Are You Asking the Right Questions in Your Family Office?

Assuming the responsibilities of a family office principal can be daunting and overwhelming, particularly for those who have recently come into wealth and perhaps lack experience in asset management. While you may feel like you have more questions than answers, that’s not necessarily a bad thing. Asking the right ones will guide you toward the knowledge and strategies needed to build and lead a robust family office.   

ONE WORLD CEO Scott Saslow forged his family’s office from the ground up after his father’s passing, and through the challenges and lessons learned from that experience, he has curated a list of five essential questions principals should ask themselves to become effective, prudent stewards of the family’s assets. You will also find a more detailed look at Scott’s story, his learnings, and the five pillars in his book Building a Sustainable Family Office.

Does the Family Office Have a Stated Purpose?

Does the family office have a broader purpose beyond increasing the capital base, and if so, what is it? Every family office is committed to stewarding wealth and investing capital for generations to come, yet a foundational (but often overlooked) pillar of this stewardship is a shared purpose that transcends financial management. This purpose can be internally focused, for example to support an operating business, or have a more external outlook, geared towards creating positive change such as social or environmental impact.

The latter can include philanthropic approaches like creating a family foundation or donor-advised fund, or a strategy that unifies the goals of both financial return and positive impact, as we see in methods like ESG integration and impact investing. These can also be effective ways to attract the interest and involvement of younger generations like Millennials and Gen Z in the family office, as these age groups tend to be particularly keen to address broader social and environmental issues. 

Whatever the office’s broader purpose may be, it is important that it is determined collectively through active participation of family members. It can also be helpful to establish shared values that form the foundation of this broader mission. Once alignment has been achieved, codifying these values and purpose into an official mission statement is a very useful way to structurally imbue this vision into the office’s operations. Doing so formally establishes a collective, energizing goal that transcends financial stewardship alone.

Who Is in the Family (and What Does That Mean)?

This question may seem obvious at first, but in the family office context, things get increasingly complicated with each successive generation and as in-laws and step-relatives come into the picture. While these individuals are certainly family, how does that translate formally into involvement in the office and asset distribution? Tensions can arise when expectations are not set and clearly communicated early on.

For those family members that are certain they would like to participate, what role will they play? The form that involvement takes will depend on the skills, experience, and motivation that they bring to the table, as the various roles—chairperson, board member, CEO, director/manager, and member—each come with their own levels of responsibility, skill requirements, and time commitments.

 It’s also important to note that talent doesn’t always run in the family and members of successive generations may not be best suited to management roles. At a minimum, principals should have a foundational understanding of asset classes, allocation, and risk; how leadership is performing and how much they are charging; estate planning and how the plan affects the family office, business, and themselves personally; how the family approaches philanthropy, including which causes they are committed to and how much they are donating.

As a Principal, Do You Spend the Proper Amount of Time and Attention on the Family Office? 

It is critical to understand that as a principal, you must treat the family office just like you would an operating business. Oftentimes individuals may fall into the trap of underestimating just how much time, effort, and emotional energy the office will require of them. 

Managing the family office, while rewarding, can be a challenging endeavor, so starting the journey with the right mindset – one that reflects proper motivation, responsibility, accountability – is crucial. It’s also important to remember to ask for help when it is needed, and to acknowledge and actively fill gaps in expertise, as creating wealth and managing it are two very different things.

The time and energy that family members are prepared to dedicate can also have significant implications for the office’s structure; for example, a single family office necessitates a greater investment in this regard (in addition to financial cost) as compared to a multifamily office. Finally, while bandwidth as a whole must be properly aligned with goals and structure, how workstreams are allocated also should be optimized based on both asset type (e.g. public vs. private) and management style (e.g. passive vs. active). Properly aligning capital and workstreams optimizes efficiency and returns potential.

How Do You Know When It’s Time for Your Family Office to Make a Pivot?

Being proactive, driven, prudent, and organized, are all essential characteristics of a successful family office team. Yet it’s equally important to remain flexible and adaptable as times change and as conditions evolve within the family and beyond. Regularly evaluate what’s working and what’s not so you can inform the necessary strategies. When the office is clear on its purpose as well as overall progress and performance, it will also maintain clarity over when is the right time to make a pivot if and when that moment comes. The key is to remain proactive vs. reactive.

There may also come a time when the best course of action is for the family office to disband. It may not necessarily be an issue of financial mismanagement or an unsuccessful attempt at succession; it may simply be the case that principals have come to want and need different things, so consensus, which is vital for proper functioning, is no longer feasible. As always, clear and consistent communication here is essential.

Do Your Family Members Know What Your Estate Plan Is?

Developing an estate plan is one thing (and a complex process at that). Ensuring it’s been clearly communicated to all family members and other relevant parties is another. Trustees–family or professional–should also have a very clear understanding of expectations and responsibilities. A helpful communication tool is a letter of wishes, a complement to a formal estate plan which details how a grantor would like assets to be utilized and enjoyed once passed on to beneficiaries.

 Such letters can be particularly helpful in the case of passing on nonfinancial assets such as artworks and real estate, which can become sources of conflict or tension among the younger generations when they assume management responsibilities.

 It’s important that these letters be written in such a way as to avoid contradictions or complications in relation to trusts and other legal estate documents. Involving advisors in the writing process can help ensure that they act as a helpful guiding supplement to the estate plan.

By asking the right questions and engaging in open, structured dialogue, you’ll strengthen your family office’s ability to thrive for generations and create a lasting impact.