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Aspects to Consider in the Creation and Design of a Family Office

Creating a Family Office is not an obvious process. It requires deep thought by the family and the support and collaboration of consultants specializing in this type of process.


The prior reflection which every business family should go through regarding the need for a family office must be based on the belief that a family office improves the sustainability of family assets and resolutely working on,

• The Alignment of the Family
• Family Trust
• Increased Professionalization
• Improved family relationships

Thus creating a family office may be warranted for three main reasons,

1. Communication and Cohesion, 80% (1) of leaders are of the opinion that the lack of family communication and internal differences are the main reasons why companies do not continue over multiple generations.

2. Education and values, a training class is:
• A guarantee for strengthening governance of a family business in the future.
• An essential pillar for the full personal development of its members

3. Advisory, a services and investment platform for its members to share creates higher quality service at lower cost by leveraging synergies and economies of scale.


But before creating a family office structure, the family must open an internal debate which will define the family office model you really need and for this you need to ask the following questions,

1. What are the needs of our family and what are the basic goals of our Family Office?
2. Which functions should our Family Office develop in relation to the original objectives?
3. What will be the scope, location and legal reserve of the FO?
4. What material and human resources will we have in our structure?
5. How do you finance the FO and what will be the legal implications?

Creating a Family Office is intended to cover different family needs and therefore the Family Office is designed with different basic goals.

1. The family must identify what their needs are.
2. Once family needs are identified, one can identify the objectives of the Family Office. The most common objectives are,
a. Create a platform for family services.
b. To promote family cohesion among members of the same generation and with other generations.
c. Improving communication in the family and company-family communication.
d. Promote policies for training and education.
e. Encouraging the entrepreneurial spirit of the younger generation of the family.
f. Focus activity to ensure philanthropy and Corporate Social Responsibility.
g. Bolstering the content of the family protocol (family constitution).

"If the family does not identify common needs or objectives, it is meaningless to create a Family Office".

After identifying the founding objectives of the Family Office, it is necessary to detail the functions which will be developed in relation to each objective.

Some of the most common functions of Family Office include:

a. Advisory services of an economic nature (estate planning, financial, legal and tax, agency ...).
b. Services focused on enhancing the education / training of the members of the family.
c. Corporate Social Responsibility / Philanthropy.
d. Services to help family members get to know each other better and interact more frequently.
e. Training family members both in terms of their personal and career development in their current status or as future shareholders.
f. Personal problem solving.
g. Personal services.

"With a Family Office it is not necessary to go to multiple advisors: family members have one-stop access to all the services they might need."

The Family Office structure will be designed to accommodate the functions defined in the previous step. Its design will specify two fundamental aspects:

1. Scope: The objectives and Family Office functions defined above will determine who will be the recipients of services (2G-3G-4G).
2. Legal and organizational structure:
a. Analysis from a strategic standpoint the location of the FO within the corporate structure.
b. Once defined above, you must specify the legal reserve of the FO. Choices are many, some of them might be:
• Entity created under the Protocol Family and controlled by the Family Council.
• Entity created by a new Shareholders Agreement.
• Entity statutory basis under the supervision of the Board of Directors.

"The 1G is usually not the catalyst in the creation of a SFO. Normally the need arises with the growth of the family and the company. "

To operate the Family Office, we realize the material and human resources which we will provide to our structure. The alternatives are:

1. Structure Own or Single Family Office: Hiring a management team exclusively for the family to manage as if a new business unit is being established.
2. Structure Outsourcing: hiring an outside professional team (such as a Multi Family Office) to assume all the functions of the Family Office.
3. Joint Solution: consist of creating a small structure which itself would rely on a Multi Family Office.


"There are families who choose to start with a less ambitious plan until they confirm that the model works."

Finally, we must define what resources are financing the Family Office and what are the tax implications.

They tend to include several alternatives:

1. Payment of an identical fee by each of the family branches.
2. Payment of a variable fee by each family branch depending on their level of use.
3. Financing by other household resources and charging a fee in kind to each of the actual beneficiaries of the service.
4. Initial contribution in kind or in cash from each family branch and charging a fee in kind to each of the actual beneficiaries of the service.
5. Using staff and resources of the Family Group.

"It is important to establish a method which corresponds to the service delivery system to the Family".

Designing and implementing a Family Office is a sensitive process which requires proper execution by professionals who have previous experience working with families in business and the technical skills to solve the problems that may arise during the process.

Most professionals can cover a part of the process (lawyers, consultants, financial institutions) but very few consultants can cover the full process (both design and implementation).

At the Arcano Family Office we advise the family throughout the decision-making process which involves the design and implementation of a Family Office.

Upon completion of the Family Project you will have available your own Family Office in accordance with the objectives and requirements defined by Arcano.

Madrid, April 19, 2013

Iñigo Susaeta Cordoba
Managing Partner
Arcano Family Office

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