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FAMILY BUSINESS Offi ce types


SERVICE SELECTION


Richard Joynt and Ian Slack consider what a family offi ce is and when it is appropriate to have one


HAVING RUN A FAMILY OFFICE for a single family for the past decade, we are regularly asked certain questions by our friends and business contacts. The most common are: • What is a family offi ce? • Why does the family need their own dedicated people?


RICHARD JOYNT AND IAN SLACK HAVE MANAGED THE


CROSSLAND PRIVATE OFFICE, A FULL-SERVICE FAMILY OFFICE, SINCE 2002. THEY HAVE


RECENTLY JOINED BEDELL TRUST, BRINGING THEIR


CLIENTS AND STAFF WITH THEM, AND ARE NOW DIRECTORS OF BEDELL FAMILY OFFICE SERVICES


The answer to the fi rst question is that it means all manner of things to all manner of people. The defi nition is wide-ranging and needs further clarifi cation to understand their scope of services. The other question is important because it deals with the central question with which any specifi c wealthy family must grapple: when is it appropriate to have a family offi ce and when is it an unnecessary expense?


Types of family offi ces Single or multi? The fi rst distinction to make is whether the organisation is a single-family offi ce (SFO) or a multi-family offi ce (MFO). These distinctions are usually glossed over pretty swiftly, as the diff erence appears to be obvious – it’s simply a question of how many families you are servicing, right? Underneath this obvious simplicity lie core


diff erences, some of which are explored in the table below.


Single-family offi ce Accountability


The professionals are employed directly by the family, creating a mutual reliance between family and employees – the family count on the staff to be eff ective and trustworthy, and the staff are reliant on the family for their livelihood.


Organisational design As the SFO is built around the needs of one family, it is a bespoke organisation, but this brings burdens: the family has to deal with personnel problems, and key-man issues regarding senior professionals are a risk. The family also has to be involved in matters such as premises and IT systems.


Cost


The cost of the premises, staff , IT systems and compliance with regulations must all be borne by one family. They are also fi xed, meaning that it is diffi cult to fl ex costs in line with income or with activity levels.


The future of the organisation


The SFO’s future is uncertain – it may be disbanded at any time if the family no longer needs it. This may cause recruitment diffi culties as staff may not feel secure.


Scope of services The term family offi ce can be, and is, used to describe a disparate number of organisations. A comparable example can be seen in the use of the word ‘bank’: there are many types of bank with diff erent activities and aims – commercial banks, community banks, credit unions, private banks, savings banks, building societies, etc. Similarly, a family offi ce might provide a very wide, or very narrow, scope of services. Some European MFOs deal only with the more complex investment needs of their client families, such as managing hedge fund portfolios, property funds or listed bond funds. These organisations are almost always managed by banking and investment professionals. Some family offi ces may deal with the basic practical needs of the family, such as organising travel arrangements, managing communication between family members, providing secretarial services and overseeing the smooth running of personal assets such as homes or vehicles. In a highly active family, this can be a crucial role that the family themselves are unwilling to undertake. In this sense, the family offi ce becomes the face of the family to many outsiders. In these circumstances it is not unusual to have those with PA, secretarial or concierge skills managing the family offi ce.


Multi-family offi ce


The professionals are employed by an organisation of which the family are one client group. The employees have the needs of multiple client families to service. Therefore, appropriate safeguards must be in place to ensure accountability.


The MFO takes away the burden of the mundane matters and provides a larger staff base to ensure continuity of service.


Core costs can be spread across more than one client family, giving greater effi ciencies, leading to a lower cost per family. The less active families pay less than more active families, yet get access to the same professionals.


The MFO exists as a separate organisation and continues as client families come and go. Skills can be grown and enhanced over the long term.


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