Single Family Offices: More Than Numbers
Imagine your family has just come into a great deal of (liquid) wealth. You sit together to reflect on what got you here. There are four big considerations that should guide all you do; especially when answering: What do we want to do with this wealth? Answer this from the following perspectives and the rest will be easier. These can be considered the guardrails of starting a family office.
From our heads, using analysis and research, and concrete goals.
From our hearts, with passion, care for ourselves and our loved ones.
From our gut or intuition, with a strong sense of trusting in possibilities and potential.
From our souls, knowing that this wealth comes with a commensurate sense of responsibility for a world in need.
Our heads. This one may be the easiest because there is an entire private wealth industry eager help. The risk is that this often creates the script, minimizing your work and your commitment and neglecting our heart, gut and soul. Peter Drucker’s famous adage comes to mind here: “Profit for a company is like oxygen for a person. If you don’t have enough of it, you’re out of the game. But if you think your life is about breathing, you’re really missing something.” Wealth must be in service of something greater than itself. That is where the other three voices are needed.
Our hearts. When a family sells its business, there is usually a profound sense of emptiness afterwards. The company likely gave the family a purpose and a reason to be together. Families who want to stay together need a new and compelling purpose; a new mission for their wealth. With a common vision and shared passion, wealth will still help them to be united and energize relationships. Without a compelling mission, branches will grow ever distant.
Our gut or intuition. Whatever our endeavors, delegation without monitoring to safeguard progress is essential. Family must actively oversee the family office lest they risk just end up as mere clients expecting services and worse, having no basis by which to measure the quality of the services they receive. Failing to act as interested and committed owners has consequences for the family office staff. Because many of the professionals in the family office world are risk adverse, focused on and often rewarded based on the quantitative measures, a lack of guidance from the family usually leads to lackluster performance and neglect of other services provided to the family. Family office professionals are apt to stick to convention, avoiding innovation and leading to the demise of any entrepreneurial spirit in the family.
Our souls. Given that the top 1% of wealth holders in the world control 50 % of the world’s wealth (according to a study from Credit Suisse) it seems imperative that we act responsibly and use our wealth to contribute to a fairer, better, and more sustainable world. Philanthropy, impact investing, and generally investing with a conscience can be healthy ways to keep the family bonded with common purpose and shared vision. They also help fulfill our obligation to our fellow citizens to develop our capacity to be wise stewards of this abundance.
Enterprising families benefit from balancing all four perspectives – head, heart, gut, and soul – when deciding how to move forward with managing their wealth. Finding a (new) set of shared objectives and a compelling purpose and showing up as an active partner to family office professionals helps in bringing the family closer together and making the governance of the family and the wealth more meaningful and therefore enjoyable.