Developing a "wealthbook" - How a family can benefit from having a "wealthbook" prior to forming any form of family office.
By Dr Andrew S Kane OBE
My decades of experience working with wealthy families tells me this. Families worth say $250 m and up, likely consider a single-family office platform. Wealthy families from say $100 m to $250 m often consider a single-family office, but the costly economics may lead to a multi-family office platform. For those families with wealth from say $20 m to $100 m (my ranges are admittedly arbitrary), they are still wealthy in most people’s eyes, yet often no family office format really exists.
Instead an array of advisers, some deeply trusted and well-coordinated exist. For these families where wealth creation is often rapidly increasing and asset diversification and complexity correspondingly expanding, within the confines of the heart of the family (namely the patriarch and matriarch), emotions begin to rise over retaining control over what they have , where it is located, how it should be utilized, how to create wealth transfers etc. These emotions are well hidden, only exposed to a trusted few.
For these wealthy families in the say $20 m-100 m range, I am often referred in to help them address their emotional control concerns. I create a pre-family office dialogue, process and wealthbook, primarily to address their emotional control concerns. Pre-family office planning is essentially using skills and knowledge about family offices and wealthy families, to undertake a process to aggregate all information, data, records and financial aspects of the family in order to create a family wealth book (usually in excel in my practice). Expedient as it is for the family to review this wealth book (I update it on a quarterly basis, but this is at the direction of the family), the process crystallizes what is owned, borrowed, over utilized and underutilized. Each wealth book is accompanied by my personal quarterly report, provided in person and focused on addressing the family’s needs. I write a report to compliment the meeting. All of this is undertaken under the strictest of confidentiality arrangements.
As the wealth book matures over a year or two, it becomes a highly confidential resource for the patriarch and matriarch and sometimes their adult children. It is supported by all core underlying data and cross-referenced back to the supporting documents. As the confidence rises in having in their hands a physical detailed wealth book (replete with multiple excel pages of supporting information all printed in pdf format), so the emotional stress over control dissipates.
As the family wealth continues to expand, my pre-family office planning, likely leads in many cases to having the information available to ease into a multi-family or single office platform when the situation is right.
Having managed large single family offices and spent years with wealthy families, pre-family office planning is an effective approach to keep emotions over control in check, permitting the key family members to feel they have sufficient control and understanding over their wealth to make the smart decisions over a wide range of matters, ranging from gift planning, insurance needs or philanthropic pursuits as examples. Most importantly I have found that the pre-family office wealth book helps enable clarity to plan for the family’s needs when a capital event occurs, family members succeed the patriarch/ matriarch or its just plain time to move to a multi or single-family office platform.
So perhaps others around the globe may consider a similar approach to assist wealthy families in the $20 -$100 m range prepare for a family office in an easy but sophisticated way with the help of a skilled and trusted adviser/consultant.
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Dr Kane’s practice is focused on working with wealthy families, including how and when to create, build, operate and streamline family offices. Having been President of two substantial single-family offices and consulted with many families and family offices, his experience and insights are sought out as he understands what works and what doesn’t. Prior to his experience with family offices, Dr Kane was a Managing Director at HSBC Private Bank and a Managing Partner at Arthur Andersen prior to HSBC. He holds masters and doctoral degrees in Human Development, is the author of “Three Bridges-Adulthood is Easy until Life Intervenes” and resides in Westlake Village California. Contact details and further information is available at www.andrewskane.com