Family Office Governance: a Multi-Generational Affair

By Sara Rabi  |  March 28, 2019

As an accountant and advisor to family offices, my perspective generally comes from the bookkeeping and tax side of the ledger. However, working with multi-generational family offices over the years has shown me that a family’s lasting success (or failure) is not based squarely on the balance sheet. More often, it is rooted in the structure of the family’s governance.

This experience was borne out recently when I was invited to speak at the Family Office Winter Forum in New York City, contributing to the panel, “Governance and Trust: Planning for the Next Generation.” My fellow panelists consisted of lawyers, multifamily office executives and family office consultants on governance and philanthropy.

We were asked what it meant to be trusted advisers to family offices, and the recurring answers included: facilitator, truth-teller, listener. We stressed the importance of avoiding pre-conceived ideas about how the family office should behave, or how a family should make a decision, and rather serving as an advocate for whatever the family believes is best for itself and helping to achieve that outcome. While wealth management is about growth, family office advisory services are also about wealth protection and preservation.

Though every family office client is different, the other panelists and I shared several opinions on successful governance procedures and structure.

Here are a few key points from our discussion 

• Family office governance should be intergenerational. A strict patriarchal or matriarchal model of decision making usually fails before the third generation, as households multiply, goals shift and skill sets evolve.

• Communications have to be up and down the generational lines, and these communications must be collaborative, collegial, honest and consistent.

• Start early. Building trust with family members at young ages is not a luxury – it is a necessity. However, it calls for educating children about wealth, money, working and responsibility.

• Documentation does matter – a lot. A family office constitution, the operating policies of the family office and the family’s operating businesses, service provider agreements, and trust and estate documents are critical.

• These underlying documents are not static. They need to be reviewed regularly and amended as necessary, especially as the next generation’s decision makers arrive on the scene.

As we were wrapping up, another recommendation emerged that rang particularly true to me. A family office’s professional advisors – attorneys, CPAs, consultants, all of us – have a duty to collaborate among ourselves. To the degree that we can communicate confidentially and as fiduciaries, we owe it to our family office clients to be on the same page, especially in light of the extraordinarily complex legal, tax and regulatory regimes that can confound clear decision making.

If you’d like to discuss in more detail how Marks Paneth’s family office specialists deliver value to our clients, contact us to arrange a meeting.

 

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About Sara Rabi

Sara Rabi, CPA, TEP, is a Partner at Marks Paneth LLP. She specializes in individual and fiduciary tax preparation and advisory services. She has extensive experience working with estates and trusts. Ms. Rabi is a member of the Society of Trusts and Estates Practitioner (STEP), which is a leading worldwide professional body for practitioners in the fields of trusts, estates and related issues, and is a designated Trusts and Estates Practitioner (TEP). Ms. Rabi serves... READ MORE +


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