UBS’ Global Family Office Report highlights the extent to which family offices are broadening their investment horizons, moving beyond the more traditional public markets and assets like stocks and bonds to place a greater emphasis on alternative investments, such as private equity. At the same time, direct investing – bypassing traditional fund structures – are finding favour, whilst sustainability, a desire for evidenced impact and a more professional approach to philanthropy are influencing the approach too.

But changing course is often not as easy as families think. Multiple generations of diverse stakeholders, complex global structuring frameworks, cross-border regulatory complexity and an economic environment that is constantly shifting can pose serious questions.

Assessing the landscape

Any assessment of a structure should start by taking a deep dive into key family documentation – trust instruments, letters of wishes, investment principles and policy statements, a family constitution or charter together with any other existing or proposed governing documents., One should consider the ultimate aims of the family as they stand, undertaking a gap analysis that will inform new frameworks around the investment objectives, strategy and operational function and provide an ability to assess whether external skills are required to support the anticipated change.

Whilst the assessment would naturally include an evaluation of recent investment positioning and performance, it is an opportunity to conduct a rigorous review of existing structures within the context of the overall family framework, alongside an evaluation of the proposed direction of travel and how that aligns with the family’s values and vision.

It is only after undertaking an assessment of the overall landscape alongside new or existing advisors that a family can embark on a new investment direction on solid ground, equipped with the right tools – far better to do the groundwork properly than to run into difficult, and perhaps costly, issues further down the line.

At a practical level, such an assessment will also inform any new structuring that needs to be undertaken to achieve new aims – whether establishing certain ringfenced vehicles is necessary or whether existing structures can be used. A more holistic review considers which vehicles are best suited to achieve the investment aims, from traditional trust structures, private companies, or very private funds which, once agreed, can kickstart the setup of the bank and custody accounts required to operate and trade on the investments.

Whilst ensuring that the governance provisions of the structure align to the family, we must also consider the practical challenges represented by each engagement, including the appropriate services, reporting framework and costs, particularly where the latter is to be considered as part of broader investment performance. . Guiding investment principles and investment policy statements then become a key part of these considerations and represent another opportunity to unite the family with their fiduciary and advisory teams.

Seamless

Ultimately, any change a family makes will carry a risk of disruption to ‘business as usual’, which is why a service provider partner should always look to make any transition as seamless as possible. That means providing an independent project management service, bringing in the right people to make that change happen – from custodians, investment advisors and bankers, to tax and legal advisors.

Speed of course is important – time out of the market represents an opportunity cost in losing out on potential returns. But it’s also a question of getting the right people and the best possible advice. That’s why it’s also so important to seek the support of an experienced trustee with a network of good, reliable contacts who can ensure all the right experience and expertise is brought to the table to facilitate a seamless change in direction.

That requires a deep understanding of the family as well as a positive working relationship and an appreciation of the need to have good, honest and open conversations.

Added benefits

It is often these questions which trigger a broader discussion around a family’s wider objectives and operational framework.

Is there flexibility baked into the overall framework to allow for future change? If you consider that 12% of family offices plan to establish another branch in due course (Deloitte Private), there is a real need to consider future flexibility in the context of the wider international market. Tied to that, there is also the opportunity to consider the rapidly changing demographic nature of families – geographical spread and family complexity for instance.

In all these instances, an assessment stemming from an investment strategy shift can help bring these issues in other areas of a family’s business to the fore.

As a result, whilst it may seem that undertaking a comprehensive review to support a change in investment strategy might be onerous, doing so can not only help realise those realigned investment ambitions, but support a far more efficient, better governed family operation overall too.