This question often arises when we advise owner families and CEOs in family offices. The short answer is that there is no one-size-fits-all approach to building a family office. Each family office reflects the unique aspirations, ambitions, and needs of its owner or owner family. However, there are a few elements you can consider as inspiration to start or further develop the family office and its ownership.

In a series of two articles, we uncover five key characteristics that – among other things – define a well-developed family office: 1) Aligning with the owners, 2) having the right set of competencies, 3) protecting the owners and their interests, 4) managing succession planning, and 5) controlling the family’s narrative.

1. Family office has a high level of cohesion with the owners

 A well-developed family office adapts to the changing needs and situations of the owners. Fluctuations in the owner family can place new demands on the family office. It could be, for example…

  • New marriages (prenuptial agreements, information and possible roles for the partner, or a new home)
  • Pension (planning for the next chapter, will, finding new hobbies)
  • Changes in ownership (next-gen development, observer roles, internships in family offices, changes in investment strategies)
  • Conflicts (possibly independent advisors, new governance structures, delays in projects)
  • New focus areas (knowledge on philanthropy, ESG, private equity, global markets)

The closer the family office aligns itself with the development of the family, the better equipped it is to respond to changes in the family’s situation and focus. This ensures that independent advisors can be engaged, or their advice implemented, accordingly.

What does it require from the family office?

It requires people skills, a willingness to engage in more personal conversations, and regular meetings with the owners and other family members.

What does it require from the family?

Openness, willingness to share considerations with the family office and an ability to think strategically about the ownership.

2. Family office has the right talent in-house

New focus areas and service requirements require a fresh look at the composition of employees in the family office. If the family is facing a succession, the family office must be prepared with a qualified advisory team, whether internal or external. If the investment strategy needs to be updated, new expertise may need to be recruited externally. Similarly, if the family wants to increase its involvement in philanthropy or impact investing, the family office may need to bring in additional employees.

What does it require from the family office?

A sharp focus on the organization. If it has expanded over time, it may require streamlining or redistributing tasks.

What does it require from the family?

Willingness to clearly communicate the desired level of service and advice from the family office. For example, if you want the summer house cleaned up before use while investments are largely passive, you might need a PA rather than another analyst.

3. Family office protects the owners and their interests

A well-developed family office focuses on protecting the owners and their interests. This can include personal protection during travel to high-risk areas, as well as safeguarding identity and wealth from cyber threats. As the focus on family offices increases, so does the creativity of threats, such as whaling (similar to phishing but targeting higher-value individuals), where criminals specialised in fraud attempt to steal money or personal information. Overall, protecting the owners involves not just preventing the theft of funds, but also safeguarding identities and preventing disruption of the business operations. This requires family offices to have knowledge in areas such as:

  • Risky behavior on social media
  • Risk of fraud through AI-generated voices and faces of the owners
  • Security gaps in the networks used for investments, fund transfers, signature rooms, etc.

Protecting the owners and their interests also involves mitigating unnecessary or biased media coverage. We will explore this further in the next article on family offices. 

What does it require from the family office?

First and foremost, an understanding of the threat landscape. Additionally, access to relevant advisors, including those specializing in cybersecurity.

What does it require from the family?

Openness to being consulted by the family office and external security advisors. No one likes restrictions on personal freedom, but there is a lot at stake, and it is a necessary effort that comes with being wealthy.

There are many other topics to consider when starting or developing a family office, whether as a CEO or an owner. Stay tuned for the part 2 article on family offices, where we will take a closer look at the succession process and managing the family’s branding and narrative.

If you are curious about the development of family offices, please contact us for a non-binding meeting or read more here and here.