HKS 41 51R 62G 113B

1
Background on the Family Office
PortfolioForums on Issues and Innovations in
Real Estate Prof. Dr. Rolf Tilmes October
27th, 2006Berlin
2
Conceptually, the wealth management pyramid
distinguishes three wealth segments with varying
requirements for the FO
Number of UHNWI 7.144
Financial Wealth USD 962 bn.
Ultra HNWI
Very High Net Worth Individuals
Number of HNWI 767.000
High Net Worth Individuals
Affluent
3
The German U-HNWI segment grew by 81 from 1997
to 2004
1,0
0,93
0,94
0,92
8.000
0,90
0,89
0,86
0,9
7.144
7.000
0,82
6.931
0,77
6.601
6.601
7.000
0,8
5.893
6.000
0,7
4.715
0,6
5.000
U-HNWI financial wealth in Germany USD 962
bn. Approx. 60 to 75 of total assets
invested in real estate
3.929
0,5
Number of U-HNWI
4.000
Share of U-HNWI in HNWI-population
0,4
3.000
0,3
2.000
0,2
1.000
0,1
0,0
0
1997
1998
1999
2000
2001
2002
2003
2004
Number of U-HNWI in Germany
Share of U-HNWI in HNWI-population in Germany
Quelle Capgemini
4
The understanding of Private Wealth Management is
diverse and differs by object and subject
categories
Which elements are part of the total wealth of a
person or a family?
Object Dimensions Wealth Elements
96,2
86,0
Cash Real Estate Own Business Life
Insurance Paintings/Art Antiques Gold Household Je
welry Vehicles
Working capacity Healthyness/fitness Intelligence
HumanWealth
96,2
83,7
84,9
74,4
67,9
n 43
Financial Wealth
66,0
73,2
Children Family Esteem Reputation Values Tradition
54,7
70,7
45,3
SocialWealth
63,4
43,4
56,1
41,5
51,2
37,7
51,2
n 53
n 41
Source Research of Dr. Peter Schaubach Family
Office in Private Wealth Management ebs
FINANZAKADEMIE analysis
5
The understanding of Private Wealth Management is
diverse and differs by object and subject
categories (cont.)
Which main goals do you currently pursue with
your management of
Subject Dimension Main Goals
Main Goal
Main Goal
Asset Category
Asset Category
29,6
Wealth Preservation Harmony Wealth
Accumulation Quality of life Wealth
Transfer Personal Networks Quality of
Life Esteem Wealth Preservation
79,6
FW SW FW HW FW SW FW SW HW
Increase of Financial Wealth Reduction of
Work Increase of Human Wealth Increase of Social
Wealth Increase of Social Wealth Increase of
Human Wealth Increase of Financial Wealth Wealth
Accumulation Wealth transfer Reduction of work
HW HW SW FW HW FW SW HW HW FW
27,8
70,4
25,9
68,5
24,1
64,8
24,1
51,9
24,1
38,9
22,2
35,2
22,2
33,3
20,4
31,5
14,8
n 54
n 54
FW Financial Wealth HW Human Wealth SW
Social Wealth
6
The preferences for organizational designs of
Family Offices are evident and driven by asset
size
Which form of organization do you prefer for
Family Office?
Aspect of Ownership
External Single-User- Family Office
External Multi-User- Family Office
Forein- Property
4,8
64,2
Private Single-User- Family Office
Combined Multi-User- Family Office
Private Property
26,2
4,8
Unique Position of Client
Given
Not Given
7
The use of Family Offices is deemed to be useful
already below current wealth classes
From which size of financial wealth do you
reasonable consider starting to use a Family
Office?
Minimum Financial Wealth Starting to Use a Family
Office
Multi-User Family Office
Single-User Family Office
lt 2,5 Mio. Euro gt 2,5 Mio. till 5
Mio. Euro gt 5 Mio. till 10 Mio. Euro gt
10 Mio. till 15 Mio. Euro gt 15 Mio. till 25
Mio. Euro gt 25 Mio. till 50 Mio. Euro gt
50 Mio. till 100 Mio. Euro gt100 Mio. till 250
Mio. Euro gt250 Mio. till 500 Mio. Euro
gt 500 Mio. Euro
7,1
0,0
33,3
2,3
19,0
14,0
4,8
4,7
16,7
18,6
9,5
30,2
4,8
7,0
2,4
14,0
2,4
7,0
0,0
2,3
n 42
n 43
Average 35,74 Mio Euro (without four extremes
19,60 Mio. Euro)
Average 152,15 Mio Euro (without four extremes
84,16 Mio Euro)
8
Cash and asset management are the most important
services real estate management is not in line
with total asset share
Importance of Financial Wealth Service Categories
4,08
Management of Daily Assets Cash and Asset
Management Real Estate Management Corporate
Venture Management Insurance/ Risk Management Art
Management
n 52
n 52
2,08
n 51
3,06
n 50
3,19
n 50
2,73
n 42
3,99
Declining Importance
3,19
n 52
Naming encoded as 'very important' 1 till 'very
unimportant' 5
9
Trust in and competency assessments of
bank-related Family Offices is across all major
categories lower than for auditor/ tax-related
ones
Trust to Family Office
Bank-related Family Office
Auditor-/Tax-Advisor-related Family Office
Management areas
Daily Assets Cash-/Asset Management Real Estate
Management Corporate Venture Management Life
Insurance Management Art Management Management of
(working) Capacity Management of
Intelligence Management of Physis Managem. of
Social Standing Legal- and Tax Advice Personal
Office
10,4
12,5
58,3
22,9
25,0
27,1
6,3
35,4
12,5
20,8
6,3
0,0
4,2
2,1
2,1
0,0
2,1
0,0
2,1
2,1
2,1
58,3
4,2
14,6
n 48
n 48
10
Private Real Estate Management merits a distinct
approach in the FO context and will be a major
performance driver
Private Wealth Management
PREM Services in Family Office
Single Object Optimization of locations, object
analysis and assessment, financing, tax
optimization, rental management, facilities
management,
Private Real Estate Management
integrated
Management of Non-Real Estate- Portfolio
Real Estate Portfolio Assessment and
optimization of real estate protfolios, hedging
of currency risks, measurement of value creation
/ performance attribution of single object to
portfolio, market assessment,
Financial Economics
Management of Real Estate- Portfolio
Management of Single-Investments
Total Portfolio Wealth planning and structuring,
cash flow management, return optimization, estate
planning, financial planning, controlling of
overall strategy
isolated
isolated
integrated
Real Estate Economics
Souce Tilmes/Schaubach, PREM
11
Hypotheses for profitable growth in Family Office
and Wealth Management business in Germany

• Positioning
• Define Family Office-strategy pure play Assets
  under Advisory vs. Assets under Management
• Consider Wealth Management Re-bundle traditional
  Private Banking Services with extended personal
  interaction
• Offering
• Focus product range Purely being independent
  from own product selling will generate access to
  UHNWI shift to third party product distribution
  as access is the limiting factor not the
  product
• Extend product offering Offer new, advice driven
  service (Estate Planning, Real Estate Management,
  Risk Management) and move from Financial Wealth
  to Human and Social Wealth
• Use teaming Networking with external advisors is
  key to cover the entire wealth which is more
  than just money
• Staffing
• Re-power/Re-tool staff Invest in your own Human
  Capital and train core competencies in
  advice-driven business

12
Contacts for further questions
Prof. Dr. Rolf Tilmes, CFP, HONCFEP Honorary
Chair for Private Finance and Wealth Management
at the European Business School International
University Schloss Reichartshausen,
Oestrich-Winkel Head of the Institute for Private
Wealth Management, Frankfurt Academic Director of
the ebs FINANZAKADEMIE, a Post-Graduate Training
Company of the ebs, Oestrich-Winkel Tel.
49-163-8827703 E-Mail rolf.tilmes_at_ebs-finanzaka
demie.de