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What Would I Do With a Personal CFO - Part 2


In our last piece we discussed the role and responsibilities of a business CFO. We said that the business CFO has two main jobs: first, financial "plumbing" (i.e. capture the financial data of the business and provide good reporting); and second, contribute leadership and financial strategy to support business objectives.


As Personal CFO, our role with business owners is similar:


1. The financial "plumbing" of the family.


Sometimes these activities are referred to as "back office" services, and may include:


a. Facilitating the opening and closing of bank accounts, policies, loans, and investments

b. Tracking money flows and recording activity for the family's balance sheet (or PFS)

c. Capturing and organizing all the data associated with (a) and (b)

d. Capturing and organizing all the documents associated with (a) and (b)


2. Planning and financial strategy and supports family objectives.


There is an important leadership aspect to this work that carefully considers the needs of the family and the family's capacity to address those needs at any given time. Priorities need to be articulated, major risks assessed, and key opportunities identified. And often that requires facilitating communication between family members who have different views about what is most important.


But the most valuable thing we do is help the entrepreneur with capital allocation. What's that? Well, we wrote a piece last year about advisory fees, but that piece also serves as a capital allocation primer. Furthermore, one simply cannot advise an entrepreneur on capital allocation without having a keen understanding of their business! It's hard to overstate the importance of this aspect of what we do. In my opinion, it's very difficult to be effective in serving a business owner and their family if one does not understand how the business works, the nature of the industry, why the business is profitable, what risks might erode that profitability in the future, whether the business is under or over capitalized, etc.


Yes, we take care of the family's financial plumbing. Yes, we provide advice on all things financial. But the Personal CFO does much more than that; a rich understanding of the members of the family; a keen knowledge of the business; capital allocation that accounts for all possible opportunities...these are the attributes that enable the Personal CFO to lead the family where it wants to go.

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