How to elevate your single family office to excellence

The number of global single family offices is continuously rising. With the introduction of virtual family offices, even more families take control of their wealth and their wealth’s purpose.

Whether you already have a single family office or plan for one, complexity will be its companion. The level of complexity often impacts the overall performance.

Although design and execution processes aim to provide institutional services, outstanding results are not guaranteed but require specific efforts.

Since a single family office is tailored to the individual family’s needs, there is no unified standard for size, governance, and service levels.

Family office challenges

However, single family offices face many challenges: although they should be designed and managed like a business, they have only one customer, the family.

Unlike any other industry, there is no market and immediate competition to benchmark or learn from, and that’s why excellence is hard to achieve.

So which areas lead to an institutional level performance? This post looks at the main five: human capital, governance, technology, investments, and outsourcing.

Family office governance

As mentioned, a clear vision and mission, and values lay the foundation of a successful single family office. Complemented by the specific value proposition: the services that provide value to the family and address their wants, pains, and needs.

A value proposition that goes beyond protecting, preserving and growing wealth ensures that the family doesn’t need to resort to external substitute offerings to achieve their goals.

This is the essential groundwork for every single family office. And like for any business, it is advisable to keep these elements up to date.

The governance framework

A single family office is a service operation, and superior service delivery requires policies and procedures.

They have a twofold function: ensure clarity and resilience internally and a clear rule-set for the family’s interactions.

All too often, a single family office is built around the founder and follows their ad-hoc instructions.

With a value proposition that considers the entire family and future generations as customers of the single family office, policies and process design should achieve clarity and manage all involved parties’ expectations.

Internal communication among colleagues and the family should be part of the rule-set, again for the benefit of everyone involved.

Ultimately, a coherent governance framework will foster critical thinking and proactive problem-solving in a collaborative environment.

The overall governance structure

Your overall family governance should integrate the family office seamlessly to ensure coherent results.  

Furthermore, your structure should account for the entire triangular relationship if you run a family business.

You’ll achieve more vital identification, higher performance, and alignment at all levels with comprehensive governance.

Ultimately, it will lead to an overall culture that lays an excellent foundation for success and harmony.

Family office technology

We advocate for smart, secure, and nimble solutions.

Unless you own a tech company, building your own technology should not be an option.

On-premise solutions come at a price and may soon be outdated.

Cloud-based technology offers the best of all worlds and can still adapt to individual needs.

Banking level security is essential, and you should focus on the provider’s background since they need to understand wealth management in detail.

There’s a broad offering on the market, but few applications are developed by people with deep wealth management insight and experience.

We have a home bias but believe that Switzerland is an excellent place for providers.

Comprehensive solutions

When it comes to the technology system you choose, make sure that aggregation and reporting of financial and alternative investments are at the core.

The design should be integrated with your customer relationship management and project management capabilities to support communication, service delivery, and efficient collaboration.

The selection process should be structured and based on your specific requirements.

If you replace a system, you should consider interim management and migration.

Also, additional capabilities need to be considered, and in most cases, you are best advised to retain a specialized consultant to follow the entire process.

The family office can build its ecosystem by integrating external service providers into its secure platform environment.

Such a set-up allows for oversight and control of all activities and related costs at all times.

Since not all family members may be tech-savvy, the user interface should be intuitive and provide high-security access.

Family office investments

Wealth and asset management is a vital capability of single family offices.

The specific strategy reflects the purpose of the family’s wealth: it can unify the family, empower its members, and have an impact on the community.

Still, wealth needs to be preserved in the first place to uphold the family’s financial status and standard of living.

Growth ambitions need to be evaluated in light of risk considerations.

That requires a comprehensive internal assessment before any investment decisions are taken.

The result should be a common understanding of how the family will manage its wealth over generations and which revenues are needed and envisaged within the defined risk parameters.

The family office investment strategy 

After this essential step, the family office develops an investment strategy with corresponding portfolio construction and asset allocation.

The in-house focus is on strategy since it should always support the family’s purpose of wealth and continuously monitor these primary indicators.

In our view and experience, the family office investment strategy should always be at the center of the family office.

Standard approaches will only lead to typical results.

Thus, the target should always be an individualized strategy based on the specific family’s circumstances.

With that, the family office embeds the family’s values, purpose, and financial objectives in broad terms.

Best in class execution

The next step is finding the best external asset managers for the various asset classes.

External managers have the benefit that you can change them if performance is not as expected, something that becomes cumbersome and costly if you build all capabilities in-house.

Due to your family business, there may exist specific expertise and experience in an asset class, such as real estate and private equity.

That’s a great area to build in-house capabilities.

What needs to be in-house is controlling: successful single family offices gather and analyze data in detail to provide clear findings on cost, performance, and strategy alignment across asset classes and managers.

That’s the ultimate investment value of the single family office: control and basis for informed decision-making.

Legal outsourcing

Let’s take a closer look at legal services: you may have a well-rounded generalist acting as the family office’s general counsel.

The wingspan of legal fields to cover would reach corporate, financial, private wealth, and employment law, to mention just a few.

Even if your general counsel is only allocating tasks to external lawyers, it would not be easy to ensure quality, deadline adherence, and cost-efficiency.

Integrating external, trusted, and specialized advisors into your single family office’s structure will allow for a team of specialists to achieve high-quality results on demand.

Such specialists will leverage their network in multi-jurisdictional scenarios and guarantee industry benchmark and efficiency.

Building a family office ecosystem

If your family office technology offers the collaboration platform, the ecosystem participants will create synergies and mutually enrich each other for the family office’s benefit.

The ecosystem allows for the shift from reactive risk management to anticipating risks in a continuously stress-tested framework to enhance its resilience.

You may apply this strategy in other fields such as security or operations to tackle high complexity with leading capabilities on demand.

If you ask what your general counsel’s role should be, then finding leading experts who fit in the framework, overseeing the budget, and internal knowledge management are some of our suggestions.

Your single family office’s ecosystem needs to be developed and maintained to ensure smooth service delivery when complex and urgent.