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Specialisation continues By their very nature, Family Offices are bespoke entities that adapt themselves to the greatest priorities and concerns of the underlying families. Even within this already specialized universe, there is room for a narrower focus since unique wealth and circumstances call for pertinent experience. Over the past five years, Family Offices began to emerge with distinct investment orientations – wealth creation or wealth preservation – that shaped the range and type of services offered to the family members. Similarly, there are Family Offices that choose instead to specialize in distinct types of clients, such as entertainers or professional athletes or biotech business owners, who have unique financial and risk management needs that will benefit from a highly tailored and proven approach. More recently, Family Offices that serve exclusively first generation wealth holders have materialized. As a result, the mix of services is skewed toward a younger demographic and the ongoing creation of wealth via private investment deals and investment banking capabilities.


Greater integration of services The core of most Family Offices is investment management, whether that means establishing an investment policy, handling asset allocation, selecting outside managers or actually constructing portfolios and trading. Typically, Family Offices will also coordinate related financial activities like tax and estate planning,


asset protection and charitable giving – but often these activities were conducted alongside the investing without real integration. More and more, the investment process is being closely coordinated with advanced planning to ensure that families are able to maximize their tax strategies and effect wealth transfer in accordance with their personal values.


Fee renegotiation Family offices are long-time proponents of alternative and private investments, but many are using the proliferation of offerings and recent underperformance in hedge funds as an opportunity to initiate discussions with managers about renegotiating their fee arrangements. Not all Family Offices are pursuing this course of action and those that do often treat funds and managers differently depending on the circumstances. Nevertheless, a recent survey with SFO executives revealed that a meaningful percentage of offices have already successfully lowered both management and incentive fees and in some cases adjusted hurdle rates, special deals and clawback provisions. The mindset among Family Offices to leverage their institutional purchasing power and renegotiate from a position of strength is becoming more prevalent and may soon extend beyond hedge funds to other products, services and providers.


Ms Grove is the principal of HSGrove LLC, a boutique consultancy for families and Family Offices. She is the author of 10 books on private wealth, including The Family Office: Advising the Financial Elite.


Hannah Shaw Grove FAMILY OFFICE: THE FUTURE 49


THE STRUCTURE


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