Gonna Get Rich? You Better Have a Family Office (and Know What That Means)
Everyone wants to be rich, but so few people understand what is required for wealth to grow and be maintained.
In preparation for this article we reached out to Christopher Pascale an accountant and the author of War Poems: A Marine’s Tour 2003-2008. Our original goal of the interview was to get a quote that would support a piece about wealth creation, but he stopped us in our tracks when he said, “…but none of that matters if you don’t have a family office.”
What Is a Family Office?
When Mr. Pascale said that you need a family office we thought, like most people, he meant a private room with a desk and filing cabinet. That is not what he meant at all.
According to accepted accounting regulations, “A family office is the private accounting team that is in charge of a wealthy person’s assets. Just as a business has a controller and bookkeeper who will send documents to a CPA to file come tax time, very rich people have a similar setup.”
Essentially, a family office is your personal accounting department.
Why Get a Home Office?
“The average millionaire does not need a family office,” Pascale said, “but, generally speaking, someone who is worth fifty million or more would be a fool not to have one.”
Essentially, a home office is staffed with specialists who have critical expertise in the area where you built wealth, or want to. Mr. Pascale, for instance, is an author who has a real estate and stock portfolio. If he was to become very wealthy he would hire a CPA who understands royalty statements, IP contracts, rights and licensing agreements, and matters surrounding stocks and property.
“But that’s too far ahead of where you really need to be,” Pascale concluded. “Prior to that you need to make sure you have the right bank account.”
What Is the Right Bank Account?
At this point in the interview Pascale couldn’t take us any further, so he referred us to Mark Ford, CPA. Mr. Ford is a New York City accountant with extensive family office background.
What happens when people grow substantial levels of wealth is that they not only diversify their portfolio, but they also diversify their cash. The reason for this is to protect it. After all, could you imagine having $10,000,000 in the bank and then only being able to recover the $250,000 FDIC insured amount? It would be a disaster.
For this reason the very wealthy have multiple accounts sometimes in multiple banks and brokerage houses. They also create trusts. Other funds go into hard assets like land, businesses, gold, and silver.
We all want to be rich, but pursuing great wealth (even via the lottery) while knowing nothing more than what color your Ferrari will be, and who you’ll spurn on the way up is a waste of time. Because even with millions of dollars you will fall into a poor state that will involve potentially disastrous results. That is, unless, you have a family office looking out for you.