Tips for starting a family office


Via Forbes, you can read the original if you’d like here:

So I was looking into this briefly, and there was an article on Forbes that I literally could not read because it’s infested with ads. I had to copy-paste it on my own platform just to read it, and it’s below. But since I’ve done that I might as well comment on it so that there is at least some derivative work being done. Also I don’t think the article is very good. Maybe giving an offshore writer a bunch of keywords and tell him/her to write about it isn’t the best way for Forbes to produce a substantial financial article.

Terminology (because Forbes writers can’t be bothered):

MFO = multi family office
ESG = Envitonmental, social, corporate governance. It’s a long story… maybe the best way to summarize this term is by saying: with great power comes great responsibility.
CEO = chief executive officer, the ultimate decisionmaker in a company, unless overridden by the board of directors

Without further ado, here is the article. My commentary is in attractive purple.

1. Start small
While the term “multi-family office” implies servicing multiple clients, they all had to start with one client. Taking the time to understand the client’s unique needs and tailor services so that they are relevant and useful in relieving specific pain points or merely assisting with the tasks and functions that need to be done is where success begins.

1. Looks reasonable.

2. Have your team mirror the clients
Sigurd Haavik, managing partner of the newly established Oslo Family Office, advises prospective MFOs that if they wish to be relevant for a specific profile of the client, their team should mirror the client in terms of diversity and demographics. This way the client could find them more relatable and the MFO will be more representative of their client.

2. Um… already the author talks about ESG, which he only introduces without explaining much later. Not everything revolves around ESG. And it’s nigh impossible to “mirror demographics”. I’m not going to change how I was born, if I’m taking on another client.

3. Be completely impartial and focus on the buy side only
Managing Partner at WE Family Offices in the U.S. Michael Zeuner emphasizes the importance of structuring business models to be completely focused on the “buy side”. He explains that doing so “ensures that families buy financial products and products and services that are right for them.” This is a factor that serves to build lasting trust.

However, this focus also means that none of the economics of the MFO come from the sale, distribution or manufacturing of financial products or services. As such, Zeuner advises that anyone establishing an MFO should keep in mind that the economics of helping people buy are less scalable and take longer to build. Ensuring the availability of a sufficient financial runway to withstand a slow-build is therefore essential.

3. That’s absurd. Worst advise Forbes can give. “focus on the buy side only” is a recipe for disaster. Focus on profitability – how about that?! And how is this slanted bias for buy side a “completely impartial” stance? By throwing kindergarden phrases (that are wrong) at the reader, Forbes disappoints.

4. Collaborate with other MFOs
MFOs offer a way for families to tap into specialist resources and gain special access to deals. They provide power in numbers through their ability to work with numerous clients and leverage economies of scale. When professional collaborations between MFOs occur, this power grows exponentially. Make a concerted effort to build collaborative relationships with like-minded MFOs for the mutual benefit of both your organizations and clients.

Looks tautologically reasonable.

5. Find the right insource/outsource mix
High net worth and ultra-high net worth individuals and families often have a vast array of needs on top of often highly complex affairs and transactions. It is almost impossible for those starting out to secure the talent required in-house permanently. Not only is this a costly exercise but also not always logically justifiable, especially when only managing a handful of clients.

It is vital to find the right mix of in-house and freelance staff to cater to clients’ needs in the most efficient way. With many specialists now pursuing portfolio careers, it is often possible to secure their services on-demand, building a truly next-generation MFO consultancy.

Looks tautologically reasonable.

6. Define your key metrics
Gone are the days when key metrics only revolved around financial results. Now, each multi-family office needs to develop unique ways to measure success relevant to the client and themselves.

According to Bá Minuzzi of Umana, “Our clients’ level of joy and fulfilment are the key metrics through which we measure our success. We also utilize impact metrics to assess what their legacy will be. And lastly, we look to financial results.”

Looks tautologically reasonable.

7. Be ready to adapt
Even if you’re a well-established company such as Stonehage Fleming, with a heritage dating back over a century and servicing over 250 clients, instilling adaptability and agility as core principles is vital. This ensures that you are positioned to offer clients exactly what they need when they need it, a differentiator that could help you stand the test of time.

Looks tautologically reasonable.

8. Be sure to have an ESG investment strategy implemented in the family governance
Johan Bangsborg CEO at the Danish Imperium Family Office advises “The MFO must be able to handle the growing interest from the next generation, who value purpose above return. The trend between purpose and return is increasing significantly and if the MFO doesn’t adopt the high demand for sustainable investment, they will miss an important value proposition.”

Beyond ESG, Impact investing is also an area that has seen immense growth and has been covered extensively. From 2020 the finance world has seen an increase in demand for sustainable investments and many sources say that this will increase. However Impact is more than just investing for a positive social or environmental return, it is also about understanding any negative impact that would often be unintentional. Understanding and managing this will be crucial for being aligned to future generations and customers.

8. So this looks like the writer admits that he/she knows nothing about finance, and just took a class on ESG and now applies ESG to anything and everything because it looks gucci. Let’s get our heads un-stuck out of our butts now, dear.

9. Leverage technology to craft superior client experience
Kartik Kini, Chief Operating Officer at Waterfield Advisors believes that MFOs should not underestimate the role of technology in crafting superior client experiences. He explains, “Investing in platforms that make wealth data not only accessible but also understandable is key to augmenting a client’s experience to the next level. At the click of a button, clients should be able to see how their portfolio is performing, understand risks associated with over-exposure and credit quality, and access insights that help in making better investment decisions.” He adds that by “using technology underpinned by data, MFOs can significantly decrease costs, bring greater transparency and scale faster.”

Looks tautologically reasonable.

10. Demonstrate value right from the start
As with any new relationship, making a good first impression is crucial and can set the tone. This can be achieved by focusing the initial cooperation on issues which clearly demonstrates the value of working with a professional MFO. On this point, Sigurd Haavik from Oslo Family Office comments that, “Helping to define the family purpose, setting the direction of the family’s overall strategy, shaping an investment strategy or looking at the family risk exposure, are typical “low hanging fruits”. Initial successful projects will help build trust with the client and create a solid foundation to build upon.

10. The entire article is disappointing.

My verdict? Forbes seems to be a poor source of information.

And upon further review, I’ve found this wonderful document, courtesy Citi, that has the info I need about establishing family offices: A-guide-to-establishing-a-family-office-Citi-Private-Bank

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