What Are Embedded Family Offices?

It is not uncommon for business owners as they become increasingly successful to have capable trusted personnel within their companies handle their personal affairs. Many times, these employees perform the same function as a single-family office. When this is indeed the case, the business owner can be said to have an embedded single-family office.

As with all aspects of the family office universe, no one knows the number of embedded family offices. Anecdotal evidence suggests that the number of embedded family offices is growing. This correlates to the growth in number and wealth of accomplished entrepreneurs.

Without question, owning a successful business is the primary way to become wealthy. A growing percentage of successful entrepreneurs are leveraging their businesses to deliver a portion of the capabilities of single-family offices. However, this approach tends to become problematic as the embedded family office gets more and more responsibilities. When this occurs, the preferred solution is often to spin out the embedded family office.

“We’re seeing more and more accomplished entrepreneurs transition from embedded family offices to stand alone single-family offices,” says Angelo Robles, founder and CEO of the Family Office Association and author of Effective Family Office. “For entrepreneurs it starts out easy to deal with family and personal matters from tax planning to sourcing lifestyle services by using the resources of their companies. However, it often gets very complicated pretty quickly. The commingling of business and personal issues can easily cause problems. Also, confidentiality, which is always a big concern, is more likely to be breached in embedded family offices.”

According to Rick Flynn, Co-CEO and founding partner of LVW/Flynn and author of The High-Functioning Single-Family Office, “In working with business owners who have embedded family offices, we find that almost all of them eventually find the arrangement to underperform. They’re not getting the high-caliber expertise they’re looking for and they would find highly beneficial. For most of these business owners, the answer is either converting their embedded family office into a formal single-family office or to strategically modify what they have while leveraging the capabilities of a multi-family office.”
News source: Forbes
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