EFTA01093335.pdf

Creating A Finale Family Office to Manage Wealth and Sustain the Family WHAT'S INSIDE FAMILY OFFICE • Abstract Who. What. Why The SFO Universe Creating an SFO SFO Governance SFO Infrastructure SFO Advisors Compliance and Risk Management SFOs for Business-Owning Families Adapting to Changing Circumstances Technology SFO Personnel Global Trends in SFOs SFO Profiles About the Authors aceliimer nilizsznznnsi W HIT EPA PLR The benefits of hiring internal professionals exclusively devoted Angelo J. Robles to your family's financial and personal needs Amy Renkert-Thomas EFTA01093335  ABSTRACT A Single Family Office (SFO) is a private company of professionals who are dedicated exclusively to the investment, personal and legacy needs of one family. The concept of an SFO can be traced back to the Roman major domus (head of the house) and the medieval major-domo (chief steward)' as well as the British landed estate. The modem SFO originated in the 19th century by family dynasties who accumulated significant wealth created during the American industrial age. hi Ilara' IF YOU'VE SEEN ONE SINGLE FAMILY OFFICE, YOU'VE SEEN ONE SINGLE FAMILY OFFICE... L Interest in SFOs has grown during While a number of wealth the last twenty years with a new management firms call themselves wave of worldwide wealth coupled 'family offices; this white paper with global economic turmoil of the focuses on the "Single Family past decade. Extreme volatility, Office" or SFO—a privately-owned banking and business failures and and — run wealth management firm investment fraud, has motivated developed for one family. Each many families of significant wealth to SFO is as unique as the family who take control of their financial affairs founded it. As the saying goes: "If and preserve their family legacy. you've seen one single family office, you've seen one single family office." EFTA01093336 Investment-Related Management of Accounting, Tax Asset Protection Family Services Services Complex Assets Planning and and Risk Compliance Management Who, What, Why Some advisors say the monetary 7 threshold before a single family office (SFO) makes sense is between $50 million and $100 million in total assets... L .J EFTA01093337 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Fan* 4 WHO, WHAT, WHY Some advisors say the monetary threshold For the families that create them, an effective before a single family office (SFO) makes sense SFO can provide: is between S50 million and S100 million in total assets. Some family office professionals might • Control, coordination and integrated say $500 million or more. A better question to management of investment, business, ask: Is my family's wealth—in all its financial and philanthropic and personal services non-financial forms—being well-served by my • Privacy and confidentiality existing wealth advisory team? • Dedicated focus on the needs and requirements of the family Some SFOs are substantial wealth management Services and benefits customized to the institutions, with teams of experienced needs of the family investment managers overseeing fully diversified Coordination and management of portfolios, including hedge funds, private equity. outsourced providers direct investments, real estate, commodities and Purchasing leverage, fee minimization and other alternative investments. Other SFOs are cost savings smaller, managing more limited assets. Almost • Risk management and compliance all SFOs share the following features: • Alignment with the family's legacy. vision and values The SFO manages a complex pool of investment and personal assets. Investments are selected and managed with a long-term focus (typically, for multiple generations of the family). The creator of the SFO wishes to play an active role in overseeing investment management. The creator intends to avoid the conflicts of interest inherent in the existing wealth- management industry. ID 2013 Family Office Association and Angelo J. Robin EFTA01093338 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Family 5 WHO, WHAT, WHY (coNrD) Depending on the needs and wishes of the Asset Protection and Risk Management family and the size and complexity of the assets under management, the services provided by • Investment due diligence the SFO can vary widely. They may coordinate • Insurance services and oversee various types of investment-related • Hiring, background checking and services, management of complex assets, management of household, business and accounting, tax planning and compliance, asset family office staff protection and risk management as well as • Reputation management family services. Here are the most common • Personal security services elements that each category may include: • Medical management Investment-Related Services Family Services Development of an investment policy • Family bank and intra-family loans statement (ISP) • Philanthropy and charitable activities Development and implementation of an • Family mission, constitution and governance effective asset allocation • Family legacy and values • Sourcing and due diligence for direct • Next generation education and engagement investment opportunities • Organization of family retreats • Investment due diligence • Personal and property security systems and • Aggregation and reporting of investment procedures performance Concierge services (for example, travel planning, private aviation, personal Management of Complex Assets shopping) • Residential real estate • Commercial real estate • Operating businesses • Collections • Sports teams • Socially-responsible investments Accounting, Tax Planning and Compliance • Accounting and tax filings • Identification and engagement of outsourced providers • Tax planning • Development and coordination of estate plans for all family members • Trust implementation and administration • Administration of private family trust company O 2013 Family Office Association and Angelo J. Robles EFTA01093339 The SKI Universe According to Wealth X's World Wealth Report 2012 - 2013, currently there are approximately 50,000 families worldwide, defined as having at least $100 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences... L EFTA01093340 WHITEPAPER 1Creating A Single Family Office to Manage Wealth and Sustain the Family 7 THE SFO UNIVERSE According to Wealth X's World Wealth Report and other business, investment and personal 2012 - 2013, currently there are approximately service providers. The family pays high fees for 50,000 families worldwide, defined as having at this disorganized array of overlapping services. least 5100 million in financial assets, excluding Worse, those fees likely are not fully disclosed, collectibles, consumables, consumer durables so the family can't quantify or compare them, or and primary residences. effectively negotiate with the service providers. Furthermore, many of the institutions they work The Family Office Association estimates that with have built-in conflicts of interest: brokers currently there are approximately 3,000 SFOs and other client-facing staff often receive higher around the world. Given the number of ultra commissions for selling the institution's own high net worth individuals, why are there so few investment products, giving them an incentive SFOs? Part of the reason is lack of awareness to push these products rather than choose and education regarding the benefits of an SFO, the product that best suits the client's needs fear of potential cost and complexity of set-up and circumstances. Families also rarely have and management, challenges in hiring capable the staff or the expertise to vet investment staff, and lack of professional guidance. All advisors or individual investment opportunities, these factors make families reluctant to create thereby heightening the chances that they may their own SFO. Also, the estimate doesn't inadvertently enter into a subpar investment, or include quasi-family offices: small private family worse, a Ponzi scheme or other fraud. investment companies of limited scale, or family offices embedded within family-owned and — Now more than ever, wealthy families need managed businesses. to coordinate their business, investment and personal relationships, centralize management But families that forego an SFO, whether by and oversight, implement appropriate due conscious decision or lack of awareness, face diligence and risk management procedures, and troublesome issues, particularly in times of manage their family affairs more effectively. For economic turmoil. These families often have a family of significant wealth, an appropriately fragmented and uncoordinated relationships structured and well-run SFO may be the answer. with multiple private banks, wealth managers 2013 Family Office Association and Angelo J. Robles EFTA01093341  Determine the Assess the Needs Develop a Business Purpose and and Objectives of Plan Create a Mission the SFO Statement Creating An SFO A critical early task in setting up an SFO is defining the mission of the family office... EFTA01093342 WHITEPAPER i Creating A Single Family Office to Manage Wealth and Sustain the Family 9 CREATING AN SFO Designing and implementing an SFO to fit investments? To preserve a family legacy? And your family's unique circumstances and needs why does the family want to manage assets deserves thought and preparation. While this collectively? Families planning an SFO should white paper can't cover everything a family take time at the outset to consider the purpose needs to know and consider in creating an SFO, of the SFO and its role within the family. the following can be a useful checklist. Families considering forming a SFO should put together a A critical early task in setting up an SFO task force made up of family leaders and trusted is defining the mission of the family office. advisors to lead the planning effort, with input Developing a short, focused mission statement from outside specialists as necessary. to guide the work of the SFO will help to avoid 'mission creep- in future years. The founders Determine the Purpose and Create a Mission should avoid drafting a mission statement that is Statement high-minded but vague and short on specifics. A family office consultant can help a family mold its What will be the purpose of this family office? vision and values into a practical and useful tool To manage liquidity generated by the sale of to guide the work of the SFO. a business? To oversee a portfolio of direct 2013 Family Office Association and Angelo J. Robles EFTA01093343 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Farnty 10 CREATING AN SFO (CONT'D) Assess the Needs and Objectives of the SFO client group, but can be equally critical for a first-generation entrepreneur who wishes to 1. Who are the clients? perpetuate the family's legacy over the long term. Other possible needs include property At the outset, make a list of all the individuals management and staffing, bill payment and and entities to be served by the SFO, such concierge services. as individuals, family branches, investment entities, businesses, trusts, trust companies and Develop A Business Plan foundations. The design of the SFO should take into account each client's unique needs and Once the clients, assets and needs have been requirements. itemized, the task force can begin the process of developing a business plan that outlines the 2. What assets will be managed by the SFO? services to be provided, a short- and long- term timeline, employee and outsourced talent Make a list of all the types of assets that required, service partners required (for example, the SFO will be responsible for managing: custodians, tax counsel, security services) and marketable securities, hedge fund interests, technology needs. MLPs, direct investments, operating businesses, residential real estate, commercial real estate, Budget farms, collections, aircraft, yachts, horses, sports teams. The SFO will need to hire or outsource A key objective in developing a business plan the specific expertise needed to oversee and should be determining a budget. Typically, SFO manage its particular asset pool. budgets are defined as a percentage of assets under management. SFO operating costs vary 3. What services do the clients of the SFO need widely—smaller SF0s, or those managing and want? complex assets, tend to cost more to operate than larger SFOs, or those managing a simpler Families with extensive investments, or with portfolio, because there are fewer economies of liquid capital to be invested, will need investment scale to exploit. The budget of an SFO managing management services including development an extensive portfolio of alternative investments of investment policy statements and asset and commodities for three generations of family allocation plans, manager due diligence, and members, all of whom also share a passion investment reporting. All SFO clients will need for modern art and house their collections in comprehensive and accurate performance multiple homes around the world, will necessarily reporting and accounting and tax-return be larger, both as an absolute number and as a preparation. Coordination of risk management— percentage of assets under management, than such as insurance, security and reputation the budget of an SFO managing a portfolio of management—is also a nearly universal need publicly-traded securities for a single family unit. of SFO clients. Development and coordination Family office consultants can be very helpful of estate and tax planning, possibly including in determining a reality-based budget for an management of a private family trust company, SFO, given a specified clientele, asset pool, and is an obvious need of a multi-generational service requirements. ID 2013 Family Office Association and Angelo J. Robles EFTA01093344 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Farnty 11 CREATING AN SFO (CONT'D) SFOs are not inexpensive to operate, and the available budget. The plan should also the future clients of the SFO may balk at the specify whether such expertise will be provided projected cost at first. However, when compared internally - via SFO staff - or outsourced. Once against the current expense of managing the the staffing needs are determined, the issues family's assets—taking into consideration all of location, office space needs, technology, costs, fees and expenses—the expense of an security, administrative support etc. can be SFO will likely be lower. Certainly, because addressed. the SFO will be custom-tailored to the family's needs, the return on that expenditure will be At this point in the process, CEO candidates higher. should be identified (if this task has not already been completed). Because the CEO of an The budget will drive the creation of benchmarks SFO must work closely with the family, the to set expectations for SFO performance. office staff and with a wide array of outside service providers, the CEO must have excellent How will the cost of the SFO be funded? An organizational, management and 'people skills. SFO serving the needs of a multi-generational Choosing a CEO purely because of his or her family must consider how the costs will be technical expertise in investing is generally allocated and charged to individual clients of a mistake. Because the CEO carries out a the SFO. Tasks classified as "needs" by a client high-level executive function and serves as the may slip to the category of "nice to have but family's face to the outside world, candidates not necessary today" when that client finds he should have proven experience leading, must bear the cost. Future conflict between managing and communicating successfully family office clients or between the family and in a wide variety of complex situations. Once the office can be avoided if the method of identified and hired, the SFO CEO will take on allocating expenses, determining the expected the role of carrying out the build-out of the SFO contributions by each client, and collecting fees in accordance with the plan. is made explicit from the outset. Leadership and Staffing The plan should identify the expertise required to meet the specific needs of the SFO's clients, given the specific assets to be managed and 2013 Family Office Association and Angelo J. Robles EFTA01093345 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Farnty 12 CREATING AN SFO (CONT'D) Staffing Oversight SFOs often hire investment team members The SFO should be overseen by a board of with extensive prior experience at private directors, which will meet regularly and be banks, investment houses and hedge funds. responsible for setting strategy and overseeing Such talent is highly sought after, candidates the CEO. Most families control the board of often demand—and get—co-investment rights their SF0s, to ensure that strategy is in line with or bonus compensation based on investment the family's wishes. Many SFOs are following performance. The SFO should take care in the lead of private businesses and bringing structuring such arrangements, particularly independent advisors onto the board to provide in light of the Dodd-Frank Act's requirement outside perspective and expertise. that family offices comply with RIA registration requirements unless they fit a very narrow Contingency Plan exemption. SF0s, both new and established, should seek advice of experienced counsel Planning for the SFO should include when bringing on new investment team development of a contingency plan that outlines members or adding new benefits such as carried procedures to be followed in the event of a interests. natural disaster, extreme volatility in the financial markets, theft, or technology breach or failure. All staff members, at every level, should go At the most basic level, the contingency plan through a background check and sign non- should include provisions for ensuring the safety compete, non-solicitation and non-disclosure and security of the family, its critical information agreements. Whether the SFO is large or small, and tangible assets, safety of the SFO staff, it should have an employee policy manual. The off-site backup of all information, and a plan for manual should be reviewed and updated at least re-establishing critical office activities off-site as annually by knowledgeable counsel. quickly as possible. 2013 Family Office Association and Angelo J. Robles EFTA01093346 SFO Governance Successful SFOs have strong governance structures to ensure that the organization is operated in accordance with the family's mission and values over multiple generations... L J EFTA01093347 WHITEPAPER Creating A Single Family Office to Manage Wealth and Sustain the Family 14 SFO GOVERNANCE Governance has long been a focus of corporate stewardship, oversight and management— investors, but until recently less attention has himself. Unless the controlling owner has a been paid to how SFOs are governed. An SFO formal governance mindset, he generally will that is intended to serve a family for generations prefer to run the SFO "lean and mean," without a would be wise to take time to develop and lot of staff or formal structure, making decisions implement an effective and appropriate on the fly in accordance with the his intuitive governance structure that can significantly assessment of what's needed at the moment. improve the longevity and success of the office. The controlling owner will often rely on a key advisor or staff member who "gets it" and knows Some families shy away from the term how to implement the controlling owner's plans, -governance: This term can bring to mind long who understands what is needed and does lists of onerous rules, regulations and policies. whatever is necessary to make that happen. At its core, governance is really nothing more than a set of rules that define how an It's critical to recognize that this sort of organic, organization will make decisions, large or small. first-generation govemance generally works For governance to be effective, the owners, quite effectively, at least in the early years. overseers (the board of directors or advisors) The office runs, makes investments and and management will need to be informed, accomplishes tasks. However, when the SFO understand their respective roles, rights and comes to be managed for a wider group— responsibilities, and operate the organization typically, upon the controlling owner's death, accordingly. when the assets pass to descendants or trusts for their benefit—the absence of established, One of the challenges of SFO governance is articulated policies will create a power vacuum. that the needs of the organization may change Without the founder around, suddenly no one radically—and very suddenly—over time. really knows who's in charge, what needs to be Commonly, a successful individual will create done, who's responsible for doing it, or how that an SFO following a liquidity event of some sort. performance will be measured or compensated. The founder will build the SFO structure to If the next generation hasn't been prepared suit his own needs and interests. As with any for their new roles, there may be a struggle for business run by a controlling owner, there isn't dominance, or the opposite: fearing conflict, a great need for formal governance at this stage family members may simply abdicate. The SFO of the SFO because the owner is fully informed, may slowly collapse, or a non-family member understands the goals and objectives of the may come to fill the vacuum, for good or for ill. SFO, and handles the critical roles—ownership, 2013 Family Office Association and Angelo J. Robles EFTA01093348 WHITEPAPER Creating A Single Family Office to Manage Wealth and Sustain the Family 15 SFO GOVERNANCE (coNT•o) Successful SFOs have strong governance The SFO's strategic plan goes beyond structures to ensure that the organization investing and includes education of family is operated in accordance with the family's members, to promote effective stewardship mission and values over multiple generations. over the long term. These governance structures must be robust yet flexible enough to withstand family conflict, An SFO can do much to align its operations generational transitions and cataclysmic with the family's interests, particularly in times changes in the investment environment, whether of generational change. Some SFOs find anticipated or unanticipated. The following are that family office meetings become a venue key elements of a good governance structure: for family members to air family grievances. The SFO can encourage and support the The family has articulated its mission, development of a Family Council to provide a values and vision for the future, and the forum for discussions of family issues separate strategic plan of the SFO is built around that and apart from the SFO. SFOs can play a key core. role in promoting family education, modeling The powers, rights and responsibilities of best practices, training next generation owners, board and management are clearly family members, and fostering an attitude of spelled out and followed. stewardship. The owners have appointed a board of directors or advisors to provide perspective, SFOs are typically designed to serve multiple access to specialized experience/skills, generations of a family, but an SFO is not and to set strategy and investment policy. eternal. Over the past decade, there have been The board includes individuals who are well-publicized stories of substantial SFOs that not members of the family, members of the crumbled under the conflicting demands and management team, or paid advisors. high costs of serving tens or hundreds of family • Management is free to implement the SFO's members, each with comparatively modest strategy, without interference or meddling holdings. Other SF0s, recognizing that they from the family or the owners. could no longer achieve the family's mission There are regular owners' and board and vision, or that the mission and vision had meetings, with written agendas and changed in such a way that the SFO's activities complete minutes. Information necessary for were no longer cost-effective, have undertaken effective decision-making is distributed well carefully orchestrated dissolutions. Families in advance of voting, and there is adequate should recognize that dissolving an SFO is time for discussion. inevitably a complex, expensive and time- SFO performance reports are dear, consuming process, and seek the advice of comprehensive and timely, so that decision- families and consultants who have navigated this making can be based on accurate and experience successfully. complete information. 2013 Family Office Association and Angelo J. Robles EFTA01093349  Dodd Frank Private Trust Structuring Carried Insurance and SEC RIA Company Investments Interests Registration SFO Infrastructure How the SFO will be structured depends on the jurisdiction(s) in which it will operate and the types of investments the family owns. L I EFTA01093350 WHITEPAPER 1Creating A Single Family Office to Manage Wealth and Sustain the Family 17 SF° INFRASTRUCTURE How the SFO will be structured depends on the within the definition of a "family office" or qualify jurisdiction(s) in which it will operate and the for an exemption as a bank trust company must types of investments the family owns. Many U.S. register with the SEC. While some family offices SFOs are structured as limited partnerships or have opted affirmatively to register with the SEC, limited liability companies, and are organized others are greatly concerned by the increased similarly to hedge fund administrative burden and loss management companies: of privacy that registration would the SFO entity does not own impose. SFOs are strongly advised any of the assets it manages; rather, it is a service entity to consult with securities Generally speaking, any that provides services to the counsel who have experience individual or entity providing SFO's clients on a contract Investment advice" must basis. with family office regarding register as a Registered the potential impact of SEC Investment Advisor (RIA) unless Dodd Frank and SEC RIA an exemption is available.2 Registration rules on their structures and Registration is costly and operations. entails detailed disclosures that While some SFOs are owned families typically are reluctant by their clients, others are to make. An RIA must maintain owned by an individual family member or one and preserve specified books and records, and or more senior staff members. Many families make them available to Commission examiners are reconsidering their SFO structures in light for inspection. An RIA must also implement of new rulemaking adopted in June 2011 under substantive compliance programs, prepare and the Dodd Frank Act, defining family offices. file reports with the SEC, and provide detailed These new rules eliminate the "private advisor written disclosures to their clients (known as exemption," which many SFOs relied upon to ADVs). Every RIA is subject to SEC audit. avoid having to register under the Investment Failure to register may subject an advisor to Advisors Act of 1940. An SFO that does not fit criminal and civil sanctions and penalties. O 2013 Family Office Association and Angelo J. Robles EFTA01093351 WHITEPAPER 1Creating A Single Family Office to Manage Wealth and Sustain the Family 18 SFO INFRASTRUCTURE (coNrD) SFOs may avoid registration by: one investment will affect another. For example, if the SFO holds commercial real estate, each Structuring ownership and operations to fit parcel of real property likely will be held in within the -family office exemption to RIA a separate entity. If a passer-by slips on the registration; sidewalk in front of one building, incurs a severe Outsourcing investment responsibility to one head injury and sues for medical expenses and or more third party RIAs; or lifetime maintenance, any liability in excess of Establishing a Private Trust Company the SFO's casualty coverage will be limited to (PTC). the assets of the entity that owns that building, thereby protecting assets held in other entities. Private Trust Company SFOs are increasingly utilizing sophisticated With a PTC, a family-created entity rather than holding structures such as tracking partnerships. a third party serves as trustee of the family's A tracking partnership permits family office trusts. Private Trust Companies are sometimes clients to hold different partnership assets in recommended by advisors as a mechanism to different percentages, with performance results avoid RIA registration, but PTCs may also offer tracking accordingly. substantial additional benefits for the SFO: By way of example, assume the tracking Greater participation and input by the family partnership has four separate classes of than would be possible if an outside, third interests: Class B (bond portfolio), Class S party served as trustee; (indexed stock portfolio), Class A (alternatives • Common administrative and decision- portfolio) and Class R (REIT portfolio). making policies and protocols for all trusts; • More knowledgeable and focused fiduciary Partner 1, an individual seeking a broadly oversight for family businesses, alternative diversified portfolio, might hold a 10% investments, start-ups, real estate, and interest in Class B, a 10% interest in Class other non-public investments held in trust; S, a 20% interest in Class A and a 15% • Greater privacy and confidentiality; interest in Class R. • Better understanding and knowledge Partner 2, a trust intended to fund education of family circumstances and needs of expenses for Partner l's 10 grandchildren, beneficiaries. might hold 40% of Class B and only 5% of each of the other classes. SFOs seeking to establish a PTC Partners 3, 4, and 5 would hold the balance of the interests in each Class, each in primarily to avoid RIA registration accordance with their individual investment are advised to consult knowledgeable goals. securities counsel with experience A tracking partnership gives partners the advising family offices. investment flexibility they would have if they formed several partnerships, but permits them to Structuring Investments trade between classes from time to time without recognizing gain or loss for tax purposes. The various investments managed by an SFO are typically held in individual limited liability entities, to limit the risk that losses or liabilities of 2013 Family Office Association and Angelo J. Robles EFTA01093352 WHITEPAPER / Creating A Single Family Office to Manage Wealth and Sustain the Farley 19 SFO INFRASTRUCTURE (CONT'D) Tracking partnerships offer considerable Insurance flexibility, custom-tailoring of client portfolios, and a consistent governance model for SFO clients. A critical task for any SFO will be monitoring However, they also bring with them complex tax, and managing risk for the family, SFO clients accounting and reporting issues, and so need and their holdings and interests. Property and to be designed with the help of knowledgeable casualty, liability, health and life insurance legal and accounting counsel and managed with typically will be overseen and coordinated by care. SFO staff; developing relationships with an insurance firm that has experience working Carried Interests with SFOs, knowledgeable staff and a comprehensive offering A carried interest is a of insurance products can share of profits from a SFOs are strongly advised to seek significantly improve the partnership or LLC that guidance from tax and accounting scope of coverage while is paid to a participant advisors before putting in place any reducing costs. Certain who did not provide any assets, such as private jets capital to the venture. carried interest structure or incentive and other aircraft, require A carried interest may compensation plan for SFO staff. unique holding structures, provide a tax-efficient insurance coverage and mechanism to fund regulatory compliance. family office expenses, and may be used to structure incentive compensation opportunities As the SFO grows and its clients and for SFO staff. investments change over time, it is a good idea for the family and CEO to undertake a structural Particularly in light of Dodd Frank and the SEC's audit from time to time, to make sure that the family office exemption, staff participation in SFO structure is optimal for its purpose. The SFO investments should be reviewed to ensure audit may uncover opportunities for eliminating that they do not unintentionally trigger RIA or reorganizing holding entities within the registration requirements. structure, thereby reducing reporting, accounting and compliance expenses for the SFO. 2013 Family Office Association and Angelo J. Robles EFTA01093353  SFO Advisors • A well-run SFO will have a clear process for selecting and vetting advisors... L EFTA01093354 WHITEPAPER d Creating A Single Family Office to Manage Wealth and Sustain the Family 21 SFO ADVISORS Most SFOs will draw on the expertise of a variety which may offer the family greater access to of outside advisors, including (but not limited expertise at lower cost. An extreme example of to) lawyers, accountants, bankers, insurance this trend is the virtual SFO, an entity without providers, investment advisors, philanthropic an office or even dedicated staff of its own; consultants and information technology rather, SFO services are provided by a group of specialists. Seeking advice when needed, advisors on a contract basis, quarterbacked by contracting for services, and coordinating one of those advisors. the efforts of these specialists will be a major responsibility of the SFO CEO and staff. The advantages of having an in-house, dedicated team to manage the SFO are clear: A well-run SFO will have a clear process the team's focus will be undivided; its skills will for selecting and vetting advisors. While be matched to the needs and requirements many members of the SFO team will have of the family and the SFO's specific assets experience working with various service rather than those of each team member's providers, it is important for the team to have own general client base; the family's privacy clear procedures for selecting advisors to avoid and confidentiality will be maintained and the conflicts of interest or playing favorites. Many expertise will be on-call and available whenever SFOs establish budgets for advisor-related needed. Very generally speaking, in-house expenditures on an annual or more frequent service providers will tend to be more focused on basis, thereby prioritizing needs and giving SFO and responsive to the family's needs, and their staff dear parameters for defining the scope of work will be under the sole control of the family. each project with advisory team members. Highly confidential and mission-critical services should be the first priority when determining Performance of existing advisors shoul