Finding the Family Office That’s a Perfect Fit for Your Family

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In the final part of this series of articles about the pitfalls of choosing family offices we build on the previous article by discussing the personal element involved in working with a single-family office (“SFO”) or a multi-family office (“MFO”).

How essential is a dedicated family office staff and how important is cultural and/or personal affinity?

The biggest challenge for families intending to set up an SFO is finding the right staff members and deciding how much staff would actually be necessary:

  1. Will the SFO be managed by a family member or by a non-family member?
  2. Where do you actually find somebody that will run your SFO?
  3. Will they be able to provide support with all the services you have selected?
  4. How high should their financial compensation be?

Those are just some examples of how complicated this issue is.

With larger families, it is not uncommon for a family member to run the SFO or is at least involved in some of its functions such as being a member of the investment committee. In this sort of situation, it is paramount that appropriate family governance is in place so that all family members know their exact rights and responsibilities. There is also the added challenge of ensuring that the family member has the right education to perform their tasks professionally.

In the case of first-generation wealth owners, the SFO often originates from the operational business as key staff members get involved in organising “private” matters for the business owner. This is often the case especially in emerging markets where there is no clear distinction between what is business and what is private. The problem that can arise in such a case is that the staff will simply not have the time they need to deal with both the private and the business issues, resulting in mistakes and oversights. Often the staff lacks the necessary knowledge to deal with specific private matters, such as acquiring real estate abroad or managing an investment portfolio. This set-up is therefore clearly not an advisable one. But making the step toward a standalone SFO is quite a challenge for many wealth owners because of the high costs involved.

In the case of selecting an MFO, there must be a professional, cultural, and personal compatibility between the family and MFO staff. In other words, the client needs to fit the MFO. When the MFO has more of a coordinating function, it is also important that the external providers click with the clients. This need for a special relationship is also one of the reasons why we believe families should not just follow a recommendation for a family office from someone they know; the families in their circle might also be wealthy, but they will in most cases not have the same character or needs.

Finally, families should note that some of the better MFOs do not simply take on every and any client. In these cases, you end up seeing common features among their client base. For instance, their clients may all come from a specific region, have a similar business background, or share the same interest. If the MFO does not feel comfortable with a prospective client, in most cases it will not accept them.

This concludes our article series about the process of moving from standard wealth management services to dedicated family office services. There is no denying that families wanting to take this step are confronted with quite some challenges, but they can overcome them without much trouble if they are well advised and take the process seriously.

Jan van Bueren & Thomas Ming are Co-Founders of FOSS Family Office Services Switzerland & Senior Wealth Planners in Zurich at Union Bancaire Privée, UBP SA.
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