Expert advice for starting a family office

The creation of a family office represents a significant milestone for families who have achieved substantial wealth. These offices provide a means of aligning wealth with purpose and protecting it for future generations. However, starting a family office is a complex process, requiring patience, expertise, and careful planning.

The summary below is derived from our full white paper, Expert Advice for Starting a Family Office, with commentary from seven family office experts who share advice on goals, staffing, communication, outsourcing, and bringing in the next generation. This extensive resource offers insights and reflections on what it takes to create a successful single-family office.

Defining your "why": Aligning wealth with purpose

A successful family office begins with a clear purpose. Before jumping into logistics, take the time to define the “why” behind your family office. What is its mission? Is it to grow the family’s wealth, pursue philanthropic endeavors, or support entrepreneurial aspirations?

Having frank discussions with family members is essential. Aligning on shared values and long-term goals will create a foundation for every decision your family office makes. For instance:

• Some families focus on philanthropy, creating impact through charitable giving.
• Others aim to preserve wealth through investments for future generations.

Identifying this over-arching purpose will help to act as the glue that binds the family together—and ensures the longevity of the family office.

Expert consultation: Why you need a team of advisors

Creating a family office is not always a solo endeavor. It demands collaboration from specialized professionals in law, investment management, tax planning, and estate strategy.

Why consult experts?

1. Navigate Legal Complexities: Professionals can guide you through the intricacies of setting up office structure, including governance policies, trusts, and estate plans.
2. Set Comprehensive Systems: Experienced advisors help establish procedures for internal operations, risk management, and financial compliance.
3. Avoid Costly Mistakes: With wealth at stake, cutting corners at the outset can lead to complications later.

Investing in the right team of advisors and vendors results in a solid foundation for your family office—from legal insights to investment expertise to technology.

Recruiting talent: Building your family office team

The success of a family office hinges on the talent steering it. A family office team often includes a “quarterback”—a chief executive or manager who ensures the smooth operation of the office.

When recruiting for key roles, focus on:

1. Skill Alignment: Seek candidates with expertise in management, strategy, and financial reporting, for example. Do not limit your search to those with financial experience alone. The goals of your family office will determine the specific skills required.
2. Trust and Confidentiality: Since family offices handle sensitive financial matters, hiring someone you trust is paramount.

For many offices, family members often play active roles, ensuring stronger relationships among family and team members.

Managing operational risks

Operational risk can jeopardize even the best-crafted plans. From tax filing inaccuracies to cybersecurity vulnerabilities, family offices face unique hurdles when it comes to protecting wealth.

To mitigate risk early:

1. Catalog every asset under the family office umbrella, including trusts and foundations.
2. Set up security protocols for all transactions to prevent fraud.
3. Create contingency plans for financial inaccuracies, penalties, or market volatility.

A risk-averse approach early on will safeguard your office during periods of uncertainty.

Robust technology and cybersecurity

Today’s family offices must adapt to technological advancements. Reliable technology platforms streamline operations, provide real-time asset tracking, and improve decision-making.

However, a word of caution—cybersecurity remains a top concern. Protecting sensitive data and personal information is crucial. Strategies include:

• Implementing redundant security layers to protect against breaches.
• Conducting annual cybersecurity audits using experienced external resources.

Investing in robust technology ensures smooth operations and flexibility while reducing vulnerabilities.

Preparing for market fluctuations

Market downturns and economic uncertainties are inevitable. To withstand financial turbulence, a family office must approach investments with discipline and long-term vision.

Here are a few strategies:

• Diversify Investments: Avoid concentrating wealth in a single asset class. Instead, consider exploring alternative investments, private equity, and real estate.
• Consider Risk Tolerance: Engage in regular discussions with family members about acceptable risk levels.
• Look to Professionals: Partner with experienced asset managers who have a proven ability to navigate market complexities.

Succession Planning

A family office is intended to span generations, making succession planning critical. Transparent communication and early involvement of younger generations are keys to continuity.

How to engage the next generation:

1. Offer financial and ethical education customized to their interests, such as business development, investing, or philanthropy.
2. Provide roles within the family office to familiarize them with operations.
3. Consider non-voting advisory positions on committees to offer young family members exposure to decision-making.

Involving future leaders early helps to ensure a smooth transition while preserving shared values.

Communication within the family

Effective communication is essential for family office operations. Regular meetings—both collective and one-on-one—can prevent misunderstandings and foster collaboration.

Some best practices include:

• Hold Annual Gatherings: Share updates on investments, charitable activities, and other initiatives.
• Secure Digital Platforms: Create a web portal for family documents and schedules to streamline communication.
• Anticipate Sensitive Topics: Address concerns proactively through open and honest discussions.

Building the future of your family office

Starting a family office is an opportunity to turn your wealth into a powerful force for good—for your family and the greater community. While the process can initially feel overwhelming, a clear purpose, expert advice, and a focus on long-term goals will help to ensure a solid foundation.

Whether you aim to preserve generational wealth, pursue philanthropy, or explore new business ventures, a family office offers unrivaled flexibility to achieve your ambitions.

Your family legacy begins today. Start assembling your team of advisors, define your “why,” and set your family—and your family office—on the path to multiple generations of success.