Running a Family Office that has been set up under an Multi-Family Office (MFO) involves the following:
- Specify responsibilities
- Establish governance within your Family Office
- Implement investment governance
- Measure performance
- Build communication routines
- Develop an integrated governance system
- Preparing the next generation to oversee your Family Office
Family Offices must define what they will manage by themselves, and what they will outsource to qualified professionals. Once an MFO is engaged, the investment manager within the MFO should set the overall strategy for risk and allocation of financial assets. When necessary, the investment manager can seek expert advice from investment bankers, lawyers, and consultants.
Looking beyond asset management activities, the family should decide whether it wants the MFO to have responsibilities for financial planning, philanthropy, mentoring the younger generation, or tax and legal support.
Some MFOs also provide management services relating to family homes and other personal assets, which are not investments. MFOs will keep profit-driven investments separate from these assets.
Finally, to foster effective mentoring of the next generation, Family Offices set up under an MFO can use their governance bodies, such as the board of directors, as forums for sharing the knowledge of experienced family members with younger counterparts.
For an MFO to run well, the responsibilities of two separate groups, the management group and the family members, must be clarified.
Source: EY Family Office Guide: Pathway to successful family and wealth management, Credit Suisse and University of St. Gallen.
“At 1-2% of active assets, don’t discount the cost of running a family office: Citi PB”, Asian Private Bank, 5 June 2018.