Family Office – Distribution or growth?

By Bill Humphreys

In many cases the very purpose of a family office is to provide a mechanism to transfer wealth efficiently across generations and to create a sustainable and enduring legacy. Against this back drop the basic question of whether the family office should focus on “distribution” or “growth” of a family’s wealth may seem redundant. However another school of thought may be “what is the point of creating significant wealth if the family are not able to enjoy it”.

In practice within any family, particular those in to their second, third and subsequent generations, there are likely to be a broad range of stakeholders often with incompatible goals and priorities. This will inevitably lead to conflict within the family “system”. Those family offices who have carefully thought through their purpose and objectives and developed governance systems to balance these often competing needs will be best placed to manage these conflicts. Family Education will also be a very important element in ensuring that current and future family members understand the roles and responsibilities associated with the family wealth.

A significant role for the Family Office executive is to manage the dilution of family wealth over time and to mitigate the erosive impact of leakages from the family system including complexity, spending, inflation, tax, family size etc. This will require knowledge of a broad range of technical skills and almost certainly a multi disciplinary team. It is likely that different structures may be needed to accommodate “distribution” and “growth” strategies simultaneously.

Distribution versus growth and other challenges for family offices and family wealth management will be discussed in more detail during Managing Family Office & Wealth training course conducted by Bill Humphreys in London on 19-20 of September 2013. For more details visit course website.

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