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The remit of the family office is straightforward: to manage the complex financial affairs of wealthy families, aiming to preserve and grow wealth across generations. However, successfully achieving this requires more than just careful investment management.
In this article, Christopher Costi, Director at Victus Search, examines why succession planning and governance are critical to maintaining stability and unity as control of assets passes between different generations, ensuring smooth leadership transitions.
Failing to plan for the future can expose a family office to significant risks, potentially jeopardising the very wealth it is designed to protect. Poor or non-existent succession planning can lead to wealth dilution through ill-advised investment decisions or family disputes over control and direction.
Without a clear governance structure in place, family offices may be unable to maintain a cohesive long-term strategic vision, which can negatively impact their ability to adapt to changing market conditions. Poor decision-making processes, stemming from a lack of clarity around roles, responsibilities, and authority, can compound this, leading to operational paralysis.
Ultimately, the family office may fail to capitalise on emerging opportunities and be unprepared to identify risks and respond effectively to threats, with potentially significant financial consequences.
Effective family office governance involves establishing clear structures and processes — beginning with drawing up a constitution, outlining the family’s values, vision, and objectives for the office. This provides a basis for future decision-making, ensuring all stakeholders are aligned around the same ethos and mission. Building on this, developing formal, documented policies for investment, distributions, and conflict resolution provides an invaluable framework for future reference and mitigates the risk of disputes.
Advisory boards and family councils provide a structured platform for communication, decision-making, and conflict resolution. For these to be effective, the roles and responsibilities of each family member or external advisor must be clearly defined to ensure accountability and operational efficiency, minimising the risk of conflict. Regular family meetings can help to foster open dialogue and reinforce shared understanding — ideally involving independent board members to offer objective oversight, challenge assumptions and provide an outside perspective which can help to resolve disagreements.
Formal education in finance, business management, and family business dynamics can provide a solid theoretical foundation, and this can be developed further through structured professional development programmes, tailored to individuals’ strengths and career goals, in order to develop key role-related skills and knowledge.
However, there’s no substitute for practical experience. Family offices should set up mentoring programmes with senior family members or external experts to give the prospective leaders insights into the unique dynamics of family office governance provide opportunities for firsthand involvement in operations and decision-making.
This exposure to diverse business situations and the chance to develop leadership skills and build networks is crucial for future success, helping the next generation of leaders cultivate the necessary judgment, strategic thinking, and interpersonal skills required to navigate the complexities of managing significant wealth and family relationships.
The most successful family offices are those which nurture internal talent to ensure that the stability and legacy are sustained throughout generational transitions, while also recognising the value that external experts or advisors can bring, adding an objective perspective, new ways of thinking and domain-specific knowledge. The most common areas where family offices look to outside hires to add capability and capacity include:
Governance specialists — to introduce the tools, processes and documentation that underpin good governance
Legal and tax advisors — to provide guidance on structuring, compliance, and navigating the ever-evolving regulatory landscape.
Financial advisors — to offer expertise and advice on investment strategy, portfolio management, and asset allocation.
Family business consultants — who specialise in governance and succession planning, facilitating difficult conversations and helping families navigate sensitive issues.
Mediators/facilitators — who play an instrumental role in resolving conflicts and preserving family harmony.
Advisory board members — to bring outside perspectives and cross-sectoral experience to the family’s strategic planning
The value of building long-term relationships with trusted advisors to manage the risks of an ever-evolving regulatory and tax environment cannot be understated. However, recruiting the right talent in each specialism can be challenging for family offices, which have a specific set of needs which may differ from other investment contexts.
Getting the right culture fit is critical, as transparency and equality in communication and decision-making are key to maintaining a harmonious family environment. Outlook is also an important consideration. Unlike many investment firms that are focused on the next quarter’s results, family offices take a longer-term view. They therefore need to hire both for experience, in holistic capital preservation and long-term returns, and commitment, looking for professionals who will stay with them for the long haul.
Victus Search is a trusted partner for family office recruitment. We’ve been working within the sector for over a decade, and understand the unique dynamics of family offices — and the importance of finding the right individuals for key roles, whether in leadership, advisory or specialist roles.
We share your long-term perspective, recognising that the success of a family office depends on the people who lead and guide it. Our discreet and confidential search process delivers candidates who align with your family’s values and vision, and are seeking long-term appointments where they can make a tangible impact over time.
Contact us to discuss your family office talent and governance needs.
Whether you’re looking to fill a specialist role, or seeking the right position to deploy your unique skills and experience, the first step is to get in touch with one of our expert consultants.
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