Financial Reporting-Why Not Use A Family Office
- Jake Chazan
- Jan 25, 2016
- 2 min read
Financial Reporting
We have been discussing financial reporting for high net worth individual in a number of these blog posts. The question that I have in my mind which needs to be addressed is why can't the appointed Family Office be used to provide the reporting?
I have looked at a number of family office websites (Matter Family Office), particularly some large providers of the service in the United States. And they have generally given "lip service" to the financial reporting piece. Balance sheet, income statement and a cash flow statement is generally what they offer.
It's understandable. What the family offices are primarily interested in is the investment piece of the business, that's where they earn their fees. Anything realting to financial reporting I believe is included within that overall fee. I can't be sure of this as the fees are seldom disclosed on the websites. But the primary business of family offices seems to be asset management and the other services seem to play a secondary role.
In my opinion, bundled services are not always in the best interest of the client. First of all, there may be a lack of transparency as to what the actual cost is. Second, the client should be in a position to pick the party that is to be responsible for the financial reporting. In the family office offering the client wil be appointed someone. That might not be the someone that the client would have chosen on a standalone basis. Separating out the financial reporting also provides more flexibility in replacing the incumbent. You love the financial reporting but hate the asset management but it's a package deal.
In any event, I still believe that high net worth individuals or families need to have financial reporting prepared that is both suitable and approrpiate to their needs.
included in the package of financial reports we may find it useful to prepare budgets. Budgeting can be an important aspect of managing wealth. Preparing budgets requires the addition of flexibility to the template. It's also necessary to update budgets, presumably annually at a minimum. Where there is a material change in circumstances, it may be necessary to update budgets more frequently.
Financial reporting needs to be customized, not one size fits all. In addition, there may be some times that you need assistance with financial due diligence. It's not always necessary to involve your accountant at this stage. And quite often, your accountant may not be familiar with the investment products you are being offered to provide the necessary due diligence support.
We can provide you with a full service package to meet your financial reporting needs. Where financial statements need to be presented to third parties, you will need the involvement of your accountant. However, where the information is being prepared for your internal use only, we can help! It's very much like have your own chief financial officer working for you.
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