It’s hard to find professional advice on this complicated subject in most places, and it can be even harder to find holistic help in places that have been around for a while.
Every family office is different
Families who want to start a family office should know that a single-family office is a business in its own right and needs to be set up and run as such. Family offices that aren’t set up correctly from the start often stop working properly over time.
It is important for all families to talk about and agree on the same strategic steps in order to get the best possible result. In reality, things go wrong because there isn’t such an organized process and way of doing things.
There you have it. The process is pretty much the same for every family, but the result is different. Putting together a new private family business is a lot like this process.
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12 necessary steps for setting up a single-family office
Setting up a single-family office is a big job that needs careful planning and cooperation between family members. Making a single-family office charter, also called a family office constitution, is an important step in this process. It sets the goals for the office and is what it stands for. There are many important things to think about when setting up and running a single-family office.
01 The goal of the family office
Writing a single-family office charter, also called a family office constitution, is the best way to start setting up a single-family office. All family members who are participating decide and agree on the goals of the family office through this document.
A single-family office plan can be a part of how the family is run as a whole.
02 Family involvement
Making sure that family members are involved in things like the single-family office leadership system is very important and should be done as soon as possible. In what way will a family member be active in running the family office?
03 The assets managed by the family office
What types of family assets does the family office handle, and what types does it not? Which family assets, like the family business, still need to be handled by the family?
04 The services the family office provides
The family office will offer different services to each family. It’s true that handling investments is a main service for most single-family offices, but not all of them.
05 Structure for running a family office
The Chief Executive Officer (CEO) of the family office is the leader of the single-family office. It can be very hard to find a CEO for a single-family office.
06 Making a business plan for the family office
A business plan for a single-family office should be written. A family office business plan is needed to give the process of setting up a family office some organization.
07 Budget and costs of the single-family office
Pro forma planning is the first step in setting up a single-family office. As time goes on, the family office needs to move from a rough budget to an official budget for each year.
08 The family office jurisdiction
It is recommended to do some research to find the best place to set up and run the family office. The site should work for the family members who use the family office, but that’s not the only thing that needs to be thought about.
09 The family office structure
A single-family office’s location and legal structure are intertwined. The family office’s formal structure in the law ought to be adequate there. The family office’s funding model is a significant consideration.
10 Recruitment of family office staff
Sometimes it’s hard to find and keep people for a family office. People who work in the family office usually cost the most. Every single-family office needs to figure out how many employees they need and what their job is in relation to the services the office wants to offer.
11 Infrastructure for operations
Even though it’s not the most exciting subject, the family office will need to set up office space and all the things that go with it, like computers. It’s also important to think about how the family office will actually work.
12 IT, software for the home office, and online safety
These days, you shouldn’t forget about the tech side of a family office. It is impossible to run a family office without the right IT tools. Buying or hiring software should be done.
Control and Risk management
Controlling things and managing risks are two very important parts of running a family office. Because they are so important, we don’t think of them as different steps. Instead, they are built into (almost) all of our modules when you work with us. You can find more information about how we can help you at the bottom of this page.
Beginning the process
It’s hard to even think about starting to plan a family office. The best way to describe the steps a family needs to take is by playing chess on several boards at the same time.
Most of the steps need to be planned ahead of time or done at the same time, except for setting up the family office goal. This is because setting up a good family office governance framework from the start can avoid big problems down the road.
Just like a family business changes over time, a family office should also go through different steps over time. You should know and accept that it’s almost impossible to quickly set up a single-family office that is fully stocked and ready to go. You should instead start with a strong base and keep adding to and improving it over time.
A method for professionals
Families don’t usually set clear goals for the family office or make an initial business plan, basic budget, and first set of rules. Instead, they tend to do all of these things on the spot. Or they keep thinking about it again and talking about it with their family without making a decision. One reason for this is that families act differently when they talk about their own money than when they talk about their business.
This kind of behavior is very dangerous if it goes down the road and the family business gets even more complicated as more generations join. A family office that doesn’t have any rules for how it works will not work well.
Setting up a family office is not a “nice to have” or “well, let’s give it a try” activity. A single-family office is its own professional business that needs to be set up and run in a very professional way.
If you don’t, it really will fail. Setting one up is a pretty complicated task. During the process, it’s best to get help from a single-family office project manager.
Getting family office help
Another common mistake is to make someone who used to work for the family, who is now a banker for the family, or whom you trust, like your lawyer, the CEO, or CIO of the family office, and give them the job of setting it up for the family. People in this position usually have a lot of trust in the family, but this person doesn’t have much experience setting up and running a single-family office.
It could be a mistake to not set up a good hiring process for this or those important roles. It’s not that we say you shouldn’t hire that person, but it is very helpful to have more than one option, and each one should be carefully compared and professionally evaluated.
Statistics show that there is a very small chance that you and your family already know who is the best person for the job and don’t look at any other options. We see this happen a lot when a family sets up a single-family office, but it would never happen when hiring for important jobs in the family business.
Change is the only constant
A single-family building is not a fixed structure; it changes over time. People forget this a lot. Families change over time, and so does the family office. It needs to grow and change along with the family members’ needs and wants, as well as the constantly changing outside situations.
It can be very hard to make sure that the family office can adapt to new situations and keep working well. This is especially true when the next generation is involved for the first time or when there is a change. The people who work in the family office and family members need to carefully and regularly plan for ongoing change. If they don’t, they might lose touch with the next generation.
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