Through a lot of hard work, the most successful business families end up generating a large financial and/or real estate wealth. In order to not only preserve it, but also to increase it and keep it in a single unit generation after generation, it is advisable to set up or contract a family office to manage it, taking into account the many variables: legal changes, legal procedures, family cohesion, etc. In this way, the management of wealth is clearly separated from the management of the business.
The legal structure of the family office can be a limited company. It does not have to be the parent company of the group; indeed, it is advisable that it is not.
Objectives
In order to respond to such a complex environment, the family office integrates administrators, tax specialists, financial advisors and legal experts. In this way, it can provide a global response to the challenge of preserving the wealth of a family from generation to generation through good wealth and financial management, tax planning, investment in new financial and non-financial assets, real estate management, etc. It is advisable that the leadership of the family is entrusted to a professional in the financial sector who has been hired for this purpose.
For confidentiality reasons, in some cases the persons involved must be different from those in the family business.
The most common tasks of the family office are:
- Efficient wealth management: investments, taxation, pension plans, property management, etc.
- Family respite planning.
- Training new generations in heritage management.
- Designing the overall investment strategy.
- Organisation of Family Council meetings.
Which business families need a family office
It is advisable to set up a family office when:
- The volume of assets is difficult to manage. In Spain it is usually more than 2,000 million euros.
- A company is sold and the family has to organise the assets.
- They earn very large amounts of money in a very short period of time and do not know how to manage it. This is common for example in the case of sportsmen or artists.
- There is a high degree of financial complexity: equities, mutual funds, real estate, companies…
But the family office is not just for the big fortunes on the Forbes list. Entrepreneurial families with smaller wealth often manage their wealth themselves or with the advice of a professional expert in finance and investment planning. Another option is to join with other business families in a multi-family office. In this case, starting assets can start at around 20 million euros.
For their part, large fortunes tend to resort to the single family office, a type of exclusive wealth advisory service. Two paradigmatic examples are Pontegadea, the family office of the Ortega family, owner of the Indite group, and Omega Capital, owned by Alicia Koplowitz.
How family offices invest
It is up to the Family Council through the Family Strategic Plan to decide on the investment strategy and the acceptable level of risk. However, we can point out some common trends in family office investments.
Given their lack of investment time horizons and the absence of external interference, family offices tend to invest in long-term funds. Most seek to acquire new assets similar to their existing holdings, but with a greater ability to hold them in perpetuity. The biggest enemy is inflation.
If you would like to contract personalised and professional advice for the management of your family assets, Confianz will be delighted to help you.