Aside from running a business, it is important to also know how to manage your money. Juancho Robles teaches you the basics of a family office—not a literal office space, mind you—and whether it’s the right fit for you.
Recently, I was in Singapore on a personal trip. I got in touch with a close friend, who later introduced me to the CEO of a prestigious family office catering to Ultra-high-net-worth individuals (UHNWI) and affluent families in Singapore. From there, we eventually talked about the possibilities of offering similar services in the Philippines.
We also spoke about the peculiarities of local family businesses, wherein future wealth distribution to family members is not really planned and discussed. In the Philippines, I know of a few large local family businesses that made succession plans, but they still fall short in the family governance and wealth management areas. Part of our discussions even include how family offices can assist affluent families to better plan and manage their wealth so that their children and future generations do not squander it away—interesting topics, really.
Family Offices, Defined
Family offices in the Philippines are still a “new” thing. In general, a family office is a privately-held company or consulting firm that handles investment management and wealth management for wealthy families—generally one with over $100 million in investable assets. Most “local” family offices (if you can call them that) here are internally set up by the patriarch or founders of the families and they’re run by trusted individuals—usually, senior officers employed by the family business.
Thing is, these senior officers may not necessarily have the skills and expertise to maximize the family’s wealth potential. Additionally, they may not be familiar with addressing the complexities of running a full-fledged family office. There is also the issue of confidentiality because it’s possible that family members would like their wealth managed discreetly by themselves. And consequently, wealth management is not fully given attention because the trusted individuals or even the family members are more concerned with operating and running the family business itself.
A good family office usually consists of professionals who are experts in various areas, ranging from investments to managing family relationships and even family conflicts. Apart from investment advisors, they will have legal experts, psychologists, and even health professionals on board to address the various expectations and mindsets of each family member. These professionals closely work with families to help them develop and implement the strategies that they need in order to safeguard the family members and best protect their assets both now and in the future. Additionally, they provide support services by helping families professionalize the administration of their affairs, including their privately-owned businesses and their private wealth arrangements.
In Asia, including the Philippines, affluent families traditionally have held their investments through holding companies or Special Purpose Vehicles (SPVs). Many times, this was driven by the need to maintain confidentiality and the perception of simplicity in setting up in off-shore tax haven jurisdictions. In many cases, the overall purpose of these SPVs is to reduce taxes (as a tax planning tool). Increasingly, families have found that the use of these complex structures may be become unwieldy (because of unconsolidated management and reporting), and that it also exposes them to a lot of risks from tax authorities.
According to a 2018 Credit Suisse report, globally there are more than 50,000 individuals who have a net worth greater than $100 million. Many of these individuals manage their investable assets internally. In 2019, the Philippines had around 15 billionaires and the number of our local UHNWI with more than 30 million dollars was about 569 (according to a Statista report). Overall, Credit Suisse estimates of how many individual family offices exist range widely from 6,500 to 10,500. More recently, there is a growing trend of family offices in other jurisdictions such as South America, where family offices started to cater to families with excess investible funds of $1 million to $10 million focusing on early-stage investment opportunities.
What a Family Office Does
To simplify things, a family office is the one point of contact for a wealthy family for managing a lot of things depending on their focus. For example, a family office can handle the following:
Wealth Planning: including succession planning, business continuity planning, estate planning, life insurance, prenuptial agreements, living and last wills, and lifetime gifts.
Wealth Management: investment strategies and asset allocations, private equity, investment advisory services, and consolidated wealth reporting.
Tax Planning: tax advice, international relocation structures, real estate structures, double tax treaty planning services.
Family Governance: family constitution set-ups, family council, family assemblies, internal family rules and regulations, equitable family wealth distribution, and family dispute resolution.
Trust and Corporate Services: incorporations, trust administration, nominee services, family structures and shareholding arrangements, real estate management, property management of yachts, and aircraft vehicles.
Charity and Philanthropy: gift-giving strategy, grant-making, donations, and foundations.
As you can see above, an affluent family has a lot of things they can do to perpetuate their legacy and wealth. Instead of being burdened with dealing and communicating separately with a lot of individual professionals, engaging with a reputable firm that provides family office services or who can assist you in establishing your family office will simplify a lot of things for family members. This will then allow your family to focus on running the business or perhaps allow you to relax and even retire with the assurance that your family’s wealth is in good hands.
Whether or not you decide to establish your family office, the most important goal for a family is to keep itself intact. This includes forming meaningful relationships with family members and not burdening each other with quarrels concerning inequitable wealth distribution. Wealth protection and accumulation will just go to waste if family relationships are not in order.
As my own saying goes, “A family that plans together, stays together.” Keep safe, everyone.
Juancho is currently the CEO of Chan Robles & Company CPAs, the accounting and business consulting arm of the Chan Robles Group. He is also a trainer and speaker in many areas such as leadership, strategic planning, corporate governance, risk management, financial management, business process reengineering, internal and external audits, fraud management and professionalization of family businesses.
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