Q/A: A Discussion of Reporting & Technology Trends for the Modern Family Office

Q/A: A Discussion of Reporting & Technology Trends for the Modern Family Office

A Q&A with Rob Kaufold, Managing Partner of Carriage Partners, LLC

Overview

Q: There is a growing number of highly successful hedge fund, private equity and other financial investors that are contemplating creating their own single family office. They are sophisticated investors but are beginning to see the need for tailored internal accounting and reporting, as well as other services. Are you seeing this trend and, if so, what would be some of the focus areas of these SFO start-ups?

Q: Families generally understand the concept of “knowing what they don’t know,” or in other words what they are “missing.” How can accounting, cash flow, etc., provide value in decision-making to families?

Q: Can SFOs build this internally or better to outsource?

Q: Taxes, to some degree, can be managed, in other words, more controlled than the “returns” on most investments, how come not a greater emphasis is placed on this?

Q: What trends do you see occurring over the next decade to make SFOs more efficient and effective in servicing family members?

Q: Parting comments?

AJR: There is a growing number of highly successful hedge fund, private equity and other financial investors that are contemplating creating their own single family office. They are sophisticated investors but are beginning to see the need for tailored internal accounting and reporting, as well as other services. Are you seeing this trend and,

if so, what would be some of the focus areas of these SFO start-ups?

RK: The short answer to the question is that yes, I am seeing families interested in exploring the possibility of setting up their personal family office. I will note that this is not limited to families that have built their wealth in the financial markets.

But, there is a primary reason as to why families are considering the family office model. Time. Or, more specifically, the lack of it. Many families, especially hedge fund and private equity fund managers, discover that they do not have adequate time to manage the affairs surrounding their wealth. Whether it be managing their personal accounting and reporting, managing their short-term liquidity needs, managing banking relationships or other contractual relationships. It simply takes time to do these things well, time the family does not have.

The other reason is compliance. Tax laws, trust & estate rules, and even family office rules are constantly changing in the current environment. Families have understood that they need help to understand all of these rules and how they impact their families and their assets.

The single-family office model allows for the family to build a dedicated team of internal staff and external experts that can compile internal data and understand external risk factors so that information can be presented in a succinct format that allows the family to understand their consolidated asset profile and help to make decisions on ways to move forward and preserve these assets.

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