Strategies to maintain a successful single family office

Sandy Loder, the keynote speaker at the Private Wealth Network Family Office Congress IX in Melbourne, described single family offices as a “fragile, complex ecosystem” – and he’s right.

Setting up a single family office is expensive, but fairly straightforward. Building and maintaining a successful one that’s cohesive, transparent and forward looking, however, is difficult.

A single family office goes beyond just managing and safeguarding wealth. Usually it’s a relatively small, yet multifaceted organisation that also acts as an intermediary between family members and service providers and helps secure their financial future and legacy by building, preserving, and transferring family wealth. This in itself is complex. However, it becomes even more layered when differing family personalities and personal agendas are thrown into the mix.

The glue for success

Sandy is a fifth generation member of the Fleming family that has a long history in banking and finance. He helped establish a single family office for the Fleming family, which went on to become a multi-family office where he worked for a number of years before setting up his own business.

I have elaborated on some of Sandy’s key points below about what you need to do to help preserve the single family office ecosystem:

A unified family vision about what you want to achieve. There needs to be a clear, common purpose for the family wealth with well-defined strategic goals and a plan about how to reach them.

Open and honest communication. It’s paramount to create a culture of trust where family members can regularly and candidly express their thoughts and ideas. You’re obviously not always going to agree, but listen carefully to one another and respect each other’s viewpoints and feedback.

Emotional ownership. Family members need to feel part of it, so time must be spent in understanding each individual, their own aspirations, and the level of engagement they would like.

Outsource what you can. This reduces costs and importantly, allows you to work alongside highly experienced professionals that have a deep understanding around your issues. They can also provide a much needed level of objectivity when family dynamics and emotions come to the fore.

Understand your future dynamics. Preparing the next generation is one of the most difficult aspects, yet one of the most critical. I’ve often found that they are kept in the dark, so to maximise the chance of a successful transition, the planning process should start early. It’s important to educate them – on the financial and non-financial side – and instil the right values to the inheritors by having open and collaborative conversations about how they can invest their wealth and plan for the future. What also stands out is the lack of a strong network for this next generation. This takes time to build and needs to be recognised. Similar to the comment above about working alongside professionals, the next generation needs to be engaged in the business or asset decision-making to build their experience, skills and networks to deal with the issues.