Image rights: © Prof. Dr. iur. Swen Bäuml
Original language of the article: German
Quite early in my professional life, I had the opportunity to work as a business lawyer and tax advisor directly at the interface of the corporate and asset level on the one hand and the owner/family level on the other. This as an external consultant in a responsible position with international consulting companies as well as an in-house family officer in one of the largest family businesses worldwide. The owner's view of the total assets in the private as well as in the business sector, his own risk and opportunity evaluation and the decisive criteria for owner-strategic decisions, also taking into account the family sphere, open up a considerable range of topics and instruments for implementation.
Our consulting company INFOB - 'In Family Owned Business' was founded in order to be able to meet the specific demands of wealthy entrepreneurial families in the DACHLIE area more comprehensively and at the highest level within the framework of tax structuring consulting, succession topics, but also generation and succession management as well as the organization of family office structures. This requires a high degree of specialization in our team and an unconditional commitment to quality and service as a manufacturer of individually tailored consulting solutions. This is also reflected in our internal organization and set-up, in that we do things differently than is customary in the industry. We are pleased that our INFOB has been excellently received by our clients from the very first day of its establishment.
This is a complex question to answer, since at least in the case of single family offices there is a high degree of individualization of the organizational and service structure; here, each family office is, so to speak, the individual reflection of the respective asset owners and their requirements.
In general, it can be said that a family office supports one family or asset owner (single family office) or several families or asset owners (multi family office) in the holistic management and administration of their assets. Characteristics and distinguishing features from pure asset managers are regularly a long-term, cross-generational investment and management strategy (SAA). In addition, there is also the professionalization of the family sphere, e.g. through family strategies, and also of the (ideal as well as material) asset sphere outside the entrepreneurial-operational activities.
The family office is holistically oriented in terms of its strategic advice to the principal family, and a family officer should therefore be able to perform advisory, controlling and steering functions in all asset classes without having any product or sales interests of his own. As a trusted advisor, the family officer is committed to the principal family and its economic independence.
My personal motivation to co-initiate the new course "Family Office and Strategic Philanthropy" at the University of Lucerne results from the observation that family offices and wealthy families are increasingly concerned with the impactful use of their funds. The reasons often lie in a variety of factors such as generational changes, developments relevant to society as a whole and also personal experiences as well as inspiration from role models and examples. Overall social commitment, impact investing and also the need to "give something back" to society play into this. Often, however, the necessary knowledge about "how and when and where" is lacking.
The new course "Family Office and Strategic Philanthropy" at the University of Lucerne aims to create a forum that makes inspiration and examples accessible and tangible at the same time - which is why we are delighted to have philanthropists and example-givers participating. However, the organizational and regulatory framework, the basics of "how and when and where" will also be conveyed by specialists and insiders from the fields of management, law & taxes, reporting and organization.
The course is basically aimed at all those who are considering entering into a philanthropic commitment, who would like to deal with the question of implementation and organization, but in particular would also like to get to know exemplary donors and best practice approaches. Last but not least, a forum for mutual exchange will also be able to emerge, from which already established philanthropic engagements can certainly benefit.
Specifically, the target group consists of philanthropists, asset owners and (senior) employees of family holding companies as well as (single - and multi-) family offices. However, we certainly expect that members of wealthy families who are themselves preparing for functional responsibility as "NextGen" will also be enthusiastic about participating.
Due to the high degree of individualization of the organizational and service structure in the family office sector already mentioned above, a wide range of characteristics can be found in the international context. In the DACHLIE area in particular, there is certainly a predominantly common understanding to the effect that, in addition to professional, classic asset management, which tends to be oriented more toward the protection of assets, a family office should, above all, ensure the independence of the family over several generations in strategic terms. This predominantly includes the management of family dynamics, succession and cross-generational systemic challenges.
This more "dynastic" idea is much less pronounced in Anglo-American family office structures. This is why the pure optimization of assets is given greater weight there, and the management tool of a family office is less concerned with preserving assets than with absolute returns.
Particularly after generational changes, European-style family offices are increasingly becoming a platform for the implementation of internal family values, which then lead to charitable commitment and, at the asset level, to ESG investments, impact investments and the creation of foundation structures, for example. This requires a high level of special expertise in the family office or its network, and usually also additional staff requirements beyond the original core tasks from the past.
Indeed, philanthropic commitments live on large donations and the so-called fundraising is therefore of great importance. To put this into perspective, however, it must be said that the "tool" of donation is only one manifestation of the implementation of philanthropic commitment and that there are a multitude of other possibilities, which we will present and describe not least in the course.
In the perception of many family offices and wealthy families, fundraising has become a "battle" and the flood of offers for philanthropic commitment of whatever form is enormous; the quasi "imposed" selection effort is therefore increasingly shied away from and is difficult to manage, especially for family offices with rather small staffs.
From the point of view of the wealthy families, they are instead increasingly actively approaching organizations and projects previously identified from the analysis. This selection sometimes takes place very strategically "on the quiet," often with the help of external advice or also on the recommendation and advice of trusted persons, not infrequently "peer-to-peer."
There is an increasing tendency towards impact investing and transparency; there is a desire for measurability of impact in the nonprofit sector as well, as is familiar from asset management in controlling on the basis of key figures.
This must also be ensured by appropriate conditions in the target investment, the ultimate charitable commitment. Those who can ensure this are on the radar in the selection process for family offices.
Non-profit, overall social commitment in all its facets contributes to added value in many areas. Often, and especially historically, these are also areas in which the state holds back, either because of tight budgets or because a prominent role for the state in civil society is not desirable. This altruistic approach is also incentivized by tax legislation in most countries, e.g., through partial or full tax exemption of charitable asset holders such as foundations or the deductibility of matching donations to a certain extent.
The active use of tax privileges for nonprofits and philanthropy primarily for personal (family or business) tax optimization rarely if ever occurs. The motivation for overall social, idealistic commitment almost always lies elsewhere. If some taxes can be reduced in the process, this is at best a welcome side effect, but rarely a genuine reason for the decision. The situation is different with family foundations, which have the provision of the family as their main purpose and not society as a whole.
In a few situations, charitable corporate foundations can be found; here, the preservation of the company is to be ensured through the tax-free transfer of shares to the foundation and, at the same time, the preservation of jobs through the legal form of the foundation. The income from the company is then used for charitable purposes. Tax savings and charitable status come together, often in combination with a family foundation (so-called double foundation).