The Personal Wealth Revolution – Time to Formalise Your Family Office


By Sherilyn Casiano

For the entrepreneur and closely- held family business owner, a family office, set up with the proper foundation, can be a huge help in the succession processes and beyond. Below, Sherilyn Casiano argues that having a formal family office in place sooner rather than later can make a huge difference in the ease of transition from one state to the next.

A Revolution In Progress: Will You Be Part Of It?

There is a revolution going on. It has started quietly, but it has the world of “traditional money management” managers running scared. Trying desperately to salvage loyalty and trust from their clients after the devastating financial repercussions of the 2008 global meltdown, they are losing the battle. A personal wealth revolution is in progress. “People felt cheated on … [for instance] by hedge fund managers, by not being able to get out of the hedge fund when they wanted to because of gates. By banks being saved from bankruptcy but not them,” observed Serge Krancenblum, CEO of SGG Group in Luxembourg. Consequently, they have little to no confidence in advisors’ claims that they are looking after them. As a result, more and more of the Wealthy and Ultra-Wealthy are taking back control of their wealth from fund and other money managers and putting it into direct investments, particularly art, precious metals such as gold and silver, diamonds, privately funded infrastructure projects, and real businesses. Wanting to better understand how European family offices were coping with the current climate, I recently had a conversation with Mr. Krancenblum in his capacity as Chairman of the Luxembourg Association for Family Offices. It turned out to be a very enlightening conversation, and I will share more of his insights as we go along.

DWIMBS2008 was a wake-up call that hit wealthy clients where it hurt most – in their legacy. Those who were heavily invested in the leading big-name funds and institutions watched helplessly as the economy spun out of control, taking half and sometimes all of their legacy. “Asset allocation,” that favorite tool of traditional money management for acquiring maximum assets under management, failed completely as the crash swept across all asset classes, like the first tidal suck of a tsunami that leaves all the boats and fish in the mud of an emptied harbor, with everyone wondering what happened and realising only too late that the worst was yet to come.

At the same time, those fortunate few, the wealth creators and entrepreneurs who create real products and real value in real businesses, and who saw the signs and were able to navigate the treacherous waters, have emerged as the new rich and ultra-rich. From China to Africa, Australasia, Eurasia, India, and South America, there is evidence of this revolution. We are in the early stages of the next innovation wave that always follows a huge crash, and new fortunes are again being made at record speed. 

Vehicle for This Revolution –The Single and Small Multi-Family Office

The vehicle being used to propel this personal wealth revolution is that mysterious entity, the single- or small multi-family office. Nearly every billionaire has their own formalised single-family office, the idea being that if those in the office work just for them, the wealth creator will have greater control. And we believe that the job of a family office should be exactly that: to give the wealthy family true control and peace of mind. Unfortunately, most people who create a family office make some fundamental mistakes that limit the true strategic value and usefulness of a single-family office. More on that in a minute.

More and more of the Wealthy and Ultra-Wealthy are taking back control of their wealth from fund and other money managers and putting it into direct investments.

For the entrepreneur and closely held family business owner, a family office, set up with the proper foundation, can be a huge help in the succession processes and beyond. My purpose in this article is to lay out an overview and basic outline for a family office approach that has proven wildly effective at delivering true control to ultra-rich families for the last 20+ years. If you are unfamiliar with my other articles on this subject, my name is Sherilyn Casiano, and I manage a boutique multi-family office in New York. My clients are exclusively investment bankers, venture capitalists, and serial entrepreneurs. And the family office model I will share with you is basically the same one I use in my own practice. I want to acknowledge up front my total conviction that this model, which I call the Dynamic Wealth Management SystemTM,is the most logical, practical, and effective family office model for anyone wanting to gain true control of their wealth. I hope that by the end of this article you will understand why.

So what is this thing called a “Family Office”? The Wharton Global Family Alliance offers this definition:

“A professional center dedicated to serving the financial and personal needs of an affluent family”

I would add that the formalised family office should be:

“An entity and team of talent, created to act as a hub or clearing center for capturing, authenticating, validating, archiving, disseminating, and otherwise managing all the information and documentation related to a family’s wealth in such a way that the family realises and maintains true control of all their wealth throughout generations.”

It plays a vital, essential role in the effective management of one’s financial information and in the preservation and responsible use of one’s wealth for generations to come. 

The Informal Family Office

In fact, most wealthy people already have an informal family office, a handful of professionals who handle various functions of a family office. They have a personal assistant or secretary who handles travel arrangements, can write checks, and may have a petty cash fund. A bookkeeper who comes in once or twice a week to pay bills and reconcile the various bank accounts. In addition, they have an external tax accountant who prepares their various tax returns and advises them on tax strategies; a trust and estate attorney who advises on and creates legal documents that protect and transfer assets effectively; an insurance agent or two who help to insure against risk of loss of assets; and possibly several investment advisors who specialise in different markets and advise on investment opportunities to grow their wealth. This group rarely interacts with each other, generating strategies and activity independent of one another. While this helps maintain a certain level of privacy and secrecy, it also makes it very difficult for one to get and maintain an integrated, complete picture of all of one’s wealth.

Time to Formalise Your Family Office

This sort of informal network works fine when you’re worth $10 to $20 million when it may not be financially feasible to formalise your own family office or join an existing formalised family office.

But what happens when you suddenly have an extra $50 to $100 million from the sale of a business? Or 40 to 50 limited partnerships or other investment vehicles? Add to that one or more trusts and private foundations? What if you’ve got second and third, even fourth, generation inheritance concerns?

That kind of complexity can only be handled by a team made up of people with the knowledge and skill sets to do so effectively. If the day to day is getting a little hard to handle, then it might be time to consider personal assistant staffing to help around the office. Maybe there are other people who would effectively contribute to the business as well. We will look at who those people should be a little later. For now, let’s look at what would cause one to move from an informal arrangement to a formalised family office and the typical mistakes I see. To quote Serge Krancenblum, “There is usually a triggering event.” These events often lead to the planned or unplanned execution of the succession process.

A formalised family office can play a key role by acting as an advocate not only of the founding patriarch or matriarch of the fortune, but of the other generations as well.

Besides the unprecedented events of 2008 and its aftermath, which is responsible for the current explosion in the establishment of new family offices, the most common trigger event that forces the issue is a major liquidity event, e.g., the sale of one’s business, or a business you own a major part of, or a successful IPO. This can mean a sudden influx of cash of many millions of dollars. If your personal finances had been handled by someone in the company’s finance department (not at all uncommon in family-run companies), you must, by law, separate your personal finances from the business’s finances before the company goes public or is sold.

The other most common trigger event is the sudden death, or the anticipated death (such as due to a terminal diagnosis) of the wealth creator of the family. The unexpected nature of such an event usually catches a family unprepared, both for the loss, and for the change in their financial situation.

Mr. Krancenblum also points out that another trigger is often the realisation that “you have substantial wealth and yet you are spending every weekend trying to sort out your personal affairs”, leaving no time for family or anything else.

All of these scenarios set in motion a whole series of steps for which most people have not prepared.

As a result, they often rush into the creation of a family office without fully understanding what they want or should want from such an entity and how to maximise the usefulness of it.

Typical Mistakes Made When Setting Up a Family Office

1. On the informal family-office side, there is usually a lack of a formalised system for document and information management. Your assistant may be the most conscientious and organised person you know, but what happens if they’re the one who leaves unexpectedly, or dies? Handwritten notes are great if the person reading the notes is the one who wrote the notes!

2. The tendency to put the process in the hands of the advisor you most trust, assuming that they have the required skills to set up an effective family office: tax advisor, trust and estate attorney, investment advisor. The advisor will inevitably design the Family Office around their particular skill set … and that becomes the core focus of the family office.

3. Failure to create a true business entity, and thus miss out on all the inherent benefits that accompany incorporation.

4. Going for an all-at-once/all under one roof system, rather than start with a foundation of information management that incorporates the accounting and documentation management functions and then outsource or bring in-house other functions as is necessary and feasible.

5. Failure to determine the start-up and ongoing maintenance costs, and the funding resources required and available.

6. Failure to think through what is the purpose and the desired end result of establishing a family office.

7. Failure to think through and determine the sustainability of the family office as a going concern, particularly when there is no longer a wealth creator generating substantial revenue. 

Framework for creating an optimised and effective family office

There’s not enough space in this article to give you a complete step-by-step blueprint. But here are some of the key things needed in order to establish a solid foundation on which to build everything else.

• First, I am suggesting that you think of your family office as the control center for your financial life.

Start with a core information management system built around GAAP (Generally Accepted Accounting Principles) or IAS (International Accounting Standards) or IFRS (International Financial Reporting Standards), forensic accounting best practices, and data management.

Next, think through what kind of information you need on a regular basis and what you might need in the future. To have that information in the future, you need to capture and save it now. Ask: what kind of system do I need? Is there technology you can adapt, or do you need to have a custom application built? To get something that would really do the job, I had to have one built.

Then you need to hire the right kind of manager. And a highly-trained investment professional is not it. You need someone who is highly organised, who can think through the processes and systems needed, and who has forensic accounting skills. Someone like this is most likely to be found in the “Business Management Group” of a mid-sized accounting firm.

An investment portfolio management system or a standard accounting system will give you only a limited view of your assets. You cannot get a COMPLETE picture of all your wealth with such a platform.

Once that is in place, there is a long list of wealth-related activities that need to be effectively managed to ensure the preservation, control, and effective utilisation of a family’s wealth over generations. A formalised family office can play a key role by acting as an advocate not only of the founding patriarch or matriarch of the fortune, but of the other generations as well.

Here are some key activities a family office can be responsible for, either managing them “in-house” or outsourcing them:

Information Management System: this is the platform on which all the other activities ride. The foundation on which your financial house is built. Get this wrong and your entire legacy is at risk. Start by focusing on establishing a system that can deliver a complete picture, combined with all the necessary details, in order to give you real control. Warning: an investment portfolio management system or a standard accounting system, despite all the bells and whistles or its prestigious name, will give you only a limited view of your assets because of the limited information captured in those platforms. You cannot get a COMPLETE picture of all your wealth with such a platform.

Accounting and Reporting: you wouldn’t expect your executive secretary to pay the bills for your company … and yet way too many wealthy people with a net worth of $50 million and more expect their personal assistant to also be their personal bookkeeper! Since this function deals with day-to-day financial activities, we recommend that this be part of the Family Office’s core functions. Manage your wealth as a business, with the same rigor and controls as a business.

The benefits of having a family-office far outweigh the investment of time and money involved. By following the logical approach outlined in this article, you can substantially reduce the start-up costs usually associated with a single-family office.

Coordinated estate, tax, trust and insurance planning: managing these areas requires a specialised skill set and is better kept external, especially in the early stages, since the activities and transactions are not day-to-day. Bring it in-house when you need to consolidate costs or increase accessibility.

Investment Management: In Luxembourg there is, by law, a clear separation between the family office and investment advisors. New rules in the U.S. are designed to mitigate this inherent conflict of interest, so long downplayed by the multi-family office industry, that occurs when those who manage/track the day-to-day transactions and activities are also the ones accountable for investment strategy. As this is the area of significant variable expense in a U.S.-style Family Office, we recommend that it be outsourced, where the advisor’s company will be responsible for salaries, commissions, benefits packages, transaction insurance, errors and omissions insurance, SEC compliance, and the integrity or lack of same of its employees. And you can easily change advisors if the advice proves faulty.

Direct Investing: an area of increasing interest and activity in the U.S., as the clever and arcane world of hedge funds and multi-family offices continues to wrestle with the changes brought on by the Dodd-Frank Act. It is important to have someone in-house to help who has extensive due diligence research experience.

Philanthropy: J.D. Rockefeller kept meticulous records of the names of every person or institution he ever gave any money to. It could be argued that it was this attention to the details that enabled him and the foundation he left behind to contribute so much to the world and still grow the legacy. This is yet another reason to have a full-spectrum Information Management System at the core of your family office.

Management of Closely-Held Business: long before the sale of one’s business, having a family office can be indispensable for maintaining a separation between personal wealth and corporate wealth, particularly when one is a silent partner in several ventures.

Intergenerational Conflict: wealth creators often conceal the true extent of their wealth from spouse and family. This can be a source of great conflict and legacy issues, especially if the wealth creator dies suddenly. The family office can serve as an advocate for the interests of all the family members.

Education of Younger Generations: an area that is often better outsourced, unless a younger family member has a particular interest in working as part of the Family Office team.

Business Management and Lifestyle Management: “Concierge Services” – Wealthy families often need a level of service, convenience, and discretion well beyond the norm. These can range from travel and health services, travel arrangements, property management and security services, to equestrian services, oversight of aircraft operations, etc.

In Serge Krancenblum’s experience, “most families don’t initially know what they want, or should want.” As you think through the process, I recommend that you create a “Wish List” and a “Must List.” Start with implementing the “Must List,” and then move on to the “Wish List,” as is practical.


The benefits of having a family office far outweigh the investment of time and money involved. By following the logical approach I’ve outlined here, you can substantially reduce the start-up costs usually associated with a single-family office. With such a foundation established, you can scale up as slowly or as quickly as you need, without a loss of effectiveness or control. You will get the strategic and actionable information you need to realise true control, and with it the peace of mind that comes from having true control. Having a formal family office in place sooner rather than later can make a huge difference in the ease of transition from one state to the next.


About the Author

Sherilyn Casiano is the Founder and CEO of S.I. Williams Wealth Management, LLC, in New York City. She holds an MBA from Columbia University. She was a key member of KKR’s personal wealth group service for the New York general partners. She has headed her own multi-family office for 14 years. For further information about her Dynamic Wealth Management System™ and her family office software or for help with establishing your own dedicated family office, call (212) 886-9078. Look for her soon-to-be released book, Take Back Control, for a more complete guide to establishing your own family office.


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