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| Family Office |
Office Protocol
Anne Field
06/01/2004
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When the Russell family meets, each household is given one vote.
Other families do it differently, however. For example, the older generation may
have more votes than the younger. Decisions might be made in such a way that the current senior generation retains control, and then, over time, transfers it
to the next generation, says John Duncan, a Chicago attorney with Duncan
Associates, which sets up private trusts. “They’re creating a mechanism so the
younger members can take over during a five- to 10-year period.”
An equitable
system for counting votes and approving decisions is a strategy for alleviating
the myriad issues related to personal relationships and conflicting needs within
the family. While Cavanaugh contends there has not been a serious dispute in his
family, other offices are not so lucky—especially when sibling relationships are
involved. Freeman recalls a family office in which two brothers worked. One was
highly competent, the other was not. “The one brother was mad because his
brother was getting paid for doing nothing,” he says. When their father died,
the first brother attempted to oust the other from the job. Lawsuits were hurled
back and forth, and the matter was ultimately settled out of court.
The
biggest challenges, however, commonly result from poor communication. “If you
don’t quite understand what’s going on, mistrust rears its ugly head,” explains
Lee Hausner, a psychologist and vice chairman of IFF Advisors. In fact, that is
why the Russell family introduced both a series of scheduled emails with family
updates and quarterly mailings, sent out before meetings. It took serious work
to devise the best way to communicate important information, however. Consider
financial reports. Some family members wanted more detail than others.
Determining a reporting form that met everyone’s idiosyncrasies took several
months. “As with any business, you have to be constantly flexible,” Cavanaugh
adds.
“Offices change over time, reflecting how the family is changing,”
McCarthy adds. And the Russells are changing. According to Cavanaugh, his office
recently embarked on yet another round of change. In January, the family decided
to turn the operation into a multifamily office, called Threshold Partners,
further formalizing administrative support around specific family goals. Of this
continual evolution, Cavanaugh observes, “Starting a family office has had all
the surprises, complexity and satisfaction of starting your own small
business.”
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