Single-Family Offices Feel Effects of Dodd-Frank: Study

Succession a top priority, but less than half of offices have plan

A significant number of single-family offices have been affected by Dodd-Frank regulations that went into effect in March, according to a new study by The Family Wealth Alliance.

In a survey of 34 SFOs with median assets under supervision of $320 million (mean: $450 million), 32.4% said the reform had had an effect. Fifty-nine percent reported no effect, and 9% were unsure.

New regulatory rules required many family offices to register with the SEC as investment advisors, according to Bob Casey, the Family Wealth Alliance’s head of research.

“Legal fees or other expenses affected 38.2% of participating SFOs,” Casey said. “Reported costs range from $300 to $450,000, and averaged $64,000.”

Dodd-Frank abolished the private advisor exemption for family offices, and required the SEC to come up with a new family office exemption. This applied to offices with only family clients and only family owners.

Among the SFO study’s findings:

  • Only 38.2% of family offices surveyed had a succession plan even though participants considered succession a primary challenge
  • 66.7% of participants said they had sufficient expertise to evaluate investment vehicles and strategies
  • 35.3% outsourced the chief investment officer function to handle their investments
  • 51.5% reviewed investment policy or practices, up from 39.5% last year; and 27.3% actually changed investment policy
  • 20.6% said a family member had been a victim of identity theft via the Internet
  • 11.8% said a family member had been a victim of burglary or robbery
  • 12.1% of family offices employed a security consultant.

Family offices participating in the new survey, the alliance’s fifth, comprised a total of 544 households, with a median of 16 households served. They had been in existence for a median 28 years, and served from one to five generations.

A family member was CEO of 47% of the offices surveyed.

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