Family office exchange managing change

©2002, Family Office Exchange LLCAll Rights Reserved

Managing Change in the 21st CenturyThe Evolving State of the Industry

Family Office Exchange


Bill Paying & Record Keeping

Custody & Custody & SettlementSettlement

FinancialConsolidation

Inventory of Collectibles

Custody & Settlement

PerformanceMeasurement

FoundationCompliance

PartnershipAccounting

Cashflow & Liquidity

Management

Risk Management &

Insurance

Trust &PartnershipStructures

Asset Alloc.& ManagerSelection

Gifting & Grantmaking

Tax Planning & Compliance

FamilyFamilyRisk Risk

AssessmentAssessment

FamilyGovernance

FamilyMember

Involvement

FamilyMember

Education

FamilyAssets &Liabilities

Lifestyle Goals

Wealth Transfer

Goals

InvestmentGoals & Policy

PhilanthropyGoals

Risk Assessment

Complexities of Wealth ManagementComplexities of Wealth Management


Profile of the 1980s§ Business owners face succession issues§ Leveraged buyouts create wave of nine-figure liquidity§ Owners face complex financial alternatives

The Evolving State of the Industry

Profile of the 1990s§ Private wealth separates from institutional market§ Family offices offer customized solutions and proactive management§ Private trust companies serve family dynasties

Profile of the 2000s§ Costs of dedicated family offices increase with their success§ All professional disciplines converge toward MFO platform§ Harnessing financial information is critical component



FamilyPhilanthropy

Tax &Estate

Planning

InvestmentDiversification

FamilyContinuity

RiskManagement

Interdisciplinary Strategic Advice

Trust &Financial

Management


Multi-family OfficesTrust CompaniesPredominant Service Providers

Interdisciplinary Wealth Management

Money ManagementThe Scope of the Business

6th Generation3rd GenerationThe Definition of Old Wealth

$1 Billion$100 MillionDefinition of Wealth

Early 21st

CenturyLate 20th

Century

What Has Changed?


+ Objective Strategic Advice

Integrated Wealth Advisory Firms–MFOs§ Integrated Planning§ Investment Planning§ Lifestyle Management§ Risk Management§ Strategic Philanthropy§ Family Continuity

Wealth Advisory Firms§ Tax & Estate Planning§ Trusteeship§ Investment Advisory§ Financial Planning

Investment Advisory Firms (RIAs)§ Strategy & Policy Development§ Asset Diversification§ Manager Selection & Oversight§ Performance Measurement & Analysis


Financial Planning Firms§ Budgets & Cash Balances§ Investment Diversification§ Insurance Coordination§ Event-driven Planning


Governing Boards, Advisory Boards &

Private Trust Companies

Power of Golden RuleFamily Governance

Layers of Trusts, Partnerships, LLCs

Trust & Partnerships

Ownership Structures

Early 21st

CenturyLate 20th

Century

What Has Changed?


Indexing Core & Targeting Alternatives

Added Value fromActive Management

Over-diversificationStock Concentration

16 Asset Classes6 Asset Classes

Fund of FundsCustom Portfolios

Early 21st

CenturyLate 20th

CenturyInvestment Trends

What Has Changed?


Average Asset Allocation

Average Performance Expectation Still 10-12%

Core Equity 49%

Real Estate 13%

Private equity 14%

Hedge Funds 5%

Cash 5%

Fixed Income 14%


Managing RiskMeasuring Risk

Open ArchitectureMulti-asset Class Managers

Finding Emerging Managers

Finding Consistent Performers

Early 21st

CenturyLate 20th

CenturyInvestment Trends (cont.)

What Has Changed?


Greater TransparencyLack of Disclosure

Management of Information

Lack of Financial Information

How Loss Can OccurWhat Could Be Lost

How to Own/LeverageHow to Invest

When to Get OutWhen to Get In

Early 21st

CenturyLate 20th

CenturyMeasures of Risk

What Has Changed?


Philanthropic ImpactPersonalized Giving

Family Continuity

External Advisory Boards

Business Continuity

Family Governing Boards

Wealth EnhancementInvestment Performance

Trading Money for Time

Trading Time for Money

Early 21st

CenturyLate 20th

CenturyMeasures of Success

What Has Changed?


What Hasn’t Changed?

Taking Action in the Face of Uncertainty

Finding Objective, Interdisciplinary Advice

Managing the Execution of Complex Legal Strategies

Developing Shared Control Among Families Irrevocably Tied Together

Competing Against Institutional Clients for Access to Best Products

Wealth ManagementChallenges



“It’s about so much more

than managing money”

Business Finance Philanthropy FamilyContinuity


Fostering the Entrepreneurial Spirit

Managing Financial Transitions

Developing All Types of Family Assets

Deciding How Much is Enough for Inheritors

Understanding Money, Power and Love

Offering Leadership Training & Financial Education

Developing Philanthropic Values

Family ContinuityChallenges
