Many high-performance individuals, high net worth individuals, and successful entrepreneurs will definitely reach a stage when they might benefit from the services of a family office. Their business becomes so complex and the number of transactions far exceed the capability that they can handle. That is when these individuals need a person or team to keep on top of it all, to handle day to day matters as they arise, conduct necessary research, and walk them through the background when major decisions are needed to be made.
An increasing number of wealthy families have thought of setting up a single-family office in Singapore. Broadly speaking, a single-family office is an organizational structure that manages the financial and personal affairs of one wealthy family.
Establishing a single-family office is, in fact, not an easy feat. You’ll start thinking, “Where do I start? “What do I need to organize in order for this to work out?” “Do I need to draft a family office business plan?” “Is there a best family office structure?” “How wealthy do I really need to be for a family office?” Or “Might the use of a multi-family office actually be a better solution?”
It’s always tough when you’re in unchartered territory, it’s kind of like when you’re first starting your business where you never really know what to expect.
In most countries, finding a professional step-by-step on this complicated process is a challenge and even in more established countries, holistic advice can be hard to find too! As an introductory crash course on how to do this step by step, we’ll be listing below our single-family office advisory process- 8 Steps to Setup Your Single Family Office.
1. Objective
- Your family office objective is best started by drafting a single-family office charter, also referred to as a family office constitution. Family business management planning, as a rule, is of major importance for those families, in which the capital owner has two and more adult children and grandchildren (the third generation). It also defines the vision and principles of a family’s wealth strategy and acts as an operating model
2.Family Office Location
- This should be a unanimous decision. Selecting the most suitable location for you to operate your family office is important. The location should be financially beneficial and a stable political environment.
3.Roles
- Indicating the involvement of the family clearly is crucial, for example, the single-family office leadership structure is very important and needs to be done at an early stage. Will a family member be appointed to a certain role for your family office? For instance, one key family member wishes to acquire a legitimate status to work and be based permanently in Singapore, the family member will need to be appointed in the Family Office Investment Committee.
4.Leadership Structure
- A family office needs a CEO just like any other company. Without a leader how can the company survive? Keep in mind that recruiting a family office CEO can be extremely challenging, there might be lots of potential candidates for CEO of a company but not many have the experience of running a family office.
5.Assets
- What family assets are within the scope of activities of the family office and which are not? Which assets remain to be managed by the family directly (such as the family business)?
6.Budget & Cost
- Internal operating costs – payroll, technology, and telecommunications
- Direct family expenses – residences, donation, art or other collections, travel, and taxes.
- Professional service fees – accounting, tax & legal, advisors and insurance.
- Investment advisory fees – management & custodian fee, research & analysis, and aggregated wealth management reporting.
7.Recruitment
- Without a doubt, recruiting your family members to manage the family office will be challenging. You will need to analyze the amount of manpower needed in relation to the services. It is highly encouraged to combine both family and non-family members to give an objective view on the day to day management.
8.Information Technology, Security and Software
- The technological side of a family office should not be ignored. Running a family office without any proper IT applications is virtually impossible in this day and age.
- Having Control & Risk Management should be at the top of your priority in operating your family office.
Taking the first step is hard.
Remember, starting your business for the first time is hard too, but if you managed to pull through that, so too can you pull through this. The reason we emphasize on the framework for your family office is to prevent any severe problems in the future. Most problems need to be handled ahead of time and are to be handled simultaneously.
Just as the business evolves, Single Family Offices need to evolve as time passes. Lay a solid foundation and continue to expand and build your family office overtime!
One key point to note is that a single-family office is not a static structure but rather a dynamic one. Families grow and once that happens the family office needs to adapt and grow towards the direction of the family as well.
Ensuring the family office adapts to change while remaining effective is a very difficult feat to achieve. You need to ensure that the family office grows and adapts to the needs of your family.
At Ebos we are able to help you out on setting up a Family Office if you are ever in need well after reading this guide!
