The Family Office service is devoted to wealthy individuals and their families. The need to provide care to the family and adequate protection for its wealth arises from the fact that the family estate which grows from generation to generation invariably requires a very significant amount of work and knowledge – whether the aim is to expand the estate of simply to preserve it. However, this specialised knowledge is currently often dispersed amongst different and separate entities: accounting firms, law firms and investment advisors. The Family Office combines these distinct and indispensable services, thereby allowing for the provision of a single, coordinated and comprehensive advisory service within the field of family wealth management.
By bringing together and coordinating these separate advisory services (legal, tax, financial, real estate, etc.), the Client can be confident that his affairs will benefit from complete and all-encompassing supervision, which is not available when such services are provided by a number of dispersed, unconnected and individually expensive entities.
The Family Office may also perform the role of a professional secretariat which carefully oversees all Client maters, whether relating to foreign exchange duties arising from international investments or the payment of private bills and invoices.
In addition, it may be that the Client is faced with a somewhat atypical issue, such as a planned purchase of a property in South Africa. The Family Office possesses the potential and necessary skills to handle such tasks by identifying the relevant foreign experts and coordinating their work on behalf of the Client.
Family Office and the handing over of a family company to the next generation
In the context of family-owned companies, a new generation is currently emerging in Poland which is gradually taking over the function of managing the family estate. This process gives rise to new challenges which require the provision of tailored advisory services to families whose estates are undergoing changes. This, in turn, led to the emergence of a new type of services – the Family Office. These services are primarily addressed to families who have their own businesses and are focused on passing them onto the new generation. They cover legal and tax advice, as well as the coaching and supporting of successors in taking over responsibility for the family business.
Family Office and intergenerational succession
Many law firms provide services that focus on the setting up of funds and trusts, as well as intergenerational successionplanning. Succession planning and the registration of new legal entities in Poland or in other countries requires extensive legal knowledge and a corresponding level of experience. In addition, the psychological issues that may be present in succession planning or advice as to investments are also of importance in this process.
One matter that is of particular note is the issue of managing the different processes that are relevant in the context of succession planning. Using one firm to obtain legal and tax advice and another firm to implement the investment policies of the family is conducive to the multiplication of costs and the number of entities bearing liability. By accumulating the relevant competences within a single group of experts not only guarantees that the undertaken investments will give effect to the underlying aims, but also that they have been optimally structured from a tax and foreign exchange perspective, and that they are in line with the objectives of the intergenerational succession plan. The Family Office service should therefore ensure that advisors will suggest investment products which take into account the financial aims, as well as the tax issues that arise in relation to complicated international structures.
Family Office in the context of family investments and wealth management
There exists considerable competition as regards the provision of services to wealthy individuals in relation to their investments and the management of their estates. These services are primarily offered by banks and are commonly referred to as ‘private banking’ or ‘wealth management’. Their main aim is to establish a long-term investment strategy. Given that the majority of financial investment products originate from their issuers (Investment Fund Associations and banks), such services must be distinguished from those of a Family Office. As regards private banking, clients are counselled by advisors who are also the sellers of investment instruments issued by their bank or association. The Family Office, on the other hand, provides its services as an investor who only takes account of and gives effect to the interest of the individual Client. As such, a Family Office team should always be independent and it should only act on the instructions of its Clients, and in the interest of its Clients. This requires the experts to be versatile, to always be aware of the different offers that are available on the market, to act with professional integrity and to understand the needs of the Client.
Family Office and real estate investments
Another important area for Family Office experts is investing in real estate. Poland is currently enjoying a wide plethora of companies offering advice in relation to investments in immoveable property. It is therefore crucial to find the most reliable advisor amongst the large number of intermediaries, property administrators and agents. Family members are involved in the running of the family business, and it is often only the capital surplus that is actually invested in, for example, real estate. This is because of the fact that immoveable property transactions make up only a fraction of the investment portfolio. The lack of time to administer and manage properties combined with the need to coordinate intermediaries and property agents gives rise to yet additional responsibilities. The Family Office is capable of controlling such an investment portfolio, initiating subsequent transactions that come within its scope and ambit, as well as verifying any costs relating to the servicing of the properties.
Family Office and investing in moveable assets
Investing in artwork, currency or other collectables requires a degree of interest and passion from their proponents. Investing in paintings, coins or automobiles is associated with satisfaction that goes beyong the enjoyment of any financial returns made from the sale thereof. Purchasing collectable assets may sometimes be regarded as constituting investments, primarily because works of art enjoy the smallest level of depreciation in their value.
When are Family Office services most attractive? – case studies
When I have capital surplus but the time that I have to devote to my firm prevents me from being able to think about any lucrative investments, and any attempts I make do not bring about the desired effects.
One of the fundamnetal competences of the Family Office is its knowledge about the investment market and helping Clients in investing their assets, as well as efficiently allocating all elements of their investment porftolios after having taken into account all relevant legal and tax planning issues.
When I own a family business and I am planning for its succession. When I am not sure about the different ways that the estate may be passed onto the successors. When I wish to transfer part of the business to my brother or sister, or other family members. When I have problems with my oldest son/daughter, in whom I have high hopes but I am unsure whether he/she is capable or even wants to run the family business.
The Family Office possesses the necessary knowledge for succession planning. Aside from the extensive knowledge that our lawyers and tax advisors have within this field, they are also above everything very experienced. It is not always appropriate to govern family strategies simply by reference to legal rules, wills or statutes. Crucial practical experience and common sense are often much more important. Exceptional cases require the assistance of a capable and experienced family coach.
When I own many properties and the time that I spend managing them (e.g. by reference to the time-consuming task of making periodical payments, searching for the most attractice insurance covers, etc.) does not allow me to devote my attention to other undertakings which I would also like to pursue.
The Family Office can take care of managing any payments relating to the administration of properties, finding the most beneficial insurance cover, as well as choosing a reliable property administrator who can, for example, take care of renting the property or keeping it clean. We free our Clients from any tedious and repetitive tasks which we complete on their behalf. If our experience suggests that something could be done better, we offer and propose new and cheaper solutions to our Clients.
When the estate I own is composed of diversified assets and I am the only person who has complete knowledge about it; I worry that if I were gone my family would find themselves a little overwhelmed.
The Family Office is not only an advisory firm – it is also a professional secretariat which can safely store the most important family deeds and documents. The chosen advisor can be vested with matters which require the utmost level of confidentiality and sensitivity, such as those relating to certain assets which we do not want being disclosed to our children who are still in education, or those relating to documents which we want to have delivered to a specific addressee on a pre-determined date.
When the estate I own is composed of diversified assets and I am lacking the time to verify whether all the necessary documentation is in order, or to locate this documentation in the first place. When I do not have the time to check whether there is anything that ought to be done with my investments, e.g. dealing with redemption notices.
Our Family Office team will act on the Client’s instructions in administering his assets, verifying their legal status and current market value, maintaining a detailed inventory, as well as preparing accounting reports. In order to fulfil the necessary duties of an investor, the Family Office advisors will manage on behalf of our Clients any documentation and keep track of the relevant deadlines.
I have been able to organise my professional and business life but I do not have the time to oversee and keep up with the formal duties relating to my private household. In case of a larger family (costs in relation to education, housing, healthcare, vacations or phone bills) which is associated with a big estate (immoveable properties, private boats, vehicles, etc.), managing the considerable number of monthly payments may require many hours of work. Not to mention the time that must be spent on verifying the appropriateness of insurance covers or corresponding with local authorities which have for some reason been unable to properly record our payments.
The Family Office, which also performs the role of a professional secretariat, is capable of taking on any such responsibilities. By reference to the particular Client’s preferences, we can take responsibility for any documentation relating to payment obligations, correspondence with public authorities, or preparing reports on and executing monthly payments. As regards the latter, we encourage our Clients to set up separate, dedicated bank accounts that will be managed by the Family Office. The Clients will only take responsibility for making regular instalments on account of costs.