Benefits of a Family Office
A family office is a private organisation that provides financial and other services to the principal family. It helps them not only to grow and manage their wealth, but to coordinate the often complex endeavours with which the family is involved.
Each family office is unique to the family for which it works – the size, services and personnel will be appropriate for the family’s needs. Typically, it will include investment, tax and legal components, and other services depending on the family’s businesses, status and aspirations. Roles within the office might often include Investment Portfolio Managers, CEO, CFO and other Directors, Tax Specialists, Lawyers and Property Managers – but there is no such thing as a “standard” family office, one size does not fit all. Recruiting the correct individuals for the specific principal family is obviously of great importance, and the family office will grow and evolve with the family.
Benefits of having such an office in place are manifold once a family’s holdings become quite substantial and/or complex. Notable advantages include, most importantly, greater returns on investments. Capital can be allocated better, in a way customised to the specific family, carefully selected and not limited by particular financial service providers. The family’s philosophical and financial values and goals, and their particular strengths can be taken into account. That being the case, by pooling capital and working together there will be a synergy achieved and greater opportunities opened up.
Lower cost is also a consideration. Having a centralised office, through increased efficiency and reduced duplication of efforts, can be more economical than various family members each running their own projects and investments. Of course, the family must be of sufficient means to support the costs of running the office, which is often a balance between a core team and external advisers.
The family’s particular financial goals can be focussed upon. This might not solely be the growth of their capital – their appetite for risk is a factor, their core values and any philanthropic aims, and an overall vision of what they are trying to build and the mark the family hopes to leave upon the world. The correct investment opportunities can be sought out in accordance with these ideals.
Another benefit is that of customised feedback to the family – a system can be put in place for reporting according to the needs and structure of the family. This leads to the appropriate principals being better informed, greater transparency, and the growth of trust.
Also consider that a family is not a static entity – there will be generational changes, to which a dedicated family office is best placed to respond. It’s quite common for family members to work within a family office, either sitting on the board of directors or in a hands-on role, depending on the individual’s skills and expertise.
Legal services and tax services are an important aspect of a family office – proper planning in these respects is entirely necessary. The complexity of these increases greatly with the diversity and geographical reach of the family’s business and investments, and with the family’s evolution through generations, marriages and, potentially, divorces.
A family office might also provide household management services – traditionally the domain of a butler or house manager – such as managing household personnel, making travel arrangements, and coordinating the family’s various properties around the world.
All in all – and we’ve only touched on some of the vast range of services a family office might cover – this is a very complex subject, and putting together a family office requires very detailed and careful consideration. The majority of families who require a family office will likely have a portfolio of properties as well as other assets to manage. There will be a requirement for a number of roles within it: wealth investment and management aspects such as accountants, CFOs, tax specialists and people with niche skills tailored to the family’s operations. A suitable family office leader or chief of staff will be necessary, as will legal counsel. As discussed, the specific roles will depend on understanding that family and their needs – this is where expertise in setting up the office in the optimum way is paramount.
Pembury Partners specialises in assisting clients globally in putting full successful family office teams in place within the globes most prestigious, elite and ultra-high net worth homes.
