Why set up a Family Office?
As concerns about wealth preservation and succession planning within family businesses continue to rise, wealthy families are incresinglyevaluating the benefits of setting up a family office.
There are some good reasons to set up a family office
There are many reasons why setting up a family office makes sense, but root of these is the desire to facilitate the inter-generational transfer of wealth and reduce intra-family disputes. This desire inevitably increases from one generation to the next, as the complexity of managing the family´s wealth grows. Without being exhaustive, the following points set out the reasons why a family office makes sense:
- Governance and management structure
A family office con provide governance and management structures that can deal with the complexities of the family´s wealth transparently, helping the family to avoid the future conflicts. At the same time, confidentiality is ensured under the family office structure, as wealth management and other advisory services for the family members are under a single entity owned by the family.
- Alignment of interest
A family office structure also ensures that there is a much better alignment of interest between financial advisers and the family. Such an alignment is questionable in a non family office structure where multiple advisers work with multiple family members.
- Potential higher returns
Through the centralization and professionalization of asset management activities, family offices may be more likely to achieve higher returns, or lower risk, for their investment decisions. Family offices can also help to formalize the investment process, which mayhelp to maximiseinvestment returns for all family members.
Familly offices allow for separation, or at least distinction, between the family business and the family´s wealth or surplus holdings.
- Centralization of risk
Family offices allow for operational consolidation of risk, performance management and reporting. This can help the adviser and principalsto make more effective decisions to meet the family´s investment objectives.
- Centralization of other services
Family offices can also coordinate other professional services including philanthrophy, tax and estate planning, family governance, communications, and education to meet the family´s mission and goals.risk