Navigating Compliance for Virtual Family Office Integration
The Compliance Challenge
Many financial advisors struggle with getting virtual family office (VFO) services approved through compliance. Through extensive experience working with multiple firms, we've developed effective disclosure language and guidelines that consistently receive approval from both RAs and broker-dealers.
The Essential OBA Disclosure
The key disclosure language states: "[OBA name] provides consulting services to business owners and privately held companies. Services include business planning, tax planning, consulting, and access to other professional advisors through [your virtual family office name]."
Critical Guidelines for Implementation
Entity Naming Requirements
Your outside business activity (OBA) entity name must be distinct from your investment advisor DBA. This separation is crucial for compliance and helps maintain clear boundaries between services.
Service Differentiation
The OBA should focus specifically on business planning and consulting services. There needs to be a clear separation between:
- Financial planning (through your securities license)
- Business consulting (through your OBA)
- Virtual family office services
Fee Structure Requirements
Maintaining proper fee separation is essential:
- OBA cannot charge for wealth management services
- Investment advisory fees must be separate from consulting fees
- No combined billing allowed
- Each service requires its own agreement
Payment Guidelines
The compliance framework requires strict separation:
- OBA cannot pay for client's wealth management services
- No cross-subsidization between entities
- Independent fee structures must be maintained
- Clear documentation of separate services
Marketing and Website Considerations
All public-facing materials require careful attention:
- Website content needs compliance approval
- Clear service differentiation must be maintained
- Value proposition can be comprehensive but clearly structured
- Marketing materials must respect entity separation
Implementation Strategy
Success in getting approval requires:
- Clear documentation
- Proper service separation
- Detailed fee structures
- Compliant marketing approach
- Proper disclosure implementation
Remember: The goal is to offer comprehensive services while maintaining clear compliance boundaries. This structured approach allows advisors to deliver enhanced value while meeting regulatory requirements.
