“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for”, wrote reference author Robert Kiyosaki. Truth be told, Kiyosaki was right. Like it or not, but if there is one certain thing in today’s ever-changing world, it is that managing and monitoring capital to create and preserve wealth is a challenge.
Over the years, banks, brokers, insurers, finance consultants and investment officers have devoted themselves to the idea of making more, more, and more. They have done remarkably well, but there is still a lot to be done.
Beyond just managing investments, assets and properties, there is nowadays a call for a holistic management of family wealth, whereby the whole needs of the family are taken into account, beyond money. Because merely producing more wealth is not enough anymore.
Priorities are changing, and families increasingly associate their assets to the development of a particular culture and of a value system that speaks to their members. And the ambient complexity which characterizes financial issues – whether personal, family-oriented, or business-related – has left them no other choice. One major question which remains, however, consists in defining how families chose their advisers. Because, ultimately, the people you trust with the future of your family count.
Let us start with some basic first. Generally speaking, a Family Office is an organization responsible for managing and administering the finances and wealth of individuals and families – from assets to investments, insurance portfolios, trusts, and education funds.
Depending on the case at hand, the work of a Family Office ranges from helping out with finding the perfect property to getting children into school (in a few years’ time). Setting up charitable foundations is another attribution of Family Managers, and so is the preparation required for embarking on long-term family projects. Of course, family offices also put structures and strategies in place to preserve the family’s wealth from one generation to another. In short? They are the guardian of a family’s interests over time.
There are two variations of family offices on the market, however, which answer different types of family profiles and needs.
On the one hand, the so-called single-Family Offices, as their name would have made obvious, provide services for a single family. The company’s assets are the family’s wealth, which often implies that the entry-ticket is typically in the range of $100 to $500 million. In such a model, the structure is focused on unicity and guarantees exclusivity and privacy to the family, often beyond expectations.
Multi-Family Offices, on the other hand, provide wealth management advisory services to multiple families at the same time, with a view to optimizing resources. As such, they tend to put forward a much more diversified value proposition designed to fulfil the common goals and needs of several like-minded clients. As a result, the entry requirements fall in the range of $10 million for a family, and flexibility tends to replace the exclusivity which characterizes the previous single-family focused model.
In both cases, however, the fundamental role of the Family Office is to act as a unique, exclusive and privileged advisor to a very special and specific client.
In Hong Kong, Paris or New York, the fundamental role of a family office would typically be investment management – which includes both an investing and a monitoring dimension. When operations are focused on investing, the family office reaches an agreement with the family members on an investment strategy, which they then execute by combing their efforts. When operations rather focus on monitoring, the investment strategy is not followed through by the family office but left in the hands of private banks, independent asset managers, fund managers and other investors, who will invest accordingly. In turn, the family office ensures continuous monitoring to guarantee the correct execution of the investment strategy.
The above means one important thing: a key expectation when selecting a family office should be the availability of information.
Most clients already have professional hands helping them with their finances. They have investment managers, stockbrokers, accountants, and attorneys. Yet these professionals, even at their best, have different perceptions and different objectives. Hence they are not able to provide the connectivity, coordination, and communication that a family office brings, as every person involved works from under the same roof and have a common desire – that the wealth of their client is well managed.
For these reasons, celebrities of all horizons and wealthy families in need for confidentiality have long had recourse to a variety of family offices. For instance, John D. Rockefeller formed a family office in 1882, soon after the Industrial evolution. In 2010, Oprah Winfrey was said to have started her own family office when her net worth approached $1.9 billion. Michele Rollins, who contested the United States’ congressional seat from the state of Delaware in 2010, began a family office five years after John W. Rollins, her entrepreneur husband died in 2000. He had left her with a cluster of companies involved in trucking, environmental services, and pest control. In 2010, her family fortune was reported to be as much as $350 million.
Said differently, family offices have a role to play in today’s wealth management landscape, yet everyone does not have the expertise and/or willingness to build their own structure – which leads us to the question of choosing – from a ‘why’ perspective, and from a ‘how’ perspective.
When it comes to choosing the right Family-Office, the first element relates to understanding ‘why’ you might need a family office.
As a general rule, family advisers are selected on the basis of expertise and trust. At the same time these two elements are business basics without which nothing can happen, so it also seems relevant to consider additional benchmarks.
For instance, family offices can be chosen for their ability to put management structures (such as trusts) and strategies in place to address complex family financial situations, and issues surrounding asset/property ownership. Beyond technicalities, the main benefit of this type of service is that it helps with fostering unity and cohesion in the family.
Family offices also help their clients to make direct investments without going through private equity funds – which provides liberty. Worth noting, however, is the fact that the family business or investment will then be bound to do well because everyone involved – the family members but also the family office personnel, are all working towards the same positive result.
Additional services can be provided, such as insurance management, record taking, tax preparation and payments, education trust preparation and charity services organization. Very importantly, the ability to ensure confidentiality and discretion should also be a fundamental ‘why’ to consider.
To choose a family office, the following ‘how’ criteria should then be taken into account.
First, understand the needs of your family. Every family has their preferences, therefore you should always be very clear as to what your expectations are. Involving your close-ones into the exercise can prove to be an efficient way to assess your most fundamental criteria. Hold a family meeting, clarify your long term vision, build a mission statement and draft some sets of laws.
Second, select the values you intend to live by. Values are important beliefs and ideals that are shared by members, and which ultimately help to define what is acceptable or not. Values can refer to morals, general orientations or sometimes simply interests, preferences, dispositions and choices. A number of wealthy families have developed value systems over the years, but others are yet to do the same if they want to achieve a form of synergy and uniformity to be transferred from generation to generation. The question here is, where does your family stand?
Third, you might want to focus on a specific type of service. While we mentioned previously that multi-family offices tend to offer different types of services, in practice most of them focus on one or just a few services. Some offices might decide to major in asset management, some in real estate investment and management, and others in charity services. Therefore, it is expedient that you know what services you would want to focus on.
Fourth, do your homework. Making sure to recruit the best available professionals is important. Enquire from other high-net-worth families, they might just have the best recommendations for you, or lead you far from persons or organizations that you wouldn’t want to work with. And, of course, make sure that whoever will manage the future of your family holds the necessary licenses…
In our opinion, the key factor when it comes to choosing the right family adviser is however a matter of soft skill. Ask around you, and you will probably notice that most Family Offices place their focus on asset management and return optimization.
In reality, however, while these activities are the bread and butter for most, our deep belief is that such a focus occults the most important part of the equation: family preservation.
Ultimately, the reason why a family entrusts an office with their assets is not just profit. The deep and absolute reason is patrimony preservation and family durability, across time, across generations, and across borders. Whether the family is based or does business in Mainland China, Hong Kong, Singapore or Europe, the point will always be to guarantee that every member of the family receives the care attention they need. Which implies that the core focus of your adviser should not be asset management but cohesion development in the long term.
Said differently, what really makes the difference is not just the ability to manage assets but proximity and human links. Keep this point in mind. The key factor when it comes to choosing the right office for your close ones should always be the office’s ability to nurture a safe and cohesive family environment, where unity, happiness, love and quality of life will matter most.
Take your time, enter into a discussion and see for yourself. Do you have a good feeling? Does it appear that your interlocutor genuinely has your family’s affairs at heart? Will the discussion always be focused on money and assets, or will your family be given a chance to do even better, from a human perspective?
Today, more families are turning to family offices to take up the responsibility of managing their wealth. Getting a family office might just be the solution you have been waiting for – to take your finances to the peak. Observe, determine what your needs are, and decide accordingly.
At Jia, we sincerely believe that your family should be at the heart of everything we do. Day after day and year after year, we strive to treat family members as unique clients, and we excel at preserving their interests, beyond money and asset management.
Our experts and partners support your family as team members support each other, but beyond this we become the unique support you always dreamed about. Having a family spirit is not just important, it is at the core of our DNA. It's as simple as that. So, how can we help you today?
Are you interested in reading more tips on family protection and development? Read our family resource blog!