How to Start a Family Office, step 3 of 12

Build the Operating Plan for Your Single Family Office

In short. Translate your family's goals into a workable office design. Map the family and its advisers, decide what expertise to hire or outsource, and plan for accounting and investment oversight. Set out how the office will handle risk, privacy, and daily operations. Use a staged process with clear responsibilities, a budget, and written procedures.

By Richard C. Wilson, from chapter 3 of How to Start a Family Office

A single family office needs a clear operating plan before it needs a large team. In my experience, families make better decisions when they first map who is involved, what the office must handle, and where outside expertise is needed.

The right design depends on your family's needs. Some offices coordinate a small group of advisers, while others employ full-time staff and manage more responsibilities. Agree on what your office is meant to do before looking at another family's structure.

Map the Family and Its Advisers

Start with a family tree. Identify the original wealth creator and label the generations involved. A visual map helps advisers understand who is part of the family, whose needs are in scope, and how decisions may affect different branches.

Then draw a mind map of the advisers and team members. Many families begin with a wealth creator connected to several professionals who rarely speak with one another. A family office can give those relationships a coordinator, such as a CEO, COO, or board chair, who helps experts work together on the family's behalf.

Use the map to see where responsibility is unclear or concentrated in one person. If you bring in a formal team, show who reports to whom and what authority each role has. If you are considering whether a smaller arrangement fits, review what a single family office is and compare it with other service models.

Build the Office in Stages

I use a five-part process to organize the work. Begin by listening to the family and assessing its needs. Review what is already known, what has caused difficulty, and what the family hopes to achieve. Ask about priorities and concerns, along with experiences that may shape the plan.

Next, build the family compass. Document values, mission, objectives, constraints, governance, ethics, confidentiality, public image, and lifestyle needs. The compass helps keep operating and investment decisions connected to what the family says matters. See why a family compass belongs before the office.

Then assess resources and talent. Write down which professional roles are needed, which advisers are already trusted, what is missing, and what the construction plan will cost. After that, implement the plan and establish ongoing operations. Set processes and investment decision policies. These stages can overlap, but each needs an owner and a clear deliverable.

Set a target for basic operations and distinguish that from a fully established office. The chapter describes launches that take months, while families that proceed more deliberately can take much longer. Talent recruitment and reconciling the needs of different family members can slow the work. For questions to resolve before forming, use this family discussion guide.

Decide What to Keep Inside

Assess the office's main responsibilities: accounting and administration, investment management, direct investments and operating businesses, risk, insurance, philanthropy, privacy, security, public relations, and family services. You do not have to build an internal department for each area. Many small and mid-sized offices outsource accounting or investment work when that gives the family access to needed expertise without building a larger team.

Accounting and reporting can be demanding because family assets may include businesses, real estate, public securities, and private investments. Valuation and distribution questions can require different expertise, as can tax matters. Create processes and reporting systems that give the family a clear view of assets and responsibilities. Talk with your CPA about tax specifics and your attorney about legal structures.

Technology supports accounting, administration, and reporting. It also supports communications and risk oversight, but custom systems can become expensive. Define what information needs to be gathered, who uses it, and what decisions it supports before selecting tools. Consider which technology a family office needs.

For each type of investment and operation, identify the risks and who is qualified to assess them. Review insurance with an experienced insurance professional, including coverage gaps and exclusions. Agree early on how staff may discuss the family publicly and what information stays private. Set out how security concerns will be handled. If location or domicile is under consideration, work through the legal and tax specifics with qualified advisers.

Set Authority, Controls, and Contingencies

Choose who will lead the project and who will make operating and investment decisions once the office is running. Spell out the CEO or CIO's authority, how family members participate, and who can appoint service providers. A written governance structure helps prevent confusion when a decision is difficult or time-sensitive.

Create financial controls to reduce the risk of unauthorized transactions, conflicts of interest, and investment activity that departs from the agreed mandate. Document recurring processes in an operating binder. Include who prepares reports, what approvals are required, and how routine work gets completed.

Think through likely and severe events, such as the death of a family leader, a lawsuit, a disaster, or a major change in the family's business environment. For each scenario, write practical steps and assign responsibility. This exercise can show which skills are missing from the advisory board or core team. For more on the structure of oversight, read about family office governance.

Keep the first plan proportionate to the work the family needs done. Build the office by matching responsibilities, people, and procedures to the family's priorities, then adjust as those needs become clearer.

The number one strategic priority in this first phase of setting up a single family office should be creating the strongest brain trust possible for the family.