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| Family Office |
Office Protocol
Anne Field
06/01/2004
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Cavanaugh and Powers also hired nonfinancial employees. Because some family
members owned powerboats, hiring a person to oversee watercraft made sense. When
the family decided to erect a new building to house the family office and
foundation, they hired a construction manager. They also added an employee to
coordinate family travel and retreats. Following the death of Cavanaugh’s
mother-in-law, Jane, the family hired a photo archivist to work with the
family’s photo albums and other memorabilia. All of these new employees now work
under the umbrella of the family office, Powers explains.
TOP VIEW
To meet both personal and business needs, many of us have established formal
family offices with permanent staffs of advisors and administrators. Though they
can be costly to establish and maintain, these offices enable us to retain
direct control over our business and personal affairs, in an atmosphere of
complete confidentiality. |
At the same time,
Cavanaugh decided against some services that other family offices provide. For
example, he nixed the idea of bringing in a money manager. “We knew it didn’t
make sense to hire somebody to walk the dog,” says Powers. Cavanaugh also chose
to work with only outside attorneys, choosing best-of-breed lawyers as
needed.
Not surprisingly, salaries are the largest expense in family offices.
At the Russell family office, salaries amount to approximately 60 percent of
total costs. To pay for the services, Cavanaugh considered several approaches.
In most family offices, the senior generation has considerably more money than
younger members. Some families agree that each member pays based on the
percentage of assets managed by the office, or members of the senior generation
simply pay more than younger relatives. Cavanaugh opted for a two-pronged
approach: Costs for such basics as investment advice and accounting—services
all 10 family members wanted—were split equally among the five households, based
on the amount of assets. For other services, families were charged an amount
based on the estimated cost, because some family members tended to use certain
services more than others.
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