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When the Business of Your Business Becomes Your Wealth

Presented by: Bill Andrakakos, CFA, FRM, President and Chief Investment Officer

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If you ask any entrepreneur or executive what their primary goal is, you’re almost guaranteed to get the same response: to build or grow a successful business and create value for shareholders. With the interests of the individual and the company perfectly aligned in this way, one of nature’s most frictionless, symbiotic relationships is born. However, because the lifespan of an enduring business is vastly longer than that of any individual, their interests may begin to diverge with the passage of time. This dynamic is less understood and discussed, in our experience. Much advanced planning is required to maximize a potential monetization event and ensure a smooth transition to your new business of managing the wealth you’ve created. To that end, this article delves into the key considerations and steps involved in building a strong foundation for your family’s financial future.

Building a Legacy: A Guide to Establishing a Family Office

For families with significant wealth, a family office can serve as a cornerstone, protecting and nurturing assets for generations. This centralized hub provides a comprehensive range of services, from wealth management and investment oversight to philanthropy and lifestyle management. But establishing a family office is a complex undertaking, requiring careful planning and execution.

Defining Your Needs:

Before embarking on this journey, it’s crucial to understand and define your family’s unique needs and goals. Consider:

  • Family Size and Structure: Are you a single-generation family, or are you planning for multiple generations to benefit?
  • Wealth Composition: What type of assets do you hold (e.g., real estate, private equity, liquid investments, concentrated stock/options)?
  • Legacy Objectives: Is your primary objective generational wealth transfer, or do you have philanthropic intentions, or both?
  • Financial Goals: Do you seek to preserve wealth, generate income, or grow the family’s assets aggressively?
  • Intergenerational Values: What values and principles do you want to instill in future generations?

Types of Family Offices:

It is a common misconception that the world of family office services is only available to the billionaire class, such as the owners of the Pacers or Colts. But great leaps in technological innovation and institutional-quality solutions recently have proven this to be a limitation of the past. Based on your needs and resources, you can choose from different family office structures:

  • Single-Family Office: Manages the wealth of one family, offering personalized services but requiring significant resources and time to establish.
  • Multi-Family Office: Serves multiple families, offering economies of scale while delivering highly bespoke services and, often, even greater sophistication.
  • Virtual Family Office: Leveraging technology and outsourced services, it offers a cost-effective solution for smaller families but a higher degree of day-to-day oversight.

Essential Components:

Once you’ve defined your needs and chosen a structure, focus on building a robust framework:

  • Team: Assemble a qualified team with expertise in mergers & acquisitions, wealth management, investment management, estate and tax matters, etc. It is imperative that a coordinated and holistic plan is clearly articulated to leverage efficiencies and maximize the value of each specialist group.
  • Technology: Invest in secure and efficient technology platforms for financial reporting, communication, and data management.
  • Governance: Establish clear governance structures, including family councils, investment committees, and operational frameworks.
  • Communication: Foster open and transparent communication among family members about financial matters and family values.

Key Services:

With coordination being of utmost importance, sourcing key services becomes paramount. Engaging a family office CIO, or “quarterback”, can be invaluable. At Aaron Wealth, we have built a fully customizable, institutional-quality platform to offer a comprehensive array of family office services, including:

  • M&A Advisory: Deal-related negotiations, structuring, valuations, pre-deal estate/tax planning, building a buyer group, and post-close integration.
  • Wealth Management: Investment strategy development, portfolio management, risk management, concentrated stock management.
  • Financial Planning: Estate/tax planning, risk/liability management, and liquidity management.
  • Philanthropy: Assisting with charitable giving strategies, managing foundations, and value alignment.
  • Next-Generation Education: Providing financial literacy training, investment education, and support for future generations.

Building a Sustainable Future:

Remember, a family office is a dynamic entity that evolves with your family’s needs and the ever-changing financial landscape. Here are some key steps for long-term success:

  • Regularly Review and Update: Continuously assess your needs, performance, and governance structure.
  • Embrace Innovation: Stay informed about new technologies and trends in wealth management.
  • Seek Professional Guidance: Partner with experienced advisors to navigate complex issues.
  • Succession Planning: Develop a clear plan for the future leadership and management of the family office.

Building a family office is a significant undertaking, but it can be a rewarding journey that safeguards your family’s wealth and fosters a legacy of financial security and well-being for generations to come. By carefully assessing your needs, choosing the right structure, and building a strong foundation, you can create a valuable tool for navigating the complexities of wealth management and preserving your family’s legacy.

*Aaron Wealth Advisors is registered as an investment adviser with the Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. *Aaron Wealth Advisors does not provide legal, tax or accounting advice, unless explicitly agreed upon between the client and the firm.