A family office protects what has been achieved and takes full advantage of all the social capital the family brings says Rosalyn Breedy in an interview with Campden Family Business.
Wedlake Bell commentated on the rocketing popularity of family offices following an EY report which claimed there are between 3,000 and 15,000 family offices worldwide, with more than half having been set up since the Millennium.
Rosalyn Breedy, partner at Wedlake Bell, said the growth in demand was being driven from three sources: New wealth, mainly from the East and emerging economies? a "demographic bulge"? and fund managers. "We are seeing continued growth in private wealth globally with BCG overall predicting a compound annual growth rate of 6% over the next five years to reach $224 trillion," Breedy said.
"The fastest growth is coming from the Asia Pacific region, which grew by 13% in 2015." An estimated $16 trillion of wealth was expected to be transferred from baby boomer entrepreneurs to their heirs in the United States along, followed by Germany, Japan, the United Kingdom and Brazil.
A number of US hedge fund managers decided to become single family offices to seek exemption from filing with the Securities and Exchange Commission under the Investment Advisers Act 1940. The manoeuvre became attractive following the narrowing of the private adviser exemption under the DoddFrank Wall Street Reform and Consumer Protection Act in 2011, Breedy continued.
A family office is the most effective structure for any ultra high net worth family that wants to preserve and transfer wealth for the family over the long term. "A family office strategy aims to reduce reliance on the family business for income, weaning family members off dividend income, thereby allowing company directors to reinvest for future growth. The very process of developing a plan can be beneficial, as the family engages to clarify its values and goals and to establish the rights and obligations owed by family members to each other, their employees, the community and other stakeholders."
Breedy has been a corporate and then financial services lawyer for more than 22 years and worked in private practice, investment banking and at a multifamily office. She said the safeguards offered by a family office plan mean provisions for governance are established for the family and the business. "A family 'constitution' reduces the possibility of disputes, which are usually driven by one party feeling that...