The transition of family leadership from one generation to the next is never a smooth road. Family members are often confused about their roles and apprehensive about where a new leader might take them. It's no surprise then that many families avoid facing the challenge of transition until it is inevitable.
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Among the most crucial functions for the family office is the chief investment officer (CIO). The position might be held by a family member or outsourced to an external professional. A minority of families hire a captive investment professional-a strategy considered by many to be among best practices for families with ten-figure wealth.
This issue paper focuses on the principles, practices, and policies of family governance. It aims to help philanthropic families understand the theory and practice of effective family governance.
The senior generation of a financial family usually has some notion of when and what to tell the next generation about the family finances. This is typically based on the family goals and family philosophy on how to reach those goals. For example, if parents are concerned that their offspring will fail to become productive members of society if all the financial facts and circumstances are revealed, they might be closed-mouthed or vague about the amount of wealth that will be passed along.
Profile of the Brumley family.
Philanthropy is and was, for the Brumley family bone deep. When the Brumleys addressed a complex philanthropic problem, they invested every form of capital available to them; a considerable treasure and commitment. The Brumleys were committed to total engagement in all that they did together.
As a tool for the successful management of capital, the investment committee has been a serious disappointment. This paper discusses the reasons why investment committees tend to subtract, rather than add, value and proposes a new approach to the use of the investment committee.
It is now becoming more common for families to focus their overall estate planning strategy on communicating a family vision expressing the philosophical and moral imperatives of the wealth creators, rather than merely on minimizing taxes. The common structure for providing incentives to encourage or alter behavior is the trust.
The decision to make a planned gift allows the donor to satisfy his/her charitable intentions without the loss of income from the securities. Unlike an outright gift, this transfer is of the remainder interest only; the donor retains the current income stream.
Family offices, by definition, are professional-staff intensive and allocate as much as 70 percent of total operating expenses to compensation costs-a significant portion of the budget. (See page 3 for information on FOX studies of wealth management costs and family office compensation.) In light of the current market environment, with markets contracting and budgets shrinking, it's time for family offices to take another look at their compensation plans. Family offices need to understand the role compensation can play in supporting family and family office goals.