It seems that nearly every affluent family in Australia is either establishing a family office or seeking advice on how to do so from wealth managers across the country.
Here, we help answer the question: “Do I need a family office?”
What is a Family Office?
A family office solution helps affluent family groups project manage not only their financial assets but also other critical areas such as family governance, succession planning and engagement with the next generation. Financial assets can include passive and active investments, operating businesses, real estate portfolios and lifestyle holdings.
We advocate for family-focused family offices, which prioritise human capital and the development of the family while excelling in managing financial or business assets.
Many family offices evolve into physical office spaces, with their primary function being to consolidate and streamline the management of the family’s financial and non-financial wealth. This promotes efficiency, organisational clarity, and opportunities for future generations.
Why Establish a Family Office?
Leo Tolstoy once wrote, “Happy families are all alike; every unhappy family is unhappy in its own way”. This sentiment rings true when comparing two families of substantial wealth.
Take ‘Family 1’ as an example, with striking resemblance to the fictional Roy family from the TV series Succession. In this family, conflicts are almost a daily occurrence. Rivalries and power struggles over wealth and control of family businesses dominate family dynamics. Communication breakdowns and a lack of trust aggravate these tensions, leading to decisions driven by personal agendas rather than long-term family goals. The younger generation, despite being involved in the family business, faces resentment and scepticism from non-family employees due to perceived entitlement and a lack of experience. As a result, the family’s wealth washes away within just a couple of generations, leaving behind a legacy of disharmony and financial ruin.
In contrast, ‘Family 2’, with comparable wealth, takes a different approach. They prioritise cohesion and unity through a shared family set of goals and intentions and a structured governance framework. Decisions are mostly made collectively, guided mostly by a shared family mission that emphasises values such as stewardship, responsibility and long-term sustainability. Members of the younger generation are actively mentored by family and non-family mentors, and some are prepared for future leadership roles. This proactive approach not only preserves wealth but also nurtures a sense of purpose, meaning and responsibility among family members. By fostering a culture of respect, trust and collaboration, Family 2 ensures that their wealth remains intact and continues to grow across generations.
Where do we start?
Research by Preisser Williams in the book Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values confirms that the following few factors contribute to 96% of intergenerational wealth loss experienced by Family 1:
- Breakdown of communication
- Lack of trust within the family
- Unprepared heirs
- Absence of a family mission
- Poor advice
The good news is that the pitfalls faced by this family are entirely preventable. By starting a conversation with your family advisor, you gain an independent perspective to help you navigate these challenges. Establishing a well-structured strategic plan for your family can help you uncover your purpose and clarify your collective vision. Our expertise in family facilitation ensures alignment of your family’s financial and emotional goals.
Our governance process helps families establish robust decision-making mechanisms, bespoke investment frameworks and provides comprehensive support for future generations. This significantly enhances the preservation of positive family relations and ensures the smooth transfer of inter-generational wealth. At William Buck, we take the time to understand your unique circumstances, ensuring a holistic approach. We work with families to create bespoke Family Charters, facilitate ongoing meetings via Family Councils, and provide tailored investment policies.
For more information on establishing a family office tailored to your needs, contact your William Buck Wealth Adviser.
