Family office challenges in a changing landscape

In our latest thought leadership, Altum Group’s Robert Venticinque speaks about the challenges faced by family offices and the strategies for navigating this intricate landscape.

Each family office is a unique entity, meticulously tailored to the specific needs and requirements of its founders; they are an effective tool for families to manage their investments, governance and succession and promote the family’s vision and legacy, consolidation of wealth, management of risks and privacy.

Adapting to market dynamics and family expectations

There has been a fundamental shift in both the behaviour of Family Offices and the professionalism of the Family Office to move to behave more like a corporate structure rather than relying on the wealth creator to drive all the decisions. It is now common to have C-Suite executives holding roles within Family Offices, supplemented by policies and procedures to aide governance. However, development of corporate risk management and monitoring remains a lower priority, presumably driven by a lack of capacity and or expertise to change and challenge.

Succession planning remains a fundamental weakness within many Family Offices. The leader of any Family Office must have both a transition plan and effective support from those around them to be able to allow the new leader to thrive, and there are clear barriers that need to be carefully navigated. Many Family Offices have also failed to truly recognise the risk of disaster within a Family Office; what to do if the private plane crashes, a property becomes unusable or the super yacht sinks? These are very real risks and could expose Family Offices to financial and reputational damage.

Adapting to family expectations

Adapting to changing market conditions and meeting the expectations of the family are significant challenges for all Family Offices. Human behaviour has a tendency for the irrational which is exacerbated when there are no controls and worse still where there is no recourse. The very nature of informality that exists between family members is the very reason why there is a low uptake in adopting a more structured approach. Developed Family Offices have taken steps to deal with these challenges by seeking to separate the emotional element from the business decisions. Those that have been successful have sought the implementation of defined reporting lines with structured board meetings where decisions are made based on recommendations to the board. The development of a corporate structure with clearer mandates have attracted a wider talent pool to work for Family Offices. Genuine C-Suite talent is in short supply and, to attract the best people, Family Offices must be proactive and adaptable. On the family side, the key is to manage personal feelings and emotions and challenge each to act as a fiduciary.

We speak a lot about a family constitution or a charter that sets out the mission statement of the family as being the appropriate tool. A well drafted and embraced constitution seeks to move away from the typical legalese of shareholders agreements and the like to distil the family’s principles around governance, management, asset management, education, and resolution conflict. The best outcomes naturally occur with the governance tools being in place well ahead of a trigger event. For instance, the death of a family member is stressful enough without having to navigate a succession plan that is neither written nor agreed. This will lead to conflict in most cases. Mistakes also occur when there is a lack of genuine engagement with all stakeholders and the depth and quality of the engagement with the wider family is weak. Forcing your personal values on others is unlikely to garner buy in, so the best results will be achieved through deep, meaningful and robust conversations.

How can we help.

At Altum Group, we understand the complexities and challenges family offices face. Our dedicated team is here to provide expert guidance and solutions. Whether you need assistance with governance, succession planning, risk management, or engaging family members, we have the experience and expertise to help you navigate these challenges successfully.

This article is part of a series of thought leadership following the STEP conference, click here for the source and speaker presentation.