While each family office is as unique as the DNA of its family members, there are some common core themes which differentiate effective family offices. What makes resilient family offices more capable of weathering unpredictable storms?
Recently many of us witnessed on a global stage, the importance of robust and honest communication between family members. In a family office, more so than any other commercial organisation, communication and trust are paramount. Breakdowns in communication and trust are cited as the number one reason why 70% of wealth transfers fail. There is no question that the strength of a family unit as a whole is more powerful and resilient than its component parts. Building positive and constructive family dynamics is a critical element, which sets strong and resilient families apart.
Without strong alignment around the purpose of a family’s wealth, there is a lack of ‘glue’ to keep the family working and investing together. Defining a shared purpose amongst family members (often across multiple generations with diverse perspectives and motivations), provides not only a sense of fulfilment but a core foundation for strategic decision making during challenging times.
It’s one thing to define the purpose of a family’s wealth, but it’s quite another to develop, implement and report against a strategy to achieve it. A strategy doesn’t have to be long and cumbersome, but it should clearly articulate the family’s basic goals – whether they are investment, entrepreneurial, philanthropic or intergenerational, together with an outline of the resources and expertise that the family will mobilise to execute the plan.
Establishing and operating a family office requires careful consideration and planning to properly manage and protect a family’s wealth so it can flourish over time. As with any organisation, the relative success or failure of a family office relies on effective governance. Effective family offices create a governance infrastructure that encompasses all activities from the operational to the strategic.
Engagement and education
Families who are willing to invest the time and energy in bringing their children on the journey to help them understand what lies ahead, prepare them to be good wealth inheritors. Identifying any knowledge gaps amongst family members and supporting them in bridging the divide with an education process – be it formal or informal, is a key differentiator of resilient families.
Sustaining wealth, maintaining family harmony and entrenching lasting legacies doesn’t happen by chance. Creating a resilient family office requires strategic planning, a collective sense of purpose, sound governance, engagement across generations and a commitment to open communication and trust.