Why set up a Single Family Office?
•Despite the media and political (somewhat demagogical) perception that wealth is passed on from a privileged few to their privileged descendants, the reality is that 95% of family businesses do not survive the 3rd generation of family ownership and a majority of FO’s have typically served no more than 3 generations.
•So Family Offices endeavor to :
•better manage the multitude of risks associated to great wealth;
•cover the full wealth / asset spectrum, of which financial assets are only a part;
•in-source key skills & capabilities to be leveraged by the family. How should a family take this decision?
•Just like any other business decision: draft a business plan and calculate precisely costs, benefits and savings.
•Ultra-High Net Worth families (UHNW) made their fortune in business, so they have the skills and ability to make their own decisions when it comes to setting up a family office.
•They need an adequate Governance structure, experienced people, standard processes and specialised information systems... just like any business. Beware of temptation to avoid Governance, controls and policies!
•Controls & Compliance make sense for the family as “investor”, do not trust people who tell you that they are unnecessary administrative chores.
•Have strong internal controls and processes to ensure the interests of the family are safeguarded.
•Make sure your board is on top of the control/compliance agenda.
•Remember: you are likely to be considered a “sophisticated” or “accredited investor” in several of your banks’ jurisdictions. Hence you get little regulatory protection against inappropriate sales pitches.
•Use industry standards, there is no need to try to reinvent the wheel!
•IFC Family Business Handbook, UK Combined Code on Corporate Governance, United Nations PRI, CFA-Institute Asset Manager Code of Professional Conduct.