Creation and Management of a Family Office

A family office is defined as an entity established by a family, or appointed by a family, for the management of its wealth. The objective of a family office is the proper management and governance of the family’s existing wealth and its preservation for present and future generations.

There are two types of family office models: the Single Family Office (SFO) and the Multi-Family Office (MFO).

For the proper establishment and management of a family office, family members should play an active role in governance, having both insight and authority over final decisions. The family must set the objectives, define the level of investment risk tolerance, and establish rules and regulations. Key decisions should be made by family members.

A family office is governed by a board of directors consisting of both external professionals and family members. The board’s duty is to ensure that the role, characteristics, and responsibilities of the family office are clearly defined in its governing documents (family office charter/articles of association).

The core functions of a family office include portfolio and investment management, tax planning, legal and wealth structuring, and real estate management, while also providing recommendations and advisory services related to legal, tax, philanthropic, and business initiatives. The structure and size of family offices vary depending on the family and the scale of its wealth.

Based on our experience, it is a given that each family member may have different perceptions and views regarding the meaning and value of wealth. While the generation that created the wealth is often proud of its achievements, those who inherit it may take it for granted.

Localit Consulting undertakes the establishment of a family office with the objective of managing and growing family wealth. The creation of a family office presents particular challenges, which is why prudent and proper management is required through a professionally structured approach and a disciplined strategy.

The process of assuming responsibility for the creation and management of a family office must operate within a strictly aligned professional environment, free from bias and with transparent procedures, in order to achieve the investment objectives set by the family.