Families forming family offices (FOs) rarely ask themselves why they want one or what its true purpose is.  They also rarely discuss it in an open way with the wider family. Yet the “why’s” and “what for’s” are far more important than the “how’s”.

Similarly, structures of FOs need careful thought; not only for the above reasons and the resultant impact on longer term family cohesion, but also because of technical, financial and tax inefficiencies that so many face through poor structuring.

Family Offices find it notoriously tricky to identify and find the best people for senior roles, typically CEO/CFO.

This mismatch is exacerbated by

• principals often not being sufficiently involved to be able to identify the skill sets required
• looking for too many skills and qualities in one person
• a lack of understanding within the search industry of the FO market and its unique needs

Family Offices rely greatly on their external professional advisers.  It is critical that they have an internal resource, with wide and deep tax experience, and a solid understand of legal documents. This resource should be able to:

• ensure that the advice received is relevant, secure, and in line with that required
• review professional advisers and trustees to ensure they are best for the services required and are charging appropriate fee levels
• understand and oversee the key taxation advice received

Families in business together, whether acting as owners, managers, or simply by being family members, face an extraordinary range of challenges. These challenges can go well beyond the issues faced in everyday business, made more complex and harder to resolve due to the emotive impact of family dynamics.

These challenges can encompass such matters as:

• Family agreement on the values and visions of the business
• Succession of key management roles, and family v non-family considerations
• Recruitment and remuneration of family members
• Retirement of existing family management
• How/whether to pass the business down to the next generation
• Family dividends v retention of funds in the business
• Rules around family share ownership
• Approach to philanthropy

The dynamics present in any family in business can impact relationships, mutual respect and levels of trust over many years and even generations. This is one of the key reasons why only 14% of family businesses in the UK successfully make it through to the third generation.

Being part of an ultra HNW family sounds like a wonderful place to be. In reality, from inside, it is fraught with challenges and dangers in maintaining good family relations, responding to spousal influences and raising healthy and successful children.

Similarly, HNW families often struggle in determining when to pass wealth to their children and grandchildren, whilst still enabling and encouraging them to tread their own paths in life.

Opening up the channels of discussion of these sensitive matters in a safe way and at the right stage of life is never easy and often avoided. However, it is critical that families are able to speak openly about their wealth, expectations and assumptions if they wish to retain longer term family health, happiness and togetherness.

As regards wealth succession, some families never discuss it, others simply consider and discuss the “when” and “how much”.  But there is so much else to consider around why and how you are giving and, equally, how best to receive such generous gifts. A further issue that can cause tension, and often fall-out in families, is discussion close to marriage around pre-nuptial arrangements.