FOXCloud: What’s on the Minds of FOX Members – November 2023

The following were the most talked about topics within the networks on FOXChat in November 2023:

 

2024 Family Office Salary Increases

We're working on our 2024 budget and wondering what other family offices are planning in terms of pay raise increases over the next 12 months. (Source: FOPeer)

  • 3.5% for everyone - personal employees, Family Office, and Operations Companies
  • At this point - 3% across all positions

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Brokerage vs. Bank Custodian

I'd be curious whether you have an aversion to utilizing brokerage custodians (broker-dealers, like Fidelity) for holding publicly-traded securities. My understanding is that securities held at banks are kept separate and apart from the bank's assets, such that they are not on the bank's balance sheet and therefore not subject to the bank's creditors. Conversely, brokerage firms pool client assets onto their balance sheets, making them subject to seizure by creditors. While insurance (SPIC for broker-dealers) can help, presumably it would be inadequate to protect against a significant event.

We are exploring whether to move accounts from a bank to a broker-dealer and our initial reaction is that moving securities would be a non-starter for the foregoing reasons. (Source: FOPeer)

  • Would be important to verify where the bank is ultimately the custodian of the assets. Per my former life running a trust department at a regional bank, we utilized a third-party custodian to indirectly hold investment securities for trust client accounts. Over the years we have had custody arrangements with Fidelity, Vanguard, and a larger regional bank. While the trust department assets were kept separate and apart from the bank's assets, (and thus not subject to bank creditors), we were never questioned by bank examiners as to whether there was creditor risk to our third-party custodians. This is an interesting question, but I do not believe a custodian client's assets are at risk to the creditors of the custodian.
     
    Another matter you may clarify with the potential custodians (especially bank Custodians) is if client investment assets are pooled into an omnibus account with other client investment assets (and therefore potentially subject to accounting error risk in booking activity related to positions).
  • In reading the marketing materials online for several bank custodians, some of these pieces may be a little misleading on the Bank Custodian vs Broker/Dealer Custodian issues. Schwab has a FAQ on this subject matter at: Is my money safe - Account Protection | Charles Schwab.

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Crisis24 Personal Security Awareness Training

We are considering recommending the Crisis24 Personal Security Awareness training to one of our households. We were referred to Crisis24 by our insurance carrier. Because of the confidentiality of the clientele, we received written "testimonials" from various companies who have used their services, but no actual references for individuals/family offices that we can talk to about the service.

Has anyone in this group used this service, and would you recommend it? Was it delivered in person or virtually?

We would like to ensure that this session is valuable and highly professional before we recommend that family members commit their time to this training and potentially host the presenters in a family member's home.

Any insight or guidance you can share is appreciated. (Source: FOPeer)

  • We used Crisis24 for security training and were happy with the results. They conducted the training virtually but had an option to do it in person. We use them on an ongoing basis to conduct location security reviews prior to international travel.

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Fractional Share of Aircraft Ownership

We have a client looking to place fractional or full ownership of a private plane in LLC. Does anyone have a template LLC charter for such a transaction? (Source: ADVPeer)

  • Given the insurance and regulatory issues with aircraft ownership, my understanding is that there is more to this than just using the right template. A quick conversation with someone from our Aviation and Aircraft Transaction Services team (which regularly handles matters like this for family enterprises) might be a helpful starting point. Let me know if you would like me to connect you.
  • I would agree. A proactive conversation with specialized legal counsel to understand the implications and regulatory requirements for moving a private aircraft into an LLC is extremely warranted, as this is something often overlooked and misunderstood by our clients.
  • Agree. There are a handful of firms that specialize in business aviation law. Would be happy to refer you to specialists in the area. The tightrope that needs to be walked in these decisions rests between the FAA, IRS, state and local taxing authorities, operations, insurance, etc.
  • There are a couple of aviation law experts in Cayman who can likely assist. We are seeing growth in this sector here following Cayman's long-standing reputation as a leading jurisdiction for vessel registrations. Happy to provide introductions if you like.
  • Our founder handles these items for his family's SFO. Reach out to me if you'd like me to connect you with his assistant to schedule a call with him. I'm sure he will be happy to talk through his experience and recommendations.

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Grammarly Business

Have any family offices used Grammarly Business, including the integration with software, and the generative AI? (Source: FOPeer)

  • Yes, as the accountant at the family office, Grammarly Business has been extremely helpful; this is a personal perspective. Using AI to create a draft for policy and procedures can be a time saver. Editing a document is always easier than creating it from scratch. However, I would be hesitant to use AI for anything outside the family office as detecting the use of AI is on the rise.

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Generation-Skipping Trust (GST) Real Estate Holdings

We have a client with a GST Trust established in 2003. What strategies have you seen deployed for including multi-generational (primarily personal use) real estate properties in the GST? Are there any related advantages or challenges to holding and supporting these assets in the GST? Overall, there is a long-term investment horizon for the GST. (Source: ADVPeer/FOPeer)

  • You have many different choices. It depends on the language in the trust and the ability to change the language to fit the needs. In Florida, there is specific language to include to qualify the property for homestead to control the increase in real estate taxes. I welcome an opportunity to discuss the many different options.

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NetJets Negotiation

Has anyone had success negotiating with NetJets recently? Or, have your clients typically accepted the standard contract? (Source: ADVPeer)

  • There are areas that are still "negotiable" with NetJets. I can put you in touch with attorneys that are specialists in fractional transactions, as well as people who can help you with commercial terms. Let me know if you'd like me to connect you.

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Policy and Taxation Group

We recently were introduced to the Policy and Taxation Group, https://policyandtaxationgroup.com/, an organization that claims to represent the interests of family offices in Washington D.C. Have any FOX community members joined that organization and found it to be a useful resource or particularly effective advocacy group?(Source: FOPeer)

  • I've been an observer and member of the group, on and off, over the years. Of course, it's impossible to evaluate whether you think they really represent the family office world objectively given that everyone may have opinions of what that means. I will say that Pat and John are stand-up, honest people, fighting for what they believe is right. How you decide if you agree or not is obviously an individual decision. They have been fighting for policies that pretty objectively help family businesses. I can't say I really know their current position on all tax matters.
     
    For example, at one time I'm pretty sure they were arguing hard for the elimination of the estate tax. Now, I think it's more about not rolling it back, though I'm not following along well enough to know what their current positions are. So, of course, if you believe an estate tax is anti-family business and should be eliminated or not rolled back, then great.
     
    If you believe in something else, you'll obviously want to be sure their positions align with yours. They've been helpful during other things like the SEC family office exception fight, too. Their calls are super interesting if you like politics - often bringing Frank Luntz and others together for really interesting calls. I think they do lobbying days and things like that too, but I've never participated.
     
    As to their effectiveness, or the usefulness of their resources, I'm sure they have a view of that and it seems equally obviously that legislative politics is a game filled with externalities, so I'd say it's impossible to truly measure their impact, though I have no doubt they are a part of the puzzle and that puzzle would look different if they weren't out there. On the usefulness side, I think it likely depends on what you want out of it.
     
    Again, the calls are super interesting (though I wouldn't pay for them if that was how I was evaluating it), particularly if you're a political junkie. They try to stay mostly bipartisan or nonpartisan, though obviously a lot of their tax positions are more likely to be endorsed by the right side of the aisle.
     
    I think I met Pat through FOX some 20 years ago. She's committed, honest, and has been at this for a long, long time. Hope that helps. Happy to talk with anyone about what I know or have seen.

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Private Company Share Buyback Program

We have five equal family shareholders in a large, closely-held private manufacturing business. The family-only board is considering introducing an optional share buyback program to provide liquidity to family members. This is the first time we have been presented with this and would be very interested in learning more about how others think about this, what valuation discounts are/are not typically considered in this scenario, and any recommendations for high-quality valuation firms (ideally with manufacturing company valuation experience). (Source: FOPeer)

  • Jeff Bae (jeff@valuationservice.com) at VSI and Roy Meyers (rmeyers@mpival.com) at MPI would both be good choices for business stock valuations. But keep in mind that if this is a family shareholder situation, share buybacks may need to be carefully structured to avoid them being treated as "essentially equivalent to a dividend" under the tax rules. Otherwise, your sale may be taxed as a dividend and not an actual sale.
  • We have worked with Nick Adamy for several years on the valuation of a large manufacturing company. His process includes the typical lack of control and marketability discounts. We use his valuation for all our buy-back valuations, whether those buybacks occur due to an offer from the company to purchase, or due to the activation of a buy-sell agreement.
     
    It is also used for other shareholder purposes (GRAT administration, exclusion gifts, charitable giving, etc.). I would expect Nick to be able to speak to your questions authoritatively from his experience with our and other similar situations. Home - Adamy Valuation | Experts in Business Valuation & Financial Services
     
    As to your point regarding liquidity, our operating company has offered an age-based redemption opportunity, i.e., first home, start business, discharge college debt, etc., in addition to occasional strategic redemptions when cash-flow and other circumstances support it.

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Additional Topics of Interest Seeking Peer Recommendations, Feedback, or Insights

(Your comments can be submitted as a reply to the message on FOXChat or emailed to networks@familyoffice.com for FOX to post and share anonymously on your behalf.)

Director of Security

We are looking for a Director of Security. This role will report to the Family Office COO and be accountable for the security of the residences, the family office Security Operations Center (SOC), and the principal's family. This role is also jointly responsible, along with the business security team, for the security program and outcomes when the principal and/or family is traveling. It excludes executive protection.

The role includes creating and managing the family office security program goals, design (including hardware/software, vendors, and resourcing/staffing), budgeting, and owning overall outcomes. This role is also responsible for creating and administering security policies and procedures to assure the safety of property, assets, and people.

Does anyone have experience with a recruiting firm (or other point of contact) that would be good to engage for this type of role? (Source: FOPeer/HCAP)

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Family Office Accounting Audit

We would like to begin a formal annual audit process for the family's closely-held entities and holding companies. Can anyone recommend a reasonably priced audit / accounting firm that has experience with family offices? Just looking for a basic test of internal controls and third-party compilation. (Source: FOPeer)

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Fine Art Best Practices

I am looking for up-to-date best practices for maintaining art collections (sculptures and paintings in a gallery setting). I am specifically in need of updated reference sheets/best practices on the below:

  • Humidity requirements
  • Temperature requirements
  • Frequency of appraisals for insurance purposes (Source: FOPeer)

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Learning Management Systems (LMS) Platforms

We are currently designing our Rising Gen learning program to start in September 2024.

Since we have attendees in different continents, we are planning to go hybrid and are exploring several learning platforms (LMSs) to manage the program, what will allow us to have online the program schedule, the previous readings and materials, the possibility of joining online a live session, and we can follow up the attendee progress, conduct surveys.

Can you recommend any LMS platforms that you are using, either for family learning or for the family office staff? (Source: FLN/HCAP)

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Executive Assistant

In search of a full-time Executive Assistant for a Family Office and a BioTech operating company. We are looking for personal recommendation since the job will require a person of trust. (Source: FOPeer/HCAP)

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G2 Advice

A Member Discussion event was held on November 7 for members to discuss this topic. (Source: FOPeer)

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Yellowstone Mountain Club

Our client's property value increased from $83k to $250k and the real estate tax went from $27k to $47k. We are wondering if anyone else within FOX has property there and if they received very large valuation increases? If they did receive large increases, did they challenge? We'd appreciate referrals for providers to challenge the valuation as well. (Source: FOPeer)

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Member Referrals Requested:

This section includes service providers that members have recommended and/or are looking to hear about other members’ experiences.

Appraiser for Tangible Personal Property

Our client is looking for recommendations for an appraiser in the San Diego area who may be able to assist with appraising tangible personal property for an estate (general home contents but likely some antiques involved).(Source: ADVPeer)

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Aviation Attorney

Any recommendations for an attorney that specializes in aviation (private jets), including the relevant tax aspects? (Source: FOPeer)

  • We've used Michael D. Kolich from Jetlaw for leasing, financing, and regulatory compliance. mkolich@jetlaw.com
  • We have used David M. Hernandez of Vedder Price for a variety of plane purchases, sales, leases, etc., over the past several years. dhernandez@vedderprice.com
  • Suzanne Meiners-Levy at Advocate Tax Consultants, www.AdvocateTax.com, is outstanding. Here is a Tennessee Supreme Court case that required 6 years to conclude. The Supreme Court remanded the case back to the Circuit Court and then back to the Supreme Court for the final verdict where we prevailed. The verdict for us was for over $800,000 plus over $300,000 reimbursement for our attorney fees. I have used this firm for 30 years. Here is the court case that is often cited as the governing case in Tennessee and has been cited by other state courts. CAO Holdings, Inc. v. Trost, 333 S.W.3d 73 (Tenn. 2010). I will be glad to discuss. 865.850.285.

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Board Member Compensation Policy

We are looking for an advisor to help establish a compensation system/policy for members of the Board of Directors and other committees, for both family members and independent members. Does anyone have any recommendations for an advisor or company? (Source: ADVPeer/FOPeer)

  • We have a group here at RSM that can assist. Please contact me if we can be helpful.
  • BDO has an executive compensation practice dedicated to this service and conducts extensive studies in the BOD space for benchmarking purposes. Happy to get you connected to the right folks at BDO.
  • We provide this guidance to our Family Office clients frequently at Bank of America Private Bank. Please reach out to us directly or to your Private Client Advisor if you have a relationship with us. Otherwise, we are happy to jump on a call and provide some high-level perspectives and themes to consider.
     
    We can also connect you with an advisory firm directly in this space if you prefer but they will likely engage in a contractual, paid agreement with your team.

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Cybersecurity Advisor

We are currently looking for a cybersecurity advisor to carry out periodic evaluations of the current situation of the family office and generate an action plan in accordance with best practices. Does anyone have any recommendations for a cybersecurity advisor? (Source: FOPeer)

  • Has anyone had experience with GreyCastle they'd like to share?
  • They often say," An ounce of Prevention is worth a pound of Cure!"
     
    My family and many of the families I am associated with use Blackcloak, which provides 24-hour monitoring and scans regularly into the deep and Dark Web...and I get quarterly emails on the status of all the family devices for my wife, myself and three kids, which adds up. Their website is www.blackcloak.io.
     
    I am happy to make an introduction to them if you wish and share some of my experiences.
  • TRIFIDENT is made up of former IronNet employees. (IronNet was started and led by General Keith Alexander). Trifident is now dedicated to family office cybersecurity and are excellent resources with deep experience/expertise. Contact Michael Ehrlich/michael@trifident.com/About TRIFIDENT - TRIFIDENT.

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IT Managed Service Provider

Does anyone have recommendations for an IT Managed Service Provider who specializes in Microsoft 365 and Azure, can provide help desk support to end users, and ongoing consulting especially regarding cyber security? (Source: TODS)

  • We have had a good experience with Integris.

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Investment Committee Board Members

Anyone know of recruiters who find Board members or another avenue? (Source: FOPeer)

  • We had good luck with Family Business Consulting Group.
  • I might know some individuals who could be interested if you want to share some specifics, and have some FO recruiters that might do this if you want those names, but you might also consider the PwC family office matching service: https://www.pwc.com/us/familyenterprises. Last I talked to them, but that's 2019, I talked to Carin Robinson. carin.l.robinson@pwc.com.

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Land Sale Attorney

Looking for an attorney to assist with a land sale involving frac sand in Houston area. Any recommendations? (Source: ADVPeer)

  • Holland & Knight - We have Texas attorneys with significant experience with this. Happy to connect you.

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Louisiana Estate Planning Attorney

I'm seeking an estate planning attorney located in Louisiana. Preferably an attorney that has worked with families in the maritime industry but not required. Any referrals would be greatly appreciated! (Source: ADVPeer)

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Philadelphia Estate Planning Attorney

Our client is looking for an estate planning attorney in the Philadelphia area. Does anyone have a recommendation they could share? (Source: ADVPeer/FOPeer)

  • Cozen O'Connor has the leading trust and estates practice in Philadelphia for high-net-worth families. We also have estate planning lawyers in New York and South Florida. I would be happy to speak with your client.
  • We have a long-term relationship with our team at Cozen O'Connor and have been very happy with them. Below is Lexie's contact information. Alexia M. Fishman/afishman@cozen.com
  • Steven Winters at Cozen O'Connor for a bigger firm experience. swinters@cozen.com; 215-665-3733.
     
    Rebecca Rosenberger Smolen at Bala Law Group for a smaller firm experience. (610) 624-3391; rebecca@balalaw.com.
     
    Both are very experienced and excellent practitioners.

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Texas Trust Attorney

Does anyone have a recommendation for a trust attorney in Texas? One located in San Antonio would be ideal, but open to the rest of the state. (Source: ADVPeer/FOPeer)

  • Hornberger Sheehan Fuller & Beiter Inc. - Charles M. “Boxy” Hornburger/boxy@hsfblaw.com (San Antonio)
  • Uhl, Fitzsimons, Jewett, Burton & Partner - Harry W. Wolff, III/hwolff3@ufjbwlaw.com (San Antonio)

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Software Reviews/Experiences

This section contains software platforms that members have recommended and/or are looking to hear about other members’ experiences.

Budget Software

We are looking for strong budget software to track our spend vs. our annual and project-specific budgets. Does anyone have a recommendation for a program that's particularly useful here?

Any comments regarding experience with Sage Intacct's budget module, or a budget module native to an expense management platform (Bill.com/Ramp) would also be greatly appreciated. (Source: TODS)

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Enterprise Resource Planning (ERP) Solutions

We are beginning the process of finding a replacement for Microsoft Dynamics GP. We've come across two possible solutions: Acumatica and ActivityHD by AccountingWare. Has anyone used either system? If not, do you have an ERP software you would recommend? Thank you in advance. (Source: FOPeer)

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Key to Network Acronyms

  • ADVPeer: Advisor Peer Community
  • FOPeer: Family Office Peer Community
  • DIN: Direct Investing Network
  • FLN: Family Learning Network
  • HCAP: Human Capital Network
  • LCN: Legal Counsel Network
  • PTC: Private Trust Company Network
  • RGN: Rising Gen Network
  • TODS: Technology Operations & Data Security Network

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