Day-to-day what actually goes on in a Family Office

Author

Mr FamilyOffice
February 02, 2024

Day-to-day what actually goes on in a Family Office

What do you actually do?

It’s a fairly common question about family offices, so here’s a look behind the scenes:

Business Management 🏢

Running a family office is like running any business. It may not be glamorous, but the machine needs to keep running meaning executives need to:

  • Manage cash flow and other financial needs

  • Resolve employee issues and ensure a stable operation

  • Handle administrative tasks related to the office's operations

Family Offices usually operate with small teams which can mean that senior executives can get drawn into more granular tasks than in large corporations. The lesson: don’t be too proud, get on with it

Family Administration and Concierge Services 👨‍👩‍👧‍👦

A happy family is a successful family

Every family office I have known has at least one staff member dedicated to taking care of life admin, usually several

This includes day-to-day tasks for the family such as managing household staff (cleaners, chefs, gardeners, drivers, personal trainers), arranging travel and hotels, planning events, planning calendars

These EAs will often support the family office employees in day-to-day operations

Managing Family Relations 👪

Without a harmonious family, the family office can fall apart very quickly. It’s the job of the family office CEO to support family relations

This may include facilitating communication and addressing issues among family members and organizing and coordinating family meetings and retreats

Managing family dynamics certainly falls under “soft-skills” required of senior family office executives and requires a deep understanding of interpersonal relationships, emotional intelligence, and conflict resolution. Family office executives sometimes need to act as a mediator to prevent misunderstandings and disputes from escalating

The CEO should proactively work towards establishing a framework for effective family governance

Family offices can become unstuck if the management team takes the easy road and neglects family relations

Deal Flow Management 💼

One of the major challenges for the family office investment team is to manage deal flow

This involves coordinating and prioritizing relationships with fund managers and deal sources, evaluating pitches and direct deals, and screening/assessing opportunities a

Family offices are seldom short of deals coming in, but they need to manage the deal flow with smaller teams than PE/VC firms. It is therefore essential for the leadership team to ensure the right deals are coming through the door. While a majority of deals may be rejected, the family office team's responsibility lies in cultivating a consistent stream of high-quality opportunities for the family office

Due Diligence 🕵️‍♂️

Once the deals come in, the hard work starts. A meticulous due diligence process is paramount

Due diligence must be performed on potential fund managers and investments. This safeguards against fraud, underperforming managers, and poorly structured deals. The family office also needs to ensure that people and deals fully align with the family mandate and investment criteria

Family office executives must combine financial acumen and investigative skills to identify red flags and assess operational and governance structures. This is crucial for building a resilient and sustainable investment portfolio that aligns with the family's values and long-term financial objectives

Market and Portfolio Monitoring 📈

Once invested, the family office needs to monitor the market and the portfolio. This includes

  • Monitoring public markets and liquid securities

  • Monitoring performance and activities of direct investments, real estate, and private equity funds

  • Overseeing direct investments, attending board meetings or using the family office network to support companies

Networking and Knowledge Sharing 🤝

Family offices can be fairly insular. In a world where everyone is trying to gain access or sell something, it can be easy to switch off to the outside world

But there is a growing understanding that in order to grow and develop, family offices must engage with other family offices and investors with similar structures or portfolios

Networking can help family offices share best practices, insights, and strategic moves. When similar problems and challenges are encountered, collaborative relationships with other family offices can be priceless

Given the vast array of different types of family office, it’s important to network with the right family offices. More value can be found from networking with family offices that have similar backgrounds, investment portfolios, structures and sizes

Documentation and Reporting 📊

Families rely on accurate and timely reporting from their family office

Family office teams need to create the necessary reports (weekly, monthly, or quarterly) to track investment returns and progress

These are usually quantitative reports but qualitative reports describing developments in direct investments are also necessary

The team should also generate reports for accounting and taxation purposes

 

Coordination with Consultants 🔄

Some tasks will always be outsourced, and the FO needs to manage those relationships

Family offices typically collaborate with

  • tax advisors

  • insurance advisors

  • risk managers

  • investment consultants

  • wealth managers

  • lawyers

  • auditors

Technology and Cybersecurity Management 🔐

Like every organization, tech is part of everyday life in a family office. Privacy and discretion are vital, so the tech team needs to be on the ball. Tasks include:

  • Safeguarding digital assets and ensuring smooth technological operations are crucial

  • Overseeing the implementation and maintenance of secure technology infrastructure

  • Managing cybersecurity measures to protect sensitive information

  • Staying abreast of technological advancements that could benefit the family office.

Education and Succession/Estate Planning 📚

One of the primary purposes of a family office should be to prepare the next generation for the responsibilities that come with wealth

This can involve developing educational programs for family members on financial literacy and wealth management and advising younger family members on educational choices

The more enlightened family offices will develop succession plans to ensure a smooth transition of responsibilities within the family office

It is vital to review and update estate plans regularly to reflect changes in family dynamics or financial situations and to address any tax implications

Here’s a thread on family office education

Philanthropic Initiatives 🤲

Giving back to the community is often a priority for family offices

Depending on the family office, this can take up a significant amount of time as family offices identify philanthropic opportunities aligned with the family's values and goals. They then have to manage ongoing donations, sponsorships, and partnerships with charitable organizations

Managing transparency is also important - this helps all family members understand the impact of the philanthropic initiatives

Risk Management ⚖️

Anticipating and mitigating potential risks is crucial for protecting the family's wealth

Identifying and assessing potential risks to the family office's assets and investments

Implementing strategies to manage and mitigate financial, operational, and reputational risks

Regularly reviewing insurance coverage and adjusting risk management strategies accordingly

Legal Compliance and Governance 📜

While legal work is the most commonly outsourced activity in famiy offices, managing legal compliance and governance remains a key role

Family offices are ultimately responsible for ensuring adherence to regulations and compliance with local and international laws governing investments and wealth management

Family offices must establish and maintain proper governance structures

It is also important for famiy offices to manage legal documentation and contracts related to investments and transactions

Human Resources and Talent Management 👥

Like any organization, people matter

Building and retaining a skilled team is essential for the family office's success. This includes recruiting and hiring qualified professionals with expertise in finance, law, and other relevant fields, providing ongoing training and development opportunities for staff

HR in family offices can pose unique challenges. Teams can be small, career progression can therefore be limited. So strategies for ensuring employee retention and satisfaction are key

Crisis Management and Contingency Planning 🚨

Being prepared for unexpected challenges is key

Developing contingency plans for various scenarios, such as economic downturns or family emergencies

This can mean establishing crisis communication protocols to address unexpected challenges promptly

There is no typical family office, but there are common themes. The nature of the family and the structure of the office will determine which of the functions take precedence

Did I miss anything? Drop me a message on X

 

𝕏 highlights

How to build wealth:

The wealthy by tier:

As a chess tragic, I am convinced that there are life lessons that chess can teach us all

📚 what to read

It’s a badly kept secret that Succession is loosely based on Rupert Murdoch’s media empire. The Fall by Michael Wolff tells the real-life story of the dysfunctional Murdoch family and the end of an empire. I’ve only just started this, but couldn’t resist sharing

📻 what to listen to

The FT News Briefing is part of my normal morning rotation. Around 5 minutes of news headlines. I find it less sensationalist than most news in the morning and focuses on the financial implications of world events

📺 what to watch

I was discussing TED Talks with someone this week.. here are two of my all time favorites:

Sir Ken Robinson: Do schools kill creativity?

Though provoking and hilarious. A lesson in education and public speaking

Casey Gerald: The gospel of doubt

What do you do when your firmly held beliefs turn out not to be true?

#

Does anyone have any TED-talk recommendations? I realized that my picks are years old

📰 family offices news roundup

And finally…

After a couple of insanely busy months, I’m back to posting more frequently on X. So come and say hello (I get to all DMs eventually)!

It’s been pointed out that the X algorithm hates third-party content, so I will dial down the family office news links, but will of course continue sharing news stories here

That’ll do for this week, Happy Friday everyone!

See you on 𝕏

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