Freedom from Wealth by Charles Lowenhaupt & Donald B. Trone

Author:Charles Lowenhaupt & Donald B. Trone
Language: eng
Format: epub, mobi
Publisher: McGraw-Hill Companies,Inc.
Published: 2012-05-28T16:00:00+00:00

Family Office

A well-run family office can be the temple for the family wealth, where the high priests gather wisdom and follow process to allow everyone to have the blessings of the wealth. A poorly designed family office can actually keep the wealth from doing what it is supposed to do and can become a dark dungeon enslaving the family and all of its members in dysfunction and without wisdom. Careful strategic consideration must go into whether to have a family office and how to design it. Most family offices evolve out of a business or a close relationship between a patriarch and accountant, bookkeeper, or employee of the active business. Systems and operations evolve often without careful thought other than how to build efficiencies. The office grows “organically,” without much attention to purposes or strategy until processes and relationships are in place and relatively stagnant. By the time the family or a family member wants to consider whether and how the office should work, employees, systems, and “ways of doing things” are often fossilized; infrastructure, administration, and management are not easy to change.

Even if change is possible, family offices are complex, and there are no models that fit all. Instead, someone must sift through best practices, attend sessions and courses on the topic, and hire consultants to help fix or create the family office. The easy fixes are efficiencies; the hard fixes are making the family office meet the family’s needs. Until the development of the Standards of Private Wealth Management, there were no easy systems or processes or even ways to build them strategically. Clearly, building a functioning family office through creation or remodeling is very difficult and requires substantial effort.

If one purpose of the wealth is to allow self-actualization—freedom to be all a person can be—it is difficult for a single-family office to further wealth’s purposes. Creation or remodeling is difficult and time consuming. Even the well-designed and -operated single-family office requires some involvement by family members—as a steward, as a board, or as participants in some other way. Often a family member is designated to run the office, and he or she is then burdened with managing the wealth of the family (with or without compensation).

Within several months of Bernie Madoff’s exposure, I ran into the artist who had attended my talk on freedom from wealth (see Chapter 2). She had achieved “freedom from wealth,” she said, and that had made her happy. But after the events of 2008 she was unhappy again. The spread of distrust had touched her and her family office. I told her I could guess why she was unhappy. She was spending time again in the family office as she and her cousins wondered whether they could trust those running the family office, feeling that they needed to be more engaged in the office. Despite the woman’s decision that she would lead a life of freedom from wealth, the dynamics of the family office and the circumstances of the financial crisis had combined to throw her into administration, governance, and attention to detail at the office.

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