Family Office?

AFR Rich List: Lessons from how the rich invest: the rise and rise of the family office

Family offices have always had pulling power. Shrouded in privacy, and with the suggestion of enormous wealth and the access and contacts that go with it, they've been a relatively unknown quantity in the Australian market.

Family offices are increasingly being recognised as a separate and significant pool of capital. More are being set up. And people recognise the phrase: an office set up by one family, with the sole purpose of managing their own very substantial assets. There's a heightened focus on mapping out how they fit together and how they invest. Some even have their own websites

 

Managing substantial assets and wealth often does fall into this category and a dedicated office with staff are often involved. The office can be within the Corporate offices or external. I know one high end exec who went into financial planning and that was the specific offer. He acted as a outsourced office and used external tax advisers, lawyers (where required) and others. He wouldnt take on under $200m. Some use a panel of advisers as an advisory board.

Some families also outsource to large firms like KPMG, PWC and even some boutique firms most perople have never heard of and some private banks who have the relevant advisers under one roof. There can be risks with self-management by an appointed manager and external advisers pay a very part part in legal, tax and other aspects and ensure security and oversight. Some law offices have this facility - Its an invitation only service. Good for major client retention.

 

If the fees a family pay to an advisor exceed a certain level it is sometimes cheaper to employ them yourself and use the external guys to take on riskier elements.

So let’s say you pay an investment group $500k. Just employ a person to do it for 300k and pay the investment group 100k.

The benefits are that you control the advice and work done. For investment group you get rid of the conflict that financial planner are subject to. Also - employees do not have to worry about risk and being sued by their boss and they often give faster and more pragmatic advice.

Think of a company using an external bookkeeper. Eventually the costs get so high they employ a full time one themselves. This keeps on happening and a family office will often employ legal counsel, chartered accountants and investment professionals. They give the outside guys contentious tax work and legal work so you get the benefit of their insurance coverage.

 

Melbourne has always seemed to be the epicenter for family offices although over last decade or so it's spread out more

A lot of the quiet low profile wealthy Jewish and old money agricultural families have operated this way for a while

 

Family offices are all very different. Some have portfolio managers that manage external advisors or even operating businesses, some have their own investment managers, and some have 2 staff or 20. It all depends.

NSW and VIC are pretty evenly spread but it’s definitely becoming a more widely used & accepted method for managing wealth. Usually requires net worth of $50m+ for operating cost of a family office to be worthwhile.

 

There’s no way a good manager would go work for $300k. Why would I when I can compound my money at 60%+ every year

 

60% a year? Really?

 

The worlds best fund managers would love to have a chat. They would happily pay millions, in fact tens of millions per annum, if one could consistently generate those returns.

 

The worlds best fund managers wouldnt take that risk.

Director at AMP ?

 

Yeah sure you be the richest man in the world in no time with that rate (60% return)
Say you start with 5 Mil this is the figure you get after 25 years with no extra deposit of capital

1,016,482,733,300

 

The trump should hire him. US debt paid off sooner than expected.

 

Trumpenomics. There is no debt problem. Its fake.

 

Really

 

I know how to do the calcs. $5m easy to make 60%. Hard with $500m

 

Yup easy to make 60% with 5m
Why don’t u just borrow 5m each year
It cost what 5-6% a year and you make 50% Every year just start fresh each year with 5m and you end up with 1 or 2 mil richer each year
Bloody easy as -

 

Haha thanks will do just that (if I’m not already)

 

$5m debt and you go belly up, you have a problem.

$500m debt and you go belly up, the financiers have a problem.

 

Haha I don't use debt on equities/derivatives, because you never know about short-term fluctuations.

 

You r still broke