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When is a family office not a family office?

12 Jul 2022

Many technical articles on family offices have already been written. This won’t be another. Rather, I’d like to share my own experience of servicing family offices to highlight the fact that many are not actually fully-fledged family offices. Many in fact only perform one aspect of the full family office function. In this article, I will draw upon personal anecdotes to discuss the missing pieces.

With family offices multiplying exponentially across the globe, the last 10 of my 30 years in the industry have been focused on the rise of the family office solution. Over the past decade, I’ve met, interviewed, supported, set up and consulted for numerous different ‘family offices’.

In many cases, it has quickly become apparent that the ‘family office’ is focused on investment strategy and management of the family’s money. Such operations are typically established by former investment bankers who have left large firms to serve one or more ultra-high-net-worth clients. Often there are some peripheral services performed around the primary task of investing, such as reporting, but in general you can you define the family office effort in these instances as ‘investment services’.

Whilst these services are of course valuable and critical to those families (and I certainly mean no disrespect to the family offices in question), in my opinion, they do not constitute a full family office.

To my mind, the family office – whether single-family, multi-family or virtual – is a structure that, when fully utilised, will provide stability, governance, inclusivity, dynastic planning, lifestyle management, philanthropy, concierge services, everyday practical solutions, and more. The family’s nerve centre, if you will.

Keeping up with the Joneses?

Recently, I was asked to set up a family office for a new client, so put together a proposal informing the client and their family of the depth and breadth of what is possible. The response was interesting. I was told that the proposal had indeed opened the client’s eyes to the options available, however what was required would not involve the wider family. The family’s affairs were to remain under the sole control of the matriarch and a structure was needed to accommodate this, with specific advisors engaged. The client’s wealthy friends all had a family office, so this new structure was to be referred to as the family office.

This scenario got me thinking: is the increase in ‘family office’ operations over the last 10 years, at least in part, linked with peer pressure and trend, rather than a complete understanding or use of the full family office service?

The essence of a family office

What do I mean by the full family office service? Rather than serving up an exact definition of ‘family office’ here (check out Steve Sokic’s article on demystifying family offices if this is of interest), what I’d like to get across is that the family office can and should be more than just a technical exercise.

Often overlooked are the softer elements that keep a family grounded through the generations and engaged in building and sustaining the family’s legacy.

Effective succession planning is front and centre as the next generation is brought into the fold through the family office governance structures and given the opportunity to learn the ropes and challenge the views of Mum and Dad.

The family office should serve as a forum for the family, ensuring they sit together regularly with their advisors to discuss not only business and operational matters but also personal and lifestyle matters, PR strategy, reputational risk, security risk, future plans… In short: the bigger picture.

The fully-fledged family office is holistic in scope, and those offering family office services must think holistically on behalf of the family.

Looking out for the family in all respects

I was once asked, whilst sitting on a family office board, to ensure that the family’s property in the south of France was ready for two months of summer holiday and set up to receive various guests. Of course, this was not simply a case of ensuring the keys to the front door were in the safe box. What was needed was to think like the owner and effectively have their eye to ensure absolutely everything was in order.

So I found myself in France, primarily to make sure the property was sufficiently secure for celebrities to visit. The task expanded quickly to encompass the logistics of ensuring the family’s wardrobe was at the house, the wine cellars were suitably stocked, and the family jet was approved to operate out of France for the summer.

I remember clearly a meeting on the property roof; a small square area with a knee-high perimeter wall with what looked like a chimney stack in each corner, giving a castle-like look to the building. A faded ‘H’ was painted in the middle of the area. The meeting – organised to confirm we had no issues landing helicopters on the roof (this being the preferred method of delivering guests to the villa) – was between myself as the family office, the French aviation authority, aviation lawyers, and the local authorities.

As the meeting carried on I could not add much to the legal issues being debated, but I did notice that only three of the four chimney stacks were blocked and one was open. A quick check downstairs confirmed the presence of a large open fireplace that was clearly in use. I re-joined the meeting and flagged that the downwash from a landing helicopter might in fact barbeque any guests in the sitting room if a fire was burning. There was a short silence followed by some French expletives and then a swift note that that the fireplace would need to be decommissioned.

A silly example, perhaps, but it does demonstrate the all-encompassing role a family office team can play in serving a family – from global investment management through to ‘miscellaneous’ practical considerations made in the family’s best interests.

In order to move the family office dial from defaulting to family investment team, I believe there is a need within the industry to better educate families on what a true family office function could achieve for them. You never know, it could even save lives…!

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