Family Foundation

Family Foundations | What is a Family Foundation

Don Wilkinson is a veteran in the wealth management industry and has contributed his perspective on the popularity of a family foundation. More affluent Americans are finding that setting up a family foundation for themselves and their families is an ideal way to give funds to charitable causes while making those funds exempt from federal income tax. Moreover, family members can work toward common goals, and instill the value of charitable giving in future generations.

The giving vehicle of a family foundation, which provides full family control, allows for extensive benefits to families who give over $25,000 a year to charity.

The family foundation, with the same characteristics as a private foundation, is a foundation whose board consists of family members of the person who originally funded the foundation. The board of a foundation has ultimate control over its actions. It can choose an investment manager, grant recipients, hire and fire staff, etc. Many families set up a foundation specifically to involve their family in their grant making. Being involved in the foundation can be an excellent way to educate younger family members about asset management, taxes, responsibility, and family values. However, a family foundation can also be set up with only a single board member.

Unlike public charities, which generally derive their funding or support primarily from the general public, and receive grants from individuals, government, and private foundations, the family foundation does not solicit funds from the public. Funding of charitable cause is derived from family resources usually under law of dispensing a minimum of 5% of the foundation’s assets annually.

Tax Benefits

Since a family foundation is a charitable organization, it is exempt from federal income tax on its income, although it must pay a 1-to-2 percent excise tax on its net investment income. The gifts made to establish a new foundation or grow an existing foundation can offer the family certain tax advantages: income, gift and estate tax deductions are available under the law.

When making a gift of cash to a family foundation, a foundation principal can take an income tax deduction in the year of the gift. The amount of the deduction claimed can be as much as 30% of the foundation’s principal adjusted gross income (donations in excess of this limit can be carried forward for five years).

If the principal donates appreciated stock that is owned for at least one year, the income tax deduction will be equal to the fair market value of the stock. The amount of the deduction claimed for a gift of stock can be as much as 20% of the principal’s adjusted gross income (with the same provision to carry forward excess deductions for five years).

In addition to the income tax deduction for a gift of stock, the principal also avoids paying capital gains tax on any appreciation. Donations of assets other than publicly traded stock (such as real estate) are only tax deductible at cost basis, not the fair market value. However, the foundation’s principal does avoid paying capital gains tax on any type of asset contributed to a foundation.

Setting Up The Foundation

Until recently, private foundations were expensive and time consuming. Today, a number of private foundation “administrators” are utilizing Internet technology to drastically reduce the time and expense of setting up a foundation. A foundation can now be set up for less than $50,000 in a matter of days. These administrators handle all of the operations of the foundation including check writing, compliance, record keeping, tax filing and administration.

The fees for these services depend on the size of the foundation, but generally come to less than 1% of foundation assets when the foundation is larger than $1 million. Foundations with lower asset levels generally find that their expenses run from 1-2% of assets. All foundation related fees are paid by the foundation, not by the donor.

An alternative to engaging a specialized administrator is for a member of the family foundation to handle the record keeping and pay an accountant to file the foundation’s tax return. Because tax returns to the IRS differ from traditional charitable donations, it’s best to have a tax attorney or CPA on the foundation team if hiring a specialized administrator is not desirable. The foundation can pay family members salaries to manage the foundation. This is one of the few ways available for family members to take money out of the foundation.

Private Foundations At A Glance

The guest author of this article is Don Wilkinson of Wealth Management Exchange

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• Obtain family office contact details from FamilyOfficesDatabase.com

Tags: wealth management, family foundation, what is a family foundation, explaining family foundation, using a family foundation, family foundations, family funds

Below please find a list of top 20 Family Office and Alternative Investment websites which are ran by the H Media Group and others in the industry:

1. Family Offices Group
2. Hedge Fund Blogger.com
3. Albourne Village
4. Third Party Marketing .com
5. Magnum Fund Articles
6. Family Office Database
7. Harvard Hedge Funds Guide
8. Hedge Fund Startup Guru.com
9. The Wealth Report by the WSJ
10. Private Equity Blogger.com
11. NY Times Dealbook – on Hedge Funds
12. Fund Administration .org
13. Fintag’s Hedge Fund News Site
14. Prime Brokerage Guide.com
15. SEC Website on Hedge Funds
16. Hedge Fund Certification.com
17. Google News on Hedge Funds

Tags: family office, family offices, alternative investments, hedge fund, hedge funds, private equity, wealth management, financial planning, investing, investor resources, top 10, top 5, top 20

Below is a short article on what family offices and some ultra high net worth investors are investing in right now:

Simon Mellon, who’ll be heading up Bonner & Partners Family Office, our soon-to-be-launched money management and tax optimization service, is keeping in close contact with Notes HQ.

Simon is a global finance insider with a decade’s worth of experience working in capital markets. And right now he’s advising investors to remain cautious until a clearer picture emerges about the market’s direction.

When I was a child I could never sit still on a long road journey. I was always asking, “Are we there yet? Are we there yet? ARE WE THERE YET???” My father would always reply “Nearly, son… Nearly,” even though we were still miles from our destination.

This is exactly how the financial markets seem to me right now. It’s been more than two years since the credit crisis kicked off, and I’m getting itchy in my seat: I want to be back out there playing with the other financial (whizz) kids. But it feels like the end of this current rocky road is still on the distant horizon.

Wall Street wants you to believe things improving… that we are on the road to recovery… and that “green shoots” are starting to appear in the economy. Call me a cynic, but I’m just not convinced. Read more…

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Tags: Ultra Rich Investing, investments, family office, family offices, wealth management, financial planning, financial, finance, business, investments, stock market, stocks

Below please find the Family Offices Profile for Bonner & Partners Family Office. If you need contact details for this family office please refer to FamilyOfficesDatabase.com

Resource #1 (7.8.09) Raife Neuman, of Bonner & Partners Family office, continues his campaign on the injustices of the American education system.

As we all know, often the better you do the more the government wants to penalize your success. Families and college students often pay exorbitant costs for education. And, as I wrote last week, students who go on to get a professional degree are often saddled with loads of debt – creating a new class of indentured servants. You’d think the IRS could cut them a bit of a break. But you’d be wrong.The tax code says “all or part” of a scholarship or fellowship “may be tax free.” The emphasis should be on “may” because you have to meet these strict conditions to avoid taxes Read more…

Resource #2: Simon Mellon, who’ll be heading up Bonner & Partners Family Office, our soon-to-be-launched money management and tax optimization service, is keeping in close contact with Notes HQ.

Simon is a global finance insider with a decade’s worth of experience working in capital markets. And right now he’s advising investors to remain cautious until a clearer picture emerges about the market’s direction. Read more…

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• View 500+ additional Family Office Profiles
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Tags: Bonner and Partners, Bonner and Partners Family Office, Family Office, Family Offices, Wealth management, wealth

Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

Below please find the Family Offices Profile for Majid Al Futtaim. If you need contact details for this family office please refer to FamilyOfficesDatabase.com

Resource #1: (6.8.09) Hedge fund manager, Majid Al Futtaim Asset Management, is launching its first Middle East and North Africa (MENA) equity fund, the Luxembourg domiciled ‘Elite MENA Equity Fund’.

Investors can invest alongside the family office of Majid Al Futtaim and gain access to the services of the portfolio management team responsible for the MENA equity investments. The Majid Al Futtaim family office has seeded the fund with Dh550 million ($150 million), making it one of the largest MENA equity funds available to investors. source

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Tags: Majid Al Futtaim, Majid Al Futtaim family Office, Middle east family offices, family office, family office wealth management, wealth management, hedge fund, capital

Many wealth advisors have lost assets and clients through this recent recession. The one bright spot in the industry has been with multi-family offices which have been in many cases gaining new clients as individuals realize they may need more high touch services and holistic products. Paying an extra 1% seems like a small charge after someone has lost 20-30% of their portfolio within a single year. Here is a recent article excerpt on this topic:

“We’re seeing lots of interest in MFOs, and I think you’ll see more as the market improves and clients are less afraid to make a move,” said Tim White, a partner with Kaye/Bassman International Corp., an executive search firm based in Plano, Texas.

“Look, the rich are different: They want a higher level of service. They can get that at a multifamily office,” Mr. White said.

Danny Sarch, president of Leitner Sarch Consultants Ltd., a re-cruiting firm based in White Plains, N.Y., agrees.

“Advisers of high-net-worth clients are looking for alternative solutions right now, and multifamily offices are seen as places that can provide clients with trust and estate and concierge services, and are less bureaucratic and more entrepreneurial,” he said.

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Tags: Multi-Family Offices, family office, family office employment, work for a multi-family office wealth management firms, wealth managers, wealth management, financial planner employment

Family Office Assets Growing

Below is an excerpt from an article discussing another recent survey pointing to the growing trend for HNW individuals and families to have their assets managed by a family office instead of a traditional financial planner or wealth management firm:

High-net-worth investors are moving their money to multifamily offices, according to a new study that will be released Monday by New York-based accounting and financial services firm Rothstein Kass.

Fully 40% of wealthy investors who moved money this year said they had chosen a family office as their new provider, according to the study, “The Multifamily Office Solution.”

High-net-worth families are “gravitating to the family office model because of the holistic approach to wealth management and personalized attention that they can provide,”

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Family Office Assets Growing

Below is an excerpt from an article discussing another recent survey pointing to the growing trend for HNW individuals and families to have their assets managed by a family office instead of a traditional financial planner or wealth management firm:

High-net-worth investors are moving their money to multifamily offices, according to a new study that will be released Monday by New York-based accounting and financial services firm Rothstein Kass.

Fully 40% of wealthy investors who moved money this year said they had chosen a family office as their new provider, according to the study, “The Multifamily Office Solution.”

High-net-worth families are “gravitating to the family office model because of the holistic approach to wealth management and personalized attention that they can provide,”

This article was originally published on Family Offices Group.com.

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Family Office Growth

Many business dinners over the past 18 months have revolved around the topic of “what does well during a deep recession or depression?” Here is a recent article about how family offices
have benefited from the events within the financial sector over the past few years:

Tumbling markets and redemption waves have been murder on hedge funds, but the turmoil will free up top-tier talent for a quiet but well-heeled corner of the market: family offices.

The world’s wealthiest, not content to hand their fortunes to brokers and banks, can afford to build their own money management businesses. These offices, which would never be considered by top fund managers during the go-go years, suddenly look attractive thanks to their stable capital and long-term investment horizon.

“You follow the money. Right now that is leading people to family offices,” said Greg Coules, a former hedge fund manager…source

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Family Office Growth

Many business dinners over the past 18 months have revolved around the topic of “what does well during a deep recession or depression?” Here is a recent article about how family offices
have benefited from the events within the financial sector over the past few years:

Tumbling markets and redemption waves have been murder on hedge funds, but the turmoil will free up top-tier talent for a quiet but well-heeled corner of the market: family offices.

The world’s wealthiest, not content to hand their fortunes to brokers and banks, can afford to build their own money management businesses. These offices, which would never be considered by top fund managers during the go-go years, suddenly look attractive thanks to their stable capital and long-term investment horizon.

“You follow the money. Right now that is leading people to family offices,” said Greg Coules, a former hedge fund manager…source

This article was first published by the Family Offices Group on FamilyOfficesGroup.com.

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ECG Resources, Inc. is a nationally recognized Executive Search Firm with 30 years experience, specializing in the Wealth Management / Family Office arena. Please bookmark our website so that you can stay on top of changes in the marketplace.

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Referrals are sincerely appreciated.

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Tags: Ultra High Net Worth Advisor, High Net Worth Advisor Position, UHNW Financial Advisor

FamilyOfficesGroup.com Re-Launch

Our team has just re-launched FamilyOfficesGroup.com. The site now has an upgraded appearance, more free-to-access articles on family offices and many resources related to both UHNW philanthropy and alternative investments.

To learn more about family offices or to see our new site please visit http://FamilyOfficesGroup.com. Here are the most popular articles from this site:

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FamilyOfficesGroup.com Re-Launch

Our team has just re-launched FamilyOfficesGroup.com. The site now has an upgraded appearance, more free-to-access articles on family offices and many resources related to both UHNW philanthropy and alternative investments.

To learn more about family offices or to see our new site please visit http://FamilyOfficesGroup.com. Here are the most popular articles from this site:

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Just found a recent article on the performance of investments made of single family offices claiming that their returns were likely below those of other high net worth individuals. First off it is important to note when discussing single family offices that they need not relay their performance to anyone and often will not return the phone calls of journalists, publicists or surveys seeking information. This means that any reporting on this sector is skewed at best.

I believe the article noted below to be off-base in several ways. First, single family offices conduct more due diligence on hedge fund investments than their high net worth peers so if we are really comparing apples to apples here it would be hard to believe that those who conducted 4-10x as much research on their investments would perform worse in the markets. Second, single family office HNW individuals are more likely to have their investments more diversified and invested in less straight equity portfolios. While diversification may not have helped much over the past year it could prevent 60%+ drops in portfolio value seen within some concentrated equity portfolios. The last reason why I believe this article is off base is because it refers to alternative investments made by single family offices as a negative aspect of them. Recent performance indicators by the HFR and HedgeFund.net show that hedge funds have outperformed equities…would being in hedge funds then be an advantage?

Here is the article referenced above:

Dugan said: “In many cases the credit crunch has hit family offices harder than the high net worth.”

He said that the tendency of single family office portfolios being highly exposed to alternative investments – which in some cases last year comprised as much as 50% of investments in hedge funds, private equity and other alternatives – has hit the very wealthy harder.

Alternatives are expected to comprise a significantly smaller proportion of family office portfolios in the next few years, said Dugan, who made his comments at the release of a report by Merrill Lynch and Campden Research, a London-based publishing company, into single family offices in Europe. source

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Family Office List

List of Single and Multi Family Offices

Looking for a list of family office contacts?

Please complete the form below and a professional from the FamilyOfficesGroup.com will be in touch shortly.

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Wealth Management Marketers

Demand for Family Office Sales Professionals

Below is an article on family offices and how they may be well positioned to pick up the pieces and grow their market share after this financial crisis has passed. I agree with the comment below that part of the reason that ultra high net worth individuals sometimes don’t use family offices is because they don’t know they exist or have never sat down with someone to discuss why it may make sense to work with one.

I believe this is a sign of pent up demand for expert family office marketers. If you can work within the industry for 7 years and build your marketing expertise you are worth your weight in Gold to a medium to large sized family office group which is looking to further expand their services.

Here is an excerpt from the article mentioned above:

When the dust settles from the financial crisis, multi-family offices are likely to be among the winners in Europe’s wealth industry.

These businesses, which tend to advise ultra-wealthy families, expect to benefit from the damage wrought to the reputations of investment banks.

Geneva-based Global Wealth Management manages €2bn ($2.6bn) for about 30 European and Middle Eastern families. Peter Sartogo, its managing partner, says multi-family offices have until now failed to promote themselves effectively in Europe.

“One of the reasons multi-family offices haven’t grown as rapidly as might have been expected is that clients simply don’t know they exist. At the same time, there is no winning formula for a multi-family office – everyone does it differently.”

Sartogo joined GWM three years ago after 15 years as an investment banker: “I think of it as my military service,” he laughs. source

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Below is a short piece on a recent family office merger. I believe these will increase in frequency as highly profitable leaders within this industry look to re-invest cash in smaller family offices. In many cases smaller family offices could use best practice processes, centralized due diligence and manager selection services of the larger family offices. Here is the article excerpt:

Multi-family office Stonehage Group has announced the merger of TriAlpha, its asset management arm, with ACP Partners to create a combined business owned 50:50 by the two groups that will be known initially as ACP TriAlpha and has some USD2.5bn in assets under management.

Founded in 1997, TriAlpha is an asset management house with an absolute return bias that manages a range of multi-manager hedge funds, multi-asset class funds and direct securities products for clients including institutions and high net worth families.

London-based ACP was founded in 2001 by Joseph Sassoon, former founder and head of Goldman Sachs’ European private wealth management business, and Alok Oberoi, who was head of Goldman’s Asian private wealth management business and subsequently chief operating officer of global private wealth management in New York. Brett Lankester, the former head of private wealth management for Goldman in the UK, joined ACP in 2007. source

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Wealth Management Services

Wealth Management Services | Family Offices

I recently wrote an article on wealth management services. Specifically it covered the top 3 trends affecting family offices. Here’s a short excerpt and link to this article:

Family offices are private wealth management advisory firms that serve ultra-high-net-worth clients. According to the Family Office Exchange, there are more than 3,500 family offices based in the United States. By offering a complete outsourced solution to managing finances and investments, including budgeting, insurance, charitable giving, family-owned business, and wealth transfer and tax services, these offices set themselves apart from traditional wealth management firms. Although they vary in their level of service, most typically invest heavily in consultants, databases and analytical tools that help them conduct due diligence on money managers or optimize a portfolio of investments for tax purposes.

In this article, we’ll review the top three trends affecting family offices, including the rapid growth of the family office industry, the types of family office services provided, and the increasingly sophisticated use of hedge funds and alternative investments by both single and multifamily offices.

Family Office Facts
There are two types of family offices: single-family offices (SFOs) and multifamily offices (MFOs). Single family offices serve one wealthy family, while multifamily offices operate more like traditional private wealth management practices with multiple clients. Multifamily offices are much more common because they can spread heavy investments in technology and consultants among several high-net-worth clients instead of a single individual or family. According to the Greycourt White Paper “Establishing A Family Office: A Few Basics”, the minimum size for a family office can vary, because “If the goal is simply to provide family-wide accounting and bookkeeping, a family with as little as $50 million will find it economical to establish an office. On the other hand, a fully integrated family office is probably accessible only to very large families, typically those with more than $1 billion.”

Read the full article by clicking here.

To learn more about family offices please see our other website – http://FamilyOfficesGroup.com

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Tags: Wealth Management Services, Wealth Management, Wealth Services, Family Offices, Family Offices Wealth Management, wealth management group, wealth management firms

Financial Advisor Marketing

Financial Advisor Marketing Differences Q & A

Today I received this question from a New York based hedge fund marketer.

Question:When marketing to financial advisors for your hedge fund, what necessary steps do you need to take dealing with these guys? Is it any different that dealing with family offices?

Answer: Marketing to financial advisors is much different than marketing to single and multi-family offices. Here are the main differences between the two that I have noticed:

• Family ffices have more established due diligence procedures, often involving consultants or internal analysts which do nothing but look at hedge funds or alternative investment products.
• Financial advisors have lower minimum asset levels for what they will consider investing. 90% of family offices only seriously consider investing in hedge funds with at least $75M-$100M, and many require $250-$300M or even $1B in assets under management.
• Family offices are more tight lipped. It will take more effort to develop a relationship, meet in person and get clear feedback on why or why a hedge fund is a good fit for what they are looking for.
• Family offices are harder to identify in the first place. Financial advisors are easier to find, there are more of them and they advertise more openly. Some family offices advertise but many stay below the radar and some purposefully don’t even have a website.
• While family offices service to high net worth investors almost exclusively many financial advisors work with a broad spectrum of client types – this might require more caution by them and your fund in marketing products to them. It might also mean sorting through more financial advisors to find one with several HNW clients.
• In my experience financial advisors seem much more sensitive and motivated by how they will earn a commission or income from the transaction whereas many family offices charge rich enough fees that this is less of an issue.
• While some financial advisors may take 16-24 months to really get “on board” with a relevant hedge fund manager, understand your investment process and possibly invest most will come to terms a bit before then. Family offices on the other hand often take 18-24 months just to complete their due diligence and committee meetings, it is a very long sales process.
• Both family offices and financial advisors require genuine relationship-building efforts and tenacity
• From a legal standpoint there may be other precautions your fund should take but I am not a legal expert so I can’t provide any guidance within that space.

Permanent Link: Financial Advisor Marketing

Tags: Financial Advisor Marketing, Marketing to Financial Advisors, Marketing to Family Offices, Multi-Family Office Marketing, Financial Advisor Marketing Plan, Financial Advisor Marketing Ideas, Financial Advisor Marketing Strategies, Financial Advisor Marketing Systems, Marketing for Financial Advisors

Prime Broker Survey

Prime Broker Survey Results

A new survey shows that more than one-third of hedge fund and CTA managers are dissatisfied with their prime brokers. The most notable dissatisfaction is with the prime brokers’ personal service. In 2007 80% of funds rated the personal service of their prime brokers as either “good” or “excellent”, this year only 63% gave their prime brokers high marks. This may be a result of the liquidity crisis, which 16% of the managers said negatively effected the relationship with their prime broker.

The survey also shows that many funds are happy with the cost of their prime brokers, with only 7% responding “poor”. However, a considerable 38% of managers rating their prime brokers as “poor” performers of capital introduction. Funds who consider themselves technologically advanced are the most satisfied with their prime brokers.

Permanent Link: Prime Broker Survey Results

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High risk, limited liquidity, taxes, and lack of regulation make investing in private equity challenging. However, the payoff is very attractive making private equity an interesting asset class for family office. The article shows two different points of view (fund of funds and direct private placement) of how family office would enter in private equity.

From the standpoint of diversification and lowest assumed risk, a fund of funds may present the best entry point to private equity given that you do not have specialist who can perform extensive due diligence. Additionally, it is an affordable way to test the water than any other approaches. On the other hand, direct private placement represents the highest level of risk. You must have capability to perform in-depth due diligence, and dig into the portfolio companies of what really happen. The upside of private placement is of course that your return would out-perform anything on traditional security market. Read more on this here.

- Richard

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Permanent Link: Private Equity for Family Offices
Tags: Private Equity, Family offices, private equity for multi-family offices, private equity investments by family offices, private equity investment capital from single family offices

Dr. Alan Starkie, “Wealthy families are “insti-viduals”, individuals who have institutional needs in terms of complexity and sophistication”. As a result the family office market is rapidly evolving, with more family offices, more MFOs, leading to more demands on providers of services, and more outsourcing expertise needs. There are some favorable trends and facts that support the needs of outside consultants; buying support consult is cheaper than build it internally, generation changes, acquisition, specialization, lack of omniscience, independency, advanced technology.

To keep pace and take advantage of the myriad opportunities, good consultants need to differentiate themselves in the industry through their objectivity, specialized services, product and service mix, and technological sophistication. Rather than focusing on performance, they should concentrate on providing a level of service commensurate with the demands of “insti-viduals.” If they fail to do this, the perception will remain that consultants lack value added and wattage, are not “on the line” for results, and are not candid in their advice. Read more…

- Richard

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