For many HNW families, there comes a point where having family office services becomes not only beneficial, but essential to survival in the long term. First, preserving wealth is very different from creating it – this is evidenced by the famous fortunes throughout history that have disappeared within a few generations. It requires knowledge around investments and tax laws that may extend far beyond your own, as well as the ability to create and adhere to a budget. Second, having a family office can also help with the emotional component of managing the family finances, for example, when dealing with relatives with whom you have a strained relationship or opposing ideologies about investing and philanthropy. An objective governing body can help you and your relatives sidestep landmines and even heal long-standing rifts. By the same token, it fosters an inclusiveness that can ensure that a proper succession plan is created and utilized – something many HNW families neglect to do.
As with any business enterprise, your family office should have a clear mission statement that reflects your goals and values. Where do you see your family in five, ten, twenty years and beyond? This is not only about wealth-building and management, but about charitable giving. Philanthropy is an area that has the potential to drive a wedge amongst families members of different generations. For example, millennials and zoomers are more likely to support organizations that advocate for sweeping reform (i.e. health equality and environment protection), while boomers tend to give to traditional causes (i.e. the research and treatment of specific diseases). Giving may also reflect one’s political leanings, which can certainly be a source of contention. Your interests are evident from your giving history, but what about your heirs? When creating the mission for your family office, it’s important to have an honest discussion in which you all discuss what you’re passionate about. If there have been disagreements about such issues in the past, you might set some ground rules, such as giving everyone a set amount of time to state their case and air any grievances. The goal is to come to a compromise that protects your legacy while giving a voice to the younger generations.
Tangential to this is finding the best people to run your family office. It goes without saying that they should be at the top of their field with regard to investing and administration; you also want to ensure that your family office will be an independent entity, not just another client on their roster, as this can potentially lead to conflicts of interest. Just as important, you need advisors that go beyond the day-to-day tasks and really get to know your family and its goals, stay true to the vision mentioned above, and help navigate the often complicated dynamics among its members.
Finally, your creation of a family office does not end your involvement; rather, it should empower you and your relatives to become stewards of the family, both financially and personally. To this end you might also incorporate digital tools that keep the lines of communication open between official meetings and memos. For example, there are all-in-one solutions that allow everyone to share information on investments, physical assets, and charitable giving in real time. Bottom line: the greater your wealth, the more difficult it is to manage it. Family office services can provide the structure and a neutral space in which relatives, regardless of their individual lifestyles and interest, can come together and ensure the family’s success for generations to come.
