How to start a Family Office?
How to start a Family Office?
A single event, such as business sale can leave a family with significant assets and liquidity, but without management support that the business previously provided.
In some instances a family may have a specific desire such as greater control over their investments. Sometimes, however, the need simply arises over time when wealthy families feel that managing their affairs becomes a full-time job. Multiple consultants may give different or even conflicting advice to different family members. A family office can provide structure and clarity on how the family sets priorities and makes decisions, as well as how the wealth is invested, managed, shared and ultimately transferred.
Who needs a family office?
Whether someone needs a family office depends on the scale and complexity of their wealth and the demands that wealth places on their family. Certain situations may require many people or a team of specialists with access to valuable resources, who can address a long list of important issues.
A family office has in many cases better means of addressing the increasing complexity of structures and family relationships than simple wills or holding companies as succession vehicles.
A successful family office and a strong family office strategy is a careful balance between the past, present and future.
What are some of the challenges of setting up a family office?
As no two families are alike, each family office must serve a unique purpose. With so many potential features and services available, it’s important to clarify the mission from the very beginning. What problems does the family office intend to solve and will the benefits outweigh the costs? Recruiting, motivating and retaining engaged and qualified staff has its challenges. Every family office must cope with growing challenges of data and information security to maintain confidentiality. Families and staff also need to figure out what a family office can realistically manage in-house and what functions should be outsourced.
Needed steps to create a family office
The first and most important step in creating the family office structure is to outline the goals of one individual or family members. Forming a family office is similar to forming a regular business entity where the organisational structure development is the first step.
The next step is to determine whether you want to create a family office within a company or have a separate office, which personnel you wish to hire and which personnel you wish to outsource.
Once the assessment and decision has been made, the third step is to select which assets a family office will manage.
Family office size and cost
Like any new business venture, the family office’s operations and its associated costs must be assessed before confirming the next step in its opening.
Family offices’ sizes range from small to very large, depending on the amount of wealth and its management requirements (e.g. asset management, risk management, wealth management, investment management, etc.) and the types and variety of assets invested in. The number of employees can vary from 5 to 40.
Running a family office is more costly than using bankers’ services, just like a private jet is more expensive than a flight ticket in business class.
What type of leadership is best suited for a family office?
The best type of a leader and management for a family office depends on the specific needs, goals and values of a family. However, there are a few key qualities that tend to be important:
- Strong communication skills: family office leaders must be able to communicate effectively with family members, employees and external stakeholders. They must be able to clearly articulate family’s vision, goals and values and inspire others to support them.
- Strategic thinking: family office leaders must be able to think strategically and develop a long-term vision for the family’s wealth and legacy. They must be able to identify opportunities and risks and develop plans to address them.
- Financial acumen: family office leaders must have a deep understanding of financial markets, investment strategies and risk management. They must be able to effectively manage family wealth and make informed investment decisions.
- Management skills: family office leaders must have strong management skills. They must be able to establish effective decision-making processes, manage conflicts and ensure that family interests are protected.
- Emotional intelligence: family office leaders must have strong emotional intelligence and be able to navigate complex family dynamics. They must be able to balance the needs and desires of different family members and maintain positive relationships with them.
- Integrity: Family office leaders must have strong ethical principles and act with integrity in all their dealings. They must be able to build trust with family members, employees and external stakeholders.
- Ultimately, the best type of a family office leader and management is one that aligns with the family’s values, goals and long-term vision. Family office managers must be able to balance the family’s financial interests with its non-financial goals. They must also be able to adapt and develop as family circumstances change.
Typical roles in family offices
The core team of a single-family office usually consists of several executives in key positions. The Chief Executive Officer (CEO) leads the entire company, the Chief Investment Officer (CIO) is responsible for investment decisions, the Chief Financial Officer (CFO) is responsible for tax and financial matters and Chief Operating Officer (COO) is responsible for day-to-day operations. Leaders are in direct contact with family members or a family council. Small single-family offices consist only of an executive team, while larger SFOs with hundreds of millions of assets under management have multiple divisions.
You can find out other specialists who may be on a family office team HERE
