A family office - as a self-contained organisational unit belonging to one or more families or individuals - controls and manages wealth, advises in tax, legal and other areas, and sets up family governance, succession plans, and philanthropic engagements. Family office employees provide services to family members, in a way that is free of conflicts of interest.
Family offices are often founded when the business is sold. These changes may leave the family feeling at risk of falling apart. The loss of the company mission can leave a void, particularly among family members who were active in the business.
This is not the case when families are still in business together and family members decide to manage their individual assets together, or when the family decides to put some assets – such as real estate or minority investments – into a family office that is managed separately.
When a family office is set up, it should run as a company. It should be professionally managed, as any other company, with a vision, mission, strategy, a good governance structure and the right people.
Expectation: professional wealth management and promoting family unit
Family offices are usually established to achieve a greater degree of professionalism and effective wealth management. In some cases, this occurs through active management of stock portfolios.
The family office makes direct, cost-effective and transparent capital investment, benchmarking against other family offices. With time, the family office tailors its wealth management to fit the needs of the family, to the advantage of all of its clients.
The family office also plays an important role in reinforcing a family’s shared sense of identity. It is important for families to be aligned and connected to the family office, by developing a family constitution and a wide range of family governance structures. This is the basis for handing over the wealth and staying close as a family across the generations.
Does it make sense to have your own family office?
It is important to be clear about the scope and nature of a family office, as this informs the costs involved in this project. When thinking of a very small structure with one family officer, one assistant and one secretary, costs could add up to about £380,000 annually.
With a cost burden of 0.6 % of the total assets, a family would need at least £65 million in assets to be managed by the family office. When thinking about a small to medium structure family office that costs about £1.1 million a year, around £180 million in managed assets would be needed.
If the family has less than £65 million, they should work with a multi-family office. If they have between £65 and £180 million, they should consider founding their own family office, but think about which services could be outsourced. Wealth above £180 million would definitely justify building a single family office structure.
Success factors for an own family office
When running a single family office, it is necessary to develop strategies and governance structures that fit to the size and scale of the assets and the family.
Adapted from the book "Family Office" by Canessa, Escher, Koeberle-Schmid, Preller, Weber, 2019.
Veröffentlicht am 18. Oktober 2019 hier: https://www.ifb.org.uk/resources/for-owners/establishing-a-successful-family-office/