Virtual family office
In theory, there is no minimum on the assets a family must have in order to be able to set up an SFO. But depending on what services the family expects from the SFO and how many staff members will be needed for this, you see in practice that an SFO really makes sense starting from a total capital of around 30 million euro. If that is not (yet) available, the family can first take an MFO or work with a virtual family office (VTO). In that case, the family does not set up a separate company and mainly uses external consultants for services.
Step-by-step plan for establishing an SFO
1. Extensive consultation with individual family members
At EY the establishment of a single family office starts with an extensive survey and a discussion with each of the family members individually. Every member is intensely involved in order to clearly know what everyone thinks about it individually. Certainly in families with a strong head of household or another dominant family member, no one's voice may be lost.
So what kinds of things are being discussed?
The following questions, among others, are asked in preparation for the establishment of a family office:
- Which family members receive shares in the SFO? Only direct or also relatives related by marriage? What happens to the shares if someone dies?
- What will the SFO invest in, and in what certainly not? An investment and/or real estate portfolio? Participations in startups and scale-ups? In other family businesses, private equity, real estate...? How does the reporting over the achieved results take place?
- What services will the SFO provide and which employees are needed for this? Is it only about management and reporting or also about the fiscal and legal guidance of the family and the individual family members (including succession planning)?
- Which of the family members will play an active role in the SFO and under what conditions? What role can a family member take on (member of the board of directors, administrative assistant, active role in implementing the investment strategy, etc.)?
- What dividend policy will the SFO pursue? What percentage of the profit is distributed and in which cases does the SFO deviate from this policy?
2. Consensus proposal
A consensus proposal for the design and operation of the SFO is then presented to the family and discussed as a group. Possibly further discussions with individual family members follow to arrive at a final document.
3. Creation of SFO
The family office is designed on the basis of the consensus reached. If an instrument is available such as a family holding company, it can be converted into an SFO. If not, a company will be established. A board of directors and often also an advisory board are appointed, staff is recruited, a structure is created for a good corporate house holding, reporting, and so on.
4. External advice
Depending on the employees that the family office itself has, it will continue to rely on external expertise to a greater or lesser extent after its establishment. Thanks to the trust that we have established with the family, it often occurs that over the years EY continues to act as an external expert for a family office or sits on the advisory board. For the valuation of a scale-up in which the family wants to invest, for example, for advice on the taxation of foreign real estate or when a family member wants to start a new activity using part of the family assets with the support of the family. In any case, EY has very broad (international) inhouse know-how to be able to answer all these types of questions.