Katherine Ellis, CEO of Boston Multi Family Office was delighted to be included on the panel of experts who spoke at the recent TEP Malta Conference. The topic they discussed was Family office – onshore, offshore and Asia and fellow panellists included Natalie Peter, TEP, Blum & Grob Attorneys at Law, Switzerland and Nicholas Jacob, TEP, Forsters LLP, UK.
This article will cover topics Katherine was asked about during the panel, which included the evolution of a family office, as well as leadership, and recruiting the right talent to run a family office.
As family offices transition to serve second and third generations, what common pitfalls arise and how can family offices evolve their governance, leadership, and services to meet the dynamic needs of younger generations?
There is often hesitancy of principals to ‘let go’ of the reins and many want to retain full control over their business which they have built and have a reluctance to involve younger generations as they themselves were involved from an early age. Younger generations may wish to follow their own path and not feel tied to the family business, perhaps there is lack of clarity around what the family wants to achieve and that their objectives are – what is the money for? This can sometimes leave the rising generations ill equipped but here is a balance to be found.
Developing experience outside the family office is incredibly useful with the right people and not those that would see ‘an angle’ and exploit inexperienced family members. Within most families there are different branches of a family within a family (siblings are in general closer than cousins) and dealing with increasing fragmentation of the family and staying connected can cause issues. It is important to encourage collaboration between the younger generations rather than competition at an unhealthy level. Quite often the inability of the older generation to accept or see where competencies lie within a family can be quite fractious, this is where independent mentors are the most valuable here.
What are solutions to this? Defining family objectives and values (these could differentiate between different branches of the family), that should be evaluated and reconfirmed at different stages of the family’s journey. Education of the family is another key area, arranging open family meetings to widely discuss the objectives of the family and how younger generations can be included in key decisions is often useful.
Establishing a Family Council to encourage communication and an inclusive approach to family involvement, can also help. The Family Council can establish and govern:
- Conflict resolution mechanisms
- Guiding principles for the family and their businesses
- Fairness and Reward for those working with the business and identifying which roles need fulfilling inside and outside the business, such as family charity.
Bringing in external advisors and mentoring services can be difficult, but it is key to involve external advisors and establish a trusted network of advisory partners. This can sometimes be tricky because family offices are by their nature very private and confidential, but it is important to engage with specialist advisors to ensure they can provide a holistic approach to helping the family achieve its goals and objectives.
What qualities should families prioritise in their leadership hires and how can they address potential leadership gaps within their family office?
The transition from a structured corporate environment to a family office leader can be challenging. Being trusted with an extraordinary level of wealth and the need to be returns focussed, yet preserve capital, be empathetic with a huge level of emotional intelligence, yet assertive / firm and able to express opinions which may be at odds with family members from time to time is not always easy
What is incredibly important is a good cultural fit – a great candidate on paper that doesn’t necessarily fit with the dynamics of the family. This can cause disruption and unrest, and we have seen where this can cause widespread issues for the different branches of the family. Individuals recruited from the big accountancy or law firms can also find the lack of clear career path and structure difficult. Every family is different so cultural fit needs to be specific to the role and the family.
It is worth considering that knowledge and experience gaps can be filled by family members, and that structured family offices can outsource where necessary to ensure that this is gap is filled appropriately. Emotional intelligence goes an incredibly long way as it is very much a people driven role and as we all know with our own families, there can be conflicts and challenges. The family office leader needs to be objective, loyal and be able to exert influence in a family environment which can be very different to a corporate environment. They should be flexible in the sense that they perform multiple roles in a short space of time, for example mentoring and assisting a younger member of the family about a recent house purchase, discussing taking advantage of the ‘Trump’ volatility within the family’s investment portfolios, managing household staff, land disputes etc all within the one day.
Looking ahead, what significant changes do each of you anticipate in the family office landscape over the next 10 to 20 years? Will we see greater institutionalization, a shift toward technology-driven operations, or an increased focus on sustainable investing?
There is a drive towards discovery of the family’s purpose/vision and building the office’s operations to drive towards achieving the purpose/vision. Geopolitical changes have a huge impact on the strategies the family office implement. The general feeling is that the family office operates above current geopolitical turmoil, however it is preparing for the impact especially where the family is resident in multiple jurisdictions. Diversification in key. Where there is a multi-jurisdictional family business, the family is preparing for structural changes as a mitigation to the risk.
A shift we have seen and are likely to see more of is that Family Offices are no longer the domain of the Ultra high net worth families and technology has enabled that. Families with net worth of USD 5m are exploring multi and virtual family offices. Family offices are extended to create offices outside of the home country and following the next gen and their movement across the world.
Working with Boston Multi-Family Office
Boston clients know the value of heritage – and so do we. We have built our history and reputation by taking the time to know our families. We understand and protect their legacies and align ourselves with their ambitions.
Every family office client is unique. Direct interaction with our Chief Executive and the Senior Management Team ensures that our multi-family office services meet a client’s specific ambitions, whilst a dedicated Client Relationship Manager is appointed to provide a single point of contact. As an independent business, we offer truly impartial services to our clients. Our heritage as a successful family office has afforded us a profound understanding of the challenges and opportunities inherent in managing wealth over multiple generations.
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