Five Tips for Setting Up a Family Office

This article was first published in our regular Smart Company column.

The skills needed to manage family wealth are very different from the entrepreneurial skills needed to generate wealth in the first place. As a result, many families delegate the management of financial capital to accountants and wealth managers.

Although these professionals deal with financial capital very well, family businesses are often unaware that they need access to specialist resources and global leading edge practices to build sustainability around the full stock of their capital.

Managing Your Capital and the Family Effect

Much like outsourcing to a suite of advisers or using a multi family office, setting up your own single family office has unique advantages. It allows you to independently manage your family’s business affairs and put strong parameters in place relating to your value-sets, governance and goals, factors that will play a vital role in your family’s cohesiveness and the family wealth’s long-term survival.

Below are five tips to consider before setting up a family office.

Understand Your Capital

Without a structured, independent approach to managing family capital, the only glue holding together a growing, dispersed family is the business. Although legal and emotional shareholders may wish to preserve its identity and closeness, in doing so they run the risk of passing up opportunities to expand, evolve or sell.

Setting up a family office helps to solve this issue, but comes at considerable expense. As a rule of thumb, a business should hold $50-100 million of capital to adequately offset the costs associated with launching a family office and handling its on-going expenses.

That said, according to EY, there are at least 3000 single family offices in existence globally and at least half of these were set up in the last 15 years. According to 2016’s Global Family Office Report, there was a 7% increase in the number of family offices that are pursuing a growth strategy throughout this year.

Delegate Responsibilities

In addition to the considerable fixed annual cost of setting up a family office, employing the right people to run it can be a challenge.

Many family offices deal with administration and investment management effectively, but fail to consider how a family office can assist in the development of the family’s human capital and help to engage the next generation.

It is critical that decisions concerning the set-up of your family office utilise leading global expertise, allowing you to achieve the benefits of a fully resourced and capable office without the investment and risk of ‘reinventing the wheel’.

Likewise, a well-run family office can do much more than simply evaluate your financial capital; it can help you to adopt a global perspective towards your best practices, facilitate independent family communication and improve decision-making.

Seek out the Services of an Independent Family Specialist, Business & Wealth Adviser

One of the first things you should do when considering an alternative investment management model is find an expert that can establish the right model for you.

While long-term trusted advisers are likely to be part of your solution, be careful not to allow conflicts to arise. They may crop up as a result of the family business advice being subsidiary to the adviser’s main business – if they are accessing new funds under management, for example, or providing other financial advisory and administration services.

It is essential to regularly review how your office is being run; try to adopt the attitude that you’re developing a successful and flexible process rather than a rigid set of rules. For any operating decision made, the long-term health of the family and its business interests should be a top priority.

Clarify Your Vision for Investment

Evaluate how your capital is split between long-term and short-term assets, ensuring there are systems in place to allow for easy transfer (liquidity) as and when your family requires it.

Also, create documents that clarify the vision, objectives, goals, values, mission, and history of the family. These will serve as a blueprint for any forthcoming investment decisions and should be drawn up with the interests of successive generations in mind.

Measuring the exact performance of your investments can be tough – it’s a good idea to find existing benchmarks to use as a point of comparison. Although it’s highly unlikely you’ll find another family office with the same portfolio, breaking your assets down by type will allow you to find corresponding, measureable targets to work against. This will help family members and asset managers to clarify their return objectives.

Take a Pro-Active Approach to Succession

Family offices can act as an intermediary and forum to help deal with shifting family dynamics and intergenerational issues.

Many discuss business and economic topics in family office meetings, taking the opportunity to engage and empower younger members. There is often more freedom to do this than in standard family business meetings, away from the influence of day-to-day operations.

Leaders also benefit from having a new platform to share their hopes for future generations, instilling values that will perpetuate the family’s legacy.

If you would like to talk further about setting up a family office or just have a conversation about whether your family could benefit from setting one up, please don’t hesitate to call on 07 3229 7333. Or email us at