A lasting legacy: Managing family wealth

Oliver Ison, assistant director at Deloitte South West

Establishing and operating a Family Office requires careful analysis and planning to properly manage, protect, and grow a family’s wealth. 

When significant wealth is created, it can open up new opportunities as well as challenges for individuals and their families as they acclimatise to the increased complexities of wealth. 

One important decision may be to step away from a reliance on financial institutions or advisors and establish a Family Office to oversee the financial affairs of the family.

Establishing a Family Office

This is a big step, and one that involves many logistical, operational, and even emotional considerations. Over the past few decades, there has been an increase in family-owned businesses taking more hands-on control over investment policy decisions due to continued capital market uncertainty and a desire to commit resources to making an impact in today’s economies and in the future. 

In an era of increasing risk, investment fraud, and cybercrime, some families are adopting an institutional approach to family risk management, aided by technology to manage family financial affairs. Others are simply taking the opportunity to ensure that their day-to-day affairs are effectively managed by a bespoke Family Office.

What is a Family Office?

An increasingly popular concept, a Family Office is a private organisation established by a family to oversee, directly or indirectly, its financial affairs and is often the result, like wealth accumulation in general, of owning a successful family business.

There are various ways to set up a Family Office. In the Southwest we often see Family Offices created from the finance teams who have historically supported the main business owner, although others may recruit from the investment management community. Typically, in the former situation, the family will entrust a valued member of their existing financial team to step away from their existing role and manage the Family Office.

As an organisation, a Family Office may offer many of the same services as top-tier private banks and investment firms but is devoted to the needs of a single family. Therefore, it is a tailored organisation, reflecting the characteristics and aspirations of the family it serves.

When is the time right?

The amount of wealth necessary to form a Family Office varies. Globally, a traditional threshold is at least £200m of investable assets. In the Southwest, we typically see smaller family offices for clients with investable wealth upwards of £50m. 

In general, the amount of wealth needed depends on the dedicated resources required to provide economies of scale from both a time and money perspective and is not the only important consideration. 

There are a number of key integrated, qualitative factors that should also be considered. As more of the factors become relevant, so does the value proposition for the formation of a Family Office.

Integrated factors in the decision to form a Family Office

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This due diligence process is an important step in assessing when and how to initiate the formation of a Family Office. With the guidance of trusted advisers, the diligence process provides a structure for weighing these important factors, which will help a family determine whether and when a Family Office makes sense.

Deloitte’s Family Office Handbook

Deloitte’s Family Office Handbook is a starting point for families looking to set up a single Family Office. It is designed to help families build on their current understanding of what a single Family Office is, consider factors that have contributed to the success of other family offices, and formulate a plan that leads to the creation or expansion of their own Family Office.

How we can help

Oliver Ison is an assistant director in the Deloitte Private team at Deloitte South West. The team is focused on delivering tailored services to help individuals, families and their businesses meet their goals. 

To find out more about how the team can support your business, email oison@deloitte.co.uk