Family Office Model 

The Key to Multi-Generational Wealth Success

Introduction

What is Family Office

Recently, family offices is becoming popular especially in the investment circles. It can either be structured with one principal known as single family office or multiple principals which is known as multi-family office.

According to Investopedia, Family offices are private wealth management advisory that serve ultra-high-net-worth (UHNW) investors. They are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family.

Family Office (FO) is a concept of formulating a family constitution that is align with family values as well as guideline on how to run a family business which is consistently align with the family core values. CC Family Office is one of the services provided under Cheng & Co Group which is a one stop intermediary.

5 Key Reasons to Start Family Office

A family who decided to start a family office have their own reasons which might be different from another family as each family is unique. Therefore, we have identified 5 key reasons to start a family office:

 

    • Provide family wealth planning strategies that are sustainable for generations which including advices from professionals such as certified financial planners, lawyers, accountants, tax agents, fund managers and trust specialists.
    • Family offices provide governance which looks into the complexity of a family’s wealth with transparency as well as to reduce the risk of conflicts in the future. The advisory and wealth management for the family members are under the same entity to ensure confidentiality.
    • Family office provides better alignment of interest between financial advisor and the family.
    • Structure family business succession to transition out a business management role to the successor of the next generation while preserving the family and business harmony.
    • Family office also acts as a financial mentor. The main services provided include setting and monitoring financial goal, family cash flow budgeting, investment planning, tax planning, insurance planning, retirement planning as well as estate planning.

Benefits of working with a family office

There are several reasons to join family office. Hence, you will need to appoint a trusted family office and experts to receive the best advice. With that, your family office will be added with benefits include:

 

    • Receive valuable advices and strategies from professionals to preserve wealth with proactive management.
    • Ensure sufficient family insurance and diversification of investments with strategic assests allocation.
    • Transfer of wealth from one generation to the next and estate planning
    • Work with multiple professionals to ensure that the strategies are integrated.

Defining Net Worth

Net worth act as an indicator to your financial status. It can be a yardstick for you to measure your progress toward your financial goal such as ability to purchase new property, education planning, child planning and retirement planning.

High-income earner who doesn’t manage his or her wealth will also potentially show a negative net worth. How to build a high net worth profile? It all comes from those who maintain a high savings rate and plan for your wealth management.

Step 1 : Calculate your total assets

Assets include all items that have monetary value. Those assets can be sold or converted into cash easily and quickly are known as liquid assets such as fixed deposit or unit trust. Those assets which cannot be sold or converted into cash within short period of time are property or vehicle.

Common examples of assets are :

  • Market value of your property
  • Market value of your vehicles
  • Investment holding value of your investment account
  • Collectibles or Notable items such as jewelry or artwork
  • Your bank account balance
  • Your fixed deposit notes.
  • Your retirement saving account such as Employee Provident Fund (EPF) or Private Retirement Scheme (PRS).

Step 2 : Calculate your total liabilities

Liabilities are financial obligation. Total liabilities represent the entire debts balance or outstanding balance owing to others.

Common examples of liabilities are :

  • Mortgage loans
  • Hire purchase
  • Credit card
  • Student loan / Personal loan

Step 3 : Calculate your net worth

To calculate your net worth, take step 1 total asset subtract from your total liabilities from step 2. The resulting amount will be your net worth.

Formula :

Net Worth = Total Assets – Total Liabilities

Example

Assets RM Liabilities RM
Property 500k Mortgage 300k
Vehicle 50k Hire Purchase 15k
EPF 100k Student Loan 15k
Cash / Fixed Deposit 80k
Total Assets 730k Total Liabilities 330k
Net Worth 500k    

Business Succession Plan

Business Succession Planning provides business continuity or existing solutions for business owners. A tailor-made solution will be formulated after detailed discussion and understanding on the objectives of the business succession planning.

Importance of Business Succession Plan
Types of BSP

Retirement Planning – What they need to know and how you can help

What is your retirement life goal? How you track your goals and objectives? The life goal analysis provides you a snapshot of your entire future financial life. It identifies all anticipated sources of income and expenses.

5 keys consideration in your retirement plan

• Identify your retirement goal
• Determine your retirement expenses needs
• Strategize fund retirement fund
• Healthcare / Long-Term care planning
• Estate planning

By identifying all sources of income and expenses and recognizing the timing of each, we are able to identify any year when you’ll have a shortfall. In these shortfall years, your investment portfolio is used to cover these shortfall. If there are insufficient funds, you can only eliminate it by changing the controllable variable such as
• Seek extra income & review your expenses
• Create passive income & Improve your rate of return on your investment portfolio
• Prolong retirement age

Family Office Scope of Services

Family Office (FO) is a tailor-made services towards high net-worth individual to preserve and protect his or her family wealth. Family Office is also able to provide succession planning in order pass their wealth to the next generation and the following generations.

Just like the adage goes “Wealth Doesn’t Last for Three (3) Generations”. The objective of Family Office is to break this curse. The scope of services of Family Office are categorized into 3 main aspects : Financial Planning, Governance, and Advisory.