Why Family Governance Matters

Why Family Governance Matters

by Richard C. Wilson & Family Offices Group Association Team

In my recent book, The Family Office Book: Investing Capital for the Ultra-Affluent, I interviewed dozens of family office executives and they often highlighted the importance of family governance in the family office industry.   Today I wanted to take a quick look at this topic and sort of skim the surface of what is covered in more detail in the book interviews.

First, family governance refers to the guidelines, structure and issues related to how family members are connected, communicate with each other and how the fortune is distributed or invested.  Family offices often help negotiate through problems, and even anticipate potential issues before they become problems, and establish a clearer governance for the family that allows family members to settle on a guiding structure that hopefully satisfies the family members.  A single family office may help a ultra-wealthy family navigate this area, acting as an informal arbitrator in disputes or negotiations and offering strategies that seek to meet the needs of family members.

In other cases, a multi-family office is in an ideal position to help in family governance as it is an outside, independent party that can take a unbiased look at the family and its governance.  As family office executive, Lukas Doerig of Marcuard Family Office told me, “There is an advantage for a multi-family office; the first thing you have is experience, and the second thing is that you are really independent. You might also be in a position to bring up an inconvenient truth about the family and be open and communicate problems you are seeing that need to be addressed, while maybe in a single family office, the people in- charge might not bring up sort of thorny and difficult issues a family might have.”

So there is a benefit to using a multi-family office in governance, although single family offices often succeed in this area and as governance evolves and becomes more institutionalized, the hope is that all families will have clearer governance that minimizes disputes and leaves all members satisfied.

I hope this gave you a good overview of why family office governance is important.  You can read more about family office governance in my new book, The Family Office Book: Investing Capital for the Ultra-Affluent (Wiley Finance).

 

tags: family governance, family offices, multi-family offices, multi-family office governance, wealthy family governance, family office governance, Why Family Governance Matters, single family governance, best practices

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