The “family office” has become such a fashionable term in the private wealth management space. So catchy it is that when it comes to really defining what it means, particularly in the context of the single family office, firms of many stripes would invariably – rightly or wrongly – volunteer themselves to qualify.
It was apt and a privilege, therefore, that, for our pre-AGM panel discussion on the topic of family office governance, we had two veteran practitioners with first-hand experience of running established single family offices to share their insights: Mr Bernard Fung had run the London-based single family office and investment vehicle of Lord Sainsbury of Turville prior to returning to Singapore to join Credit Suisse as its incumbent Head of Family Office Services and Philanthropy Advisory Asia Pacific, while Ms Chew-Mee Kirtland is Managing Director of Mornington Services Pte Ltd, a Singapore-incorporated dedicated family office for members of a wealthy Asian family, which she also founded in 1999.
Good governance starts with a recognition of the key issues underpinning the successful operation of a single family office, of which Mr Fung identified the need for adequate and appropriate staffing, clarity of the relationship between the family’s businesses and the assets managed by the family office, and transparency of decision-making processes. While many Asian families are somewhat behind the curve when it comes to laying down the ground rules with regard to each of these three fundamental issues, Ms Kirtland believes financial education for the key stakeholders in the family businesses and the persons of big influence in the family relationships is important. She emphasised the value of investing resources to imbue financial discipline among family members and family office employees, enabling them to think strategically on all matters financial, from investments to administration; and build self-confidence in, and accountability for, decisions made.
Ms Kirtland highlighted the need for governance specifically in the investment process of the family office, an area in which she takes special interest. After identifying investment objectives and setting overall fund management strategies, there needs to exist proper controls, from the engagement of the right professionals to manage, to identifying and managing risks. How investment professionals are remunerated and incentivised in the process also needs to be transparent and certain. A proper governance framework ensures that decision-making at every level is properly focused.
In the end, both speakers emphasised that a family office is every bit the ‘people business’ that, say, private banking, in its truest form, is meant to be. It is about investing time, effort and other resources at the earliest possible time in education and the management of attitudes, expectations and interpersonal relationships and dynamics, between family and professionals. Only then can one develop a sensible, clear process for making sound decisions, which is what governance is all about.