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Putting the “family” in family office

Families in Business chaired a roundtable discussion at the European Family Office Conference in London to find out the true function of a family office, what services it can provide for the family and what the experts learned from their own experience

Roundtable panel

Johan Andresen is the owner and CEO of Ferd, a fifth-generation investment firm based in Norway. "We're a family office of one in the sense that there isn't really a family – there's one owner, one operator and that's myself."

The Hon Henry Channon is a director of Iveagh Private Investment House. "We were part of a larger family office that became unwieldy. So five of us split away amicably and invested our assets in a fund of funds operation where we combine this specialist expertise with the more conventional investments of the family office."

Lansing Crane is a former chairman and CEO of Crane & Co, a seventh-generation family business based in the US. "We have 100 owners and members of the family and it is very much an objective of ours to maintain and make stronger the family connection and identity and to support our operating business in a healthy way. A family office is a very nascent part of this."

Andrew J Hancock is executive chairman of the Nordia Group Family Office in Australia. "I have had experience working in a multifamily office and also with a smaller single family office. We currently only have five staff, but it still serves three branches of the family."

What is the need for a family office? And what is the principal role of the family office in each of your individual experiences?

Hancock: Where there isn't an operating business, the family office becomes critical in providing a focal point for the family. It can provide the opportunity for some common investments, but it mainly provides a central point of confidential, independent advice. If you can have that independence and confidentiality, it can shape the family's investment philosophy and give them some purpose.

Channon: I think it is interesting that you mention independence and confidentiality. We were an old-fashioned family office doing trusts, tax, and advice of almost every nature. This became incredibly unwieldy because if someone wanted to invest outside the portfolio it would take as much time and effort on behalf of the management as a major structural change in a major client's portfolio.
However, I think the ability to have independent best-of-breed investments, either co-sharing with other family groups or individually, allows a clarity and transparency that I don't think you get by giving your money to one of the big investment banks. It may not necessarily mean that you perform better but at least you know what you're actually investing in.

I feel that success also depends on the cohesion of the family members. At the end of the day, if the operation isn't successful in its own right individuals can get disgruntled with what is going on and it is better if they are able to leave.

Crane: There is another function for a family office. Obviously, "family office" is a term that covers a lot of territory – we can be referring to many different types of models  – but I think one thing that a family office can do is to provide a focus for the family that is separate from the business. It is not a particularly healthy thing for the operating business to be the focus of the family identity and activities.
By setting up a family office that can be a focus for the family, you shift the family's identity from the business to another entity where the family can make decisions, have different activities and preserve what is important for the family without impairing the necessary business decisions.

It's a model that works for us and for a number of different families who continue to own operating businesses. Even if they own a fractional interest in some businesses it is still a healthy way of displacing some of the issues.

There are several family office options: the single family office route, the multifamily office route and the third party or the commercial family office. How do you decide which is the best for you? Is it simply the case that the more money you have the more chance you have of being a single family office?

Crane: I think that is a truism. But which ever you choose, you still have the same governance issues of how the family is organised; for example, is it a small single family or a large single family? How you state your values, how you give governance, how you have the family decision-making incorporated into the family office decisions are challenges for everybody.

Channon: I think whatever the structure, it is important to be dynamic. The hiring of good staff in the family office
sector is one of the most interesting and difficult areas.

Hancock: You don't actually want the highest flyers in the family office because they won't last. You want someone who is prepared to work with the family, who shares the family's ethics and values, and who is prepared to act as a professional person. It has been suggested that (s)he has to have the ethics of a school teacher or a doctor in the old days – someone who wasn't highly paid but did it in the sense of providing good advice.

Crane: It is an interesting generational point. I think there were more people like that 30 years ago than perhaps today.

Hancock: And you don't want to go out and hire the head of a global bank because he's the smartest mind in town – it won't work in a family office.

Andresen: Yes, it is difficult but it not impossible [to find the right people]. I think by definition you have to be very open. We have a set of values and one of them is credibility as credibility assumes openness both in terms of our annual report – which appears on our website – and what I say when I'm on stage. A lot of people like that.

Crane: The challenge of getting capable non-family talent to work for the family in an effective way is a serious one. You have to find a cultural fit and if it's going to be a success, it needs to be someone who can understand the family and its values – but that is not always easy to do. You have to be prepared to compensate competitively so you're drawing from the same pool.
You have to ask yourself, does the person have the potential to understand the family, the family's values and work collaboratively with the family. If that's the case then the other talents come into play. It ends up just being a judgement call on your part and there are times when we haven't got it right.

Let's move onto the role of family members in the family office. What level of involvement is good, what level of involvement is bad? And how do you manage that?

Channon: I think you have to avoid becoming and introspective. As you're not trying to compete in the [family office] market, it can be difficult to know whether you're doing a good job or not.

A key division is between the management and the money; the management team and the family members. I work in the office but I'm unpaid; I'm on the board but I don't make any key day-to-day investment advice. It is important to get the balance right, to make sure people feel involved and engaged, but in the end you hire top professionals to do a job.

Andresen: The paradox of having a family office with one family member is that, in the end, the more you professionalise your whole operation, the less power you have. In other words, I can't say we have to do this investment because the guy in charge says "no I don't want to allocate my funds this way and I don't want to be measured on this investment and therefore it's not going to get done". And it's not in my interest to do something that the professionals don't want to do either. I hired the people because they were better than me, not because I was going to overrule them.

Crane: I think family offices that are primarily investment focused and that have a family member can create conflicts of interests, so it's probably better to have professional advisors under those circumstances.

Andresen: It seems to me that the issues facing the family office are the exact same issues facing a family business that hasn't established a family office and has multiple shareholders. I think the difference in many ways is that the family office already has the will to professionalise something. At what level that should be professionalised, I guess that is up to each family to define.

Away from the investment side, how important are the other services that a family office can provide?

Hancock: I feel the philanthropic side is important, and I think the business side is important. Personally I don't think a concierge service is important, I think it's better that a family stands on its own two feet.
A key question is: "Do you want to manage other people's money?" You can be in that business or not as a family office, alongside investment reporting and compliance, which are fundamental in providing the family office as a one-stop-shop for financial advice. It's the key role of the family office – if you can't provide that basic service, you're not in the game, I don't think.

Crane: Since we don't have a family office that has an investment function, it's everything else that's left as the glue for the family, but it doesn't go as far as concierge services. My belief is that family offices get sucked into doing those kinds of things – it's not really part of their strategic plan but the word "no" just doesn't come out of their mouths when they're asked.
The focus of activity for us is bringing together a family that used to live in one neighbourhood, but which now lives all over the world, to help them generate a sense of family and pass that down to other generations.

Being able to provide services that are related to legal, tax and investment services is a real opportunity and will help as we go down future generations and pass on that heritage.

Channon: Interestingly we've gone down the opposite route. We had done that 100 years, but we've found that using outside legal and tax advice works better. You don't need high-level tax advice all the time – if you get some advice it should have a certain shelf-life to it.
The whole issue of tax and estate planning is really very crucial to the whole setup; I think it's almost the most crucial part in some way, but it mustn't be the thing that dictates all forms of investment strategy, which it can end up doing.

Hancock: I really see the sort of family office that I was talking about as being the gatehouse for going out and buying the best tax and investment advice. It does all the basics, it's got some bright people who are keeping up with the tax changes, but they are also people who know when they need to go out and get the other advice in an efficient manner that suits the family.

With regards to the family being spread all over the globe, what is the role of the family office in bringing people together and communicating?

Crane: In our case we are continuing to evolve the ways in which we gather and communicate with each other. We have a long weekend every year where the family comes from all over the world, while regional meetings are generated by people who are interested in one subject or another.
A big project over the last few years has been writing an updated family history. When we're talking business issues we have shareholder meetings and there's a website for people to interact with. I'm sure a blog's coming, it hasn't started yet but I have no doubt that a blog is on the way. The family has a much better knowledge of who they are today than they did 10 years ago.

Channon: Our family is slightly different because we are a large, disparate, old Irish family in which everyone knows where everyone else is. We use weddings and funerals to meet up and I spend most of the time trying to avoid my family! But, seriously, of course there is a shared heritage and a certain shared value and when two or three people gather together they often do talk about the old days.
I don't think one wants to get obsessed by the past but I think there should be some like-minded focus, although I don't see it as an official function of the family office.

Hancock: Do you see the family office as a safety net?

Channon: It's definitely a forum, perhaps an independent forum where you can discuss things with people in a more professional level than you normally would over lunch. I think it definitely serves a purpose of formalising the

Andresen: I guess we act as a sort of family office for my father and mother. I never really thought of it as a family office function before as it's just something you do – everything from gardening to insurance and tax – it just comes naturally. They know they can tap into the advice that they would like to have.
But what makes the link with what you're talking about is when I set up this business, the values of the business were values that came from the family. They are values that I know family members who are not part of us today can agree with, identify with and, in many ways, those are the values which I have used as guiding lights for bringing up my kids. So by the time they are old enough there will be a link there between the new family members and the business. So I think that's a nice glue that will hopefully stand the test of time.

Campden Conferences is holding four family office meetings in 2008. These exclusive, private events are located in London, Hong Kong, Moscow and Boston. To register or for more information please visit

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