What is the difference between an accounting firm that specializes in family and business matters and a Family CFO?
Some folks have a difficult time understanding the distinction between operating an accounting firm that specializes in family and business planning and consulting services, with other accounting firms that just perform traditional tax and accounting services but – on occasion - may perform those types of services for their clients.
The most distinguishing feature separating the two businesses is that with Family CFO services (firm), you must always be in a ‘proactive’ mode of thinking.
As accounting professionals, we are taught (or brought up) to be reactionary; someone brings us a project or problem, and we try to solve or resolve (such issue or problem). Then we go back to helping other clients with their issues; leaving unattended the primary goals and objectives of the family (client).
Secondly, one must be willing to forego providing the traditional accounting services (tax compliance, planning, accounting, auditing, etc.) in order to service the best interests of the client. Some larger accounting firms provide family office (type) services in attempt to be more things to their clients (or prospective clients). Mr. Rutherford - president of a Tulsa based accounting and consulting firm – is more than willing to forgo those services to have them performed by other professionals (if need be) in order to have the appearance of transparency, independence and complete objectivity. Some clients will also desire various services from the accounting firm but the [accounting] firm being a separate legal entity will bill for any related services separately (from SFS). Furthermore, SFS is more than content working independently with existing accounting and tax professionals as they work to achieve the goals and objectives of the families/clients.
How is your firm different from other Family CFOs?
SFS might be considered the “small” Family CFO firm due to the fact that SFS does not (typically) seek out ‘mega-wealthy’ families with net worth’s in excess of over $1.0 billion. Those families (for the most part) need ‘Single Family” Office providers; firms that work almost exclusively for only one or two families.
Furthermore, SFS seeks out and desires each client to be a good fit for the firm. Families that are perceived to be very dysfunctional in its family governance may not be the right fit for SFS. The type of families referred to as dysfunctional, typically need a larger FOC firm to handle the – often time-consuming – wants and needs of the various family members.
Families with a minimum net worth of $10.0 million to (approx.) $800 million, are the typical potential client for SFS. There have been clients that have fallen below the $10.0 million threshold, due to the fact that there was a stroke or death of the primary income earner which resulted in SFS stepping in to dissolve or carry on business dealings.
Instead of taking over all aspects of the client’s needs, legal, wealth Mgmt., banking, etc., we hire the best-in-the-business and let them help the client. We manage those Service Providers to be sure they stay on track, don’t over charge the client; don’t miss something and be able to talk “legal-E’s” with them; e.g., translate.
What are the benefits to the client(s)?
Economies of scale
Special (discount) pricing, in some instances
Smooth transitions
Getting free advice from Service Providers (that would normally) charge for such service/advice.
Having a director treat their family affairs as a sustainable business operation.
Freeing up the family to give them more time to devote to other matters; pleasure, philanthropy, travel, etc.
A firm to handle their affairs while they are out of town (the country).
Be able to get answers to a litany of questions that surface as life progresses.
Are you too busy to get everything done with work or other obligations to spend on personal financial matters?
Do you lack the knowledge of knowing whether you are getting products and services that are best suited for you and your family and at the best price?
Are you getting up in the age where you don’t feel you can handle (juggle) all things and maybe having health issues?
Who (that you are working with) is continually looking out for your best interest?
Is it worth it to you to have someone (a firm) relieve you from the exhaustion and hassles of dealing with everything from household issues, security, to sophisticated and complex financial matters?
The starting point would (typically) be someone with at least $10.0 mil. in net worth.
Someone (family) who understands the value of collective group a professionals managing their financial and some of their personal affairs.
Someone who gets the fact that no one can be an expert in everything and value comes in obtaining the right (service provider) to guide them through the maze of (sometimes) complex rules and regulations and seizing opportunities that they (themselves) may not have available to them.
What (who) would you consider a high net worth individual?
Folks who do not meet the net worth (minimum requirements).
People who think they can and should do it all themselves; don’t see the value a synergistic approach to their business, financial and personal affairs can have on the health and welfare.
Folks that don’t see this approach as an investment, but rather as a unnecessary evil.
Folks that feel since they have all the players already in place, feel everything is properly managed (possibly by themselves, spouse or financial planners).
Families that don’t see third party Service Provides as adding flexibility to families in being able to choose different S.P.’s whereas banks may have in-house departments that handle certain services (trust dept.), the client may not wish to use another firm to provide those services.
People who don’t see more value in letting a team of professionals handle their affairs in a synergistic way; using a ‘director’ to coordinate and develop a synoptic viewpoint for the benefit of the family.
Who would not or should [not] use SFS’s services?
How many financial planners coordinate with the tax compliance or planning specialist on a regular basis? Why would they think they need to? i.e., what would trigger that (communication) if they themselves were ignorant of the various tax laws?
How many call insurance agents and coordinate the various insurance needs and issues the client may have? Many financial planners also hold insurance licenses as well as securities licenses. Therefore, they often times find themselves in a competitive situation with some insurance agents, who also carry similar licenses as do the financial planners; they have competing interests.
Same holds true with the clients banking needs. They have no incentive to contact them. Large and regional banks compete (very much so) with financial planners.
The bottom line is, they aren’t getting paid for it, so why should they do it; at least on a long-term basis.
On the one hand, Americans seem to be trending towards treating their relationships as a commodity i.e., buying things online because it’s easier and cheaper (fungible spending habits); what is the cheapest, what’s the quickest? Loyalty seems to be fading at an ever-increasing pace.
That is why so many financial planners, large local and regional banks, insurance agents, etc. fail at or cannot properly be successful at the Family CFO approach. They cannot be objective due to the competing interests and the protection of those interests.
Then on the other hand, since customer loyalty is fleeting, such firms (institutions) attempt to hold their clients captive, by doing more things for them (the one-stop-shop). This relationship makes it more difficult for the family/client to leave; due mainly to the fact that their options are (seemingly) limited. Unfortunately, the family could end up in worse shape because they will pay higher fees and more than likely get far less service for those (higher) fees.
Why can’t financial planner (types) do what SFS does? Many of them claim they do (indeed) perform those services, sometimes for no charge.