeper–to make sure you stay in the black. For example, they might audit your books, prepare payroll tax reports, or simplify all the financial rigmarole and minutia that come with running a business. When establishing a family wealth office, it’s important to have an accountant who can communicate your financial standings and work in your interest to reach financial goals.Investment Advisers
Investing is a valuable way to grow your wealth. So, it’s a good idea to utilize investment advisers who will be able to work with you and your accountants and ensure that you’ll see positive returns. A family office may be responsible for investment portfolio management, private equity deals, hedge fund investments, and/or venture capital investments. If you’re interested in commercial real estate, they may also handle real estate purchases, sales, and property management. Like everyone else on your team, these professionals are available to help grow and protect your wealth.Tax Planners
Many accountants are tax historians rather than tax planners. For instance, a tax historian might all the correct forms at the right time, but is looking in the rear view mirror. What you need in your family office is a tax planner. A tax planner proactively looks forward and presents you with ideas on how you can legally save the most possible money in taxes.Insurance Experts
Everyone needs insurance to protect their belongings. But, as you grow your wealth, this becomes even more important. Insurance transfers risk, therefore it is the key to a defensive financial strategy. Additionally, there are tricks of the trade that insurance experts know, which can benefit you and your family in the long run.Attorneys
Another aspect of protecting your wealth is to avoid lawsuits that could take it away. Having an attorney on your side means having someone to advise and represent you or your family. Whether it be in court, before government agencies, or in private legal matters, they’re able to act on your–or your family’s–behalf. They can interpret laws, rulings, and regulations for individuals and businesses, which becomes more important as your wealth grows.It’s also crucial to have a trusted attorney who’s able to help with estate planning. Every business owner needs to have an estate plan, because death is inevitable. If you don’t have an estate plan already, it is highly recommended to prioritize having one. While many people understand that an estate plan allows you to name the people or organizations you want to receive your belongings after you die, it’s much more than that.
You should also factor in things like instructions for your care and financial affairs if you become incapacitated. Essentially, this means designating a power of attorney and funding assets into a living trust. You’ll want to update beneficiary designations and name a guardian for your minor children’s care and inheritance. While it’s important to think of your family and your own well being during estate planning, a major asset that needs consideration is your business.
Considerations you would need to make for your business would include deciding whether you’ll want to transfer or sell. Regardless, both of those options include paperwork. The articles of incorporation and operating agreement of your business can work collaboratively with your estate documents to help smoothen out this process.
The Benefits of a Family Office
If you are the type of person who believes you can do it all—let’s be honest, most entrepreneurs are—it may be difficult to relinquish control and let someone else take the reins. It might even be hard to let other people give you advice. But, in the long run it benefits you in so many ways. You’re able to save time, which you can then reprioritize in order to work on your business or spend time with your family.How to Create Your Own Virtual Family Office
One of the most difficult issues with having multiple advisers and consultants is navigating the collective team management. Typically, they aren’t communicating or collaborating with each other on a regular basis to achieve the best outcome for the entrepreneur.This means you’re responsible for the whole infrastructure, which takes precious time away from your other responsibilities. To make matters worse, you likely don’t speak the languages of tax, law, insurance, or investments. With a virtual family office, that responsibility is offloaded onto a wealth planning firm.
