Family Office

The concept of the Family Office, which has evolved over many years in Europe and America to advise individual families and family groups interested in long term wealth management and preservation, is progressively being adopted within the UK.

There is no uniform agreement as to exactly what services a Family Office should provide or which should be in house and which outsourced as and when needed. In some instances very wealthy families have established their own Family Office because they have become disillusioned with the investment advice and agendas of the big institutions.

The key question is “what is the overriding purpose of a family office?” Contemporary research undertaken in the United States highlights the “sustainability question”. Most wealthy families are concerned to pass as much of their wealth as they can to their children, grandchildren and other heirs. However they also grapple with the related question which is “can our wealth benefit our generation and be passed to future generations while having a positive impact on those future generations?”. Put another way, can a family’s financial capital (their money) co-exist in harmony with their human capital (their family).

In fact research shows that only around 30% of families have been able to successfully transfer wealth between generations. To be successful requires the focus on a much longer time frame for both planning and investing, which requires families to see their wealth management not as a series of activities to be performed but as an enterprise that needs to be managed. The solution is a professional infrastructure of advisers which is completely aligned with the family’s interests and with the ability to provide continuity across generations.

How can wealth be managed and transferred

This allows the family to focus on their human capital, to build family competencies and prepare the next generations for the responsibilities of life with wealth. This in turn raises a number of profound questions:

Is the financial capital really at the service of the family’s human capital, or vice versa?
How do the family prepare future generations to learn about and inherit wealth?
What values do the family share?
What is the purpose of their wealth?

The last question is usually the most difficult to answer. Money must have a meaning beyond its economic value if it is to be sustained. Once a shared purpose has been defined it needs to be translated into a family mission statement.

The last element of the “sustainability” exercise is to decide how to govern the enterprise. Family governance defines how a family will work together and make decisions. This raises questions such as, “who will assume which roles?” and “what policies are the family prepared to live by?”

Clearly this is a fundamentally challenging process which explains why the issues may either not be addressed or not addressed in sufficient detail or with sufficient discipline.

It is only when the process has been undertaken that the family can decide what it wants to do itself, what professional advice is needed and which firms or individuals it wants to work with into the future.

There is a well known saying, “shirtsleeves to shirtsleeves in three generations” which illustrates how quickly wealth generated by one generation can be exhausted by those that follow. Research shows that 65% of family businesses fail to survive the second generation and 85% are gone by the third. The statistics have little to do with chance and everything to do with planning, or rather a lack of.

The fundamental objective is to enable clients to stay in control of their wealth by establishing a clear plan for its preservation, spanning generations, while ensuring the current generation enjoy the lifestyle they have worked hard to create or sustain.

Our Credentials

The investment and financial planning expertise implicit in this description of family office services are those where we have the necessary knowledge and experience as described elsewhere. In the family office context they are brought together in an entirely bespoke form. However, equally important is our practical experience in terms of what are often referred to as the concierge services.

For example we have managed projects to oversee the order, the specification, the construction, registration and delivery of executive aircraft, on budget and on time; to recruit the pilots and cabin crew and work with the aircraft operators; to manage the purchase of substantial overseas property; to assist a client through a complex divorce; to liaise with leading Accountants and Tax Counsel in relation to complex non-domicile planning; to liaise with offshore fiduciaries, trustees and tax advisers.

If you would like to know more about our family office services then please contact us.