From Organic to Institutional – What a Family Office Needs to Know

Most often, a family office grows organically – it may start with employees of the family business supporting the administration needs of the family members, or through establishing a relationship with a tax advisory firm on a retainer basis. When a high-value liquidity event such as a sale of the family business occurs, it often crystallizes the need for more assistance – with the managing of the newly-released wealth itself, with structuring estate planning in a way that satisfies the first generation but also takes into account the needs and desires of future generations, with advice on how to manage the emotional side of new wealth in family members’ lives, with cash flow management to ensure school fees can be paid, or with management of new acquisitions, such as yachts, art or wine collections.

 

In addition to these obvious new requirements, a family also needs to address more subtle emerging needs such as comprehensive insurance coverage, physical and cyber-security, fiduciary implications of philanthropic trusts, pre-nups and more.

 

As the family grows, down the generations and through new relationships and children, the complexity of the family tree grows exponentially. And with modern approaches to marriage, divorce, adoption and surrogacy, plus the ease of international living, just keeping track of the myriad people, locations and relationships can be a constant headache.

 

As the family network grows, so the needs of the family office grow. And of course, as it increases in size, a family office will have its own employees, which brings a new level of complexity – what forms should the employing legal entities take? Where should they be located? What are the governance needs for the entities? Which family members are prepared to take on managerial responsibility and how should they be compensated? And where can the right employees be found?

 

And of course, with complexity and wealth comes risk. As the population ages and mental health concerns increase, is the family office and its legal structure set up in advance to address that? What kind of family cyber-risk comes from the grandchildren’s friends tagging them on TikTok? Should a trust fund automatically pay a ransom demand? And what about a sexual harassment suit brought by an employee? And does the legacy planning take into account climate change and the possibility of more global pandemics? The emergence and effects of the coronavirus pandemic of 2020/2021 has been a significant wake-up call to previously complacent families – how will they react and prepare for the inevitable recurrence?

 

At Inflection Point Intelligence, we understand that business families who are rigorous in the way they manage the family business often find they have created a family office without the same level of planning and knowledge. In order to bring more clarity to the subject, we have partnered with  Henley Business School to offer the Henley Family Office Program. This family office program has been designed to cover the key management concepts involved in the creation and running of a well-managed family office. Core modules in the family office course include Estate Planning, Structuring & Set-Up, Governance, the Private Bank Relationship, HR Management, Risk Planning & Crisis Management and more.

The program is structured in three sections: introduction of the core background concepts, such as trusts and tax; financial management, including portfolio management, operations and technology and administration; and finally non-financial concerns such as HR, philanthropy, next-gen education and risk management. Each of the modules includes reading and one or more lectures by experienced professionals from the family office industry, from three continents, sharing their specialist insights into best practices and key issues faced.

In addition to the core curriculum, program participants are invited to live webinars (the “Speaker Series”) covering topics related to the course and up-to-the-minute events – recent examples have covered the fundamentals of NFTs and SPACs, and an analysis of the Archegos family office crisis.

 

A complimentary service to our family office course offering is a one-year membership of the IPI Career Network. This annual subscription network (the “IPICN”) includes access to recordings of our Speaker Series webinars, and to future online events. There are also discounts on all our IPI education courses, including “How Does a Hedge Fund Really Work?” and the Henley Executive Hedge Fund Program. Membership of the IPICN gives access to our online mentoring platform and our jobs board, featuring openings at employers who recognise the value of our industry-focused training. And as normal life returns to the global financial centres, we will be resuming our popular “Networking Cocktails” events, with free invitations to IPICN members.

 

If you are looking for family office education in bite-sized pieces, then you can also find the family office program presented as individual modules on our website. These modules are also available for corporate training departments in customized cohorts – we can put together any number of the relevant modules in a tailored configuration, focusing on specific needs of company staff. Employees can take the course at the same time in a restricted cohort. The company can also add a member of management as a program faculty member.

 

For more information, contact Lisa So at lisa.so@ipi-edu.com.