Multi-Family Office Role in Transition Planning

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In Expert Q&A Tom McCullough – Family Office

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Three questions. First, what role does a well-run multi-family office typically play in its clients business transition strategizing, planning and execution? Second, does a well-run multi-family office typically function as an intermediary between its clients and its clients other professional service providers? Third, how do other professionals typically view multi-family offices?

 

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Sub-title: Multi-Family Office Interactions with Other Professionals

Multi-family office role in its clients business transition strategizing, planning and execution

The successful transition or sale of that business is one of the most significant financial and life events for that family. Family-owned businesses often are said to be made up of three intersecting circles – the management of the business, the ownership of the business and the family.

In a business sale or other transition, the process is normally led by the business management with the able assistance of an investment bank or M&A firm. The family office focuses on the other two circles – the owners and the family – helping them understand, agree to and prepare for the likely changes to come, including how to structure, invest and manage that wealth. The family office, with its deep knowledge of the family and its goals, as well as its experience in a wide variety of technical topics, plays an important role in providing the family with guidance and counsel in what is often a new area for them.

In many business transitions, the family ends up with more liquid wealth than they have ever had before and will need to prepare for this new life and the opportunities and challenges it will bring. The impact of that wealth can be overwhelming and even ruinous to families who have not been educated in the stewardship, responsibilities and management of wealth. It can also have an effect on intergenerational relationships. Communication between parents and children can be challenging at best, and a sensitive topic like money can make it even more difficult, unless it is handled well.

The multi-family office as an intermediary between its clients and other professionals

It depends on the situation. A good family office will play an overall coordination role, but most successful families also have a number of well-qualified, competent, and often longstanding, advisors. When the issue at hand relates to just one of those advisors, clients will often deal with that advisor directly.  When the issue is more complex and multi-faceted the family office is more likely to be actively involved. In all cases, it is usually helpful to ensure that the family office is copied on all activities and transactions so they can keep track of the big picture for the family.

How do other professionals typically view multi-family offices?

Good advisors typically see the role of the family office as additive, even advisors that have been working with the client for a long time. Most advisors will agree that there are often things that fall through the cracks and that there is no one with the knowledge, time or mandate to play the ‘general contractor’ role in the family.

Family offices are not normally specialists in any one area, so they rely on and work closely with the family’s other trusted specialist advisors. In our practice, when we start to work with a new family we typically develop a strong working relationship with the family’s existing advisors, such as lawyers and accountants, and often have the opportunity to refer them to other families who are looking for new advisors.

Family offices often play a proactive role within the family helping to move the ball forward on areas that are deemed to be a priority and where there is complexity and multiple people and issues involved.

Tom McCullough MBA CIM CIWM

Tom McCullough is Chairman and CEO of Toronto based Northwood Family Office LP. Northwood Family Office is recognized as one of the leaders in its field, selected as the #1 independent family office in Canada in a Euromoney global private banking survey.

Tom has spent over 30 years in the wealth management/ family office business. A member of the Editorial Board of the Journal of Wealth Management, Tom is a frequent speaker and passionate advocate of the family office and other solutions to the issues wealthy families face.

Tom teaches ‘The Management of Private Wealth’ in the MBA program at the University of Toronto’s Rotman School of Management and is an Entrepreneur-in-Residence at Western University’s Ivey School of Business.

You can reach Tom at tmccullough@northwoodfamilyoffice.com, or by telephone at 416 502 6288.

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