The Family Office Crowd Gets a Taste of New Regulation

After Madoff, anyone handling money is fair game to be pored over and counted.  At least that’s how the 3000 or so Family Offices in the US will view this latest developement…

From the Wall Street Journal:

The proposal to have single-family offices register with either the Securities and Exchange Commission or with states in which they do business indicates that — popular talk of clandestine cabals aside — the super-wealthy are clumsy lobbyists.

Though viewed as an unintended consequence of legislative efforts to protect post-Madoff investors in hedge funds and the like, the proposal could make most single family offices — privately owned investment-advice, financial-management and, in many cases, concierge-service providers to families with typically at least $100 million to manage   more expensive and less private.

One of the key ingredients to the success of the family office type of asset management was the built-in privacy that could be offered.  Keeping the management of their money away from the big commercial bank operations, wealthy families could keep the makeup and size of their holdings out of the spotlight.  This privacy may now become a thing of the past according to the article.

Less private, because RIAs have to make assets under management a matter of public record, easily accessible through the SEC or comparable state-level agencies. And a main reason ultra-wealthy families establish family offices is to keep the value of their holdings from prying eyes.

One other unintended consequence of the new reforms is that those running a family office will now be under greater scrutiny from regulators.  This means a lot more paperwork and possibly compliance personnel staffing.

Source:

Registration Could Hurt Single-Family Offices (WSJ)