September 14, 2009
As family offices struggle to make it through the recession, with many trying to cut costs and reduce staff, some are setting up advisory committees instead of hiring specialists to address issues such as family governance, investments and philanthropy. These committees are comprised mostly of family members and outside professionals, such as advisors from private banks, attorneys, accountants or independent investment management consultants who help the family make decisions on what to do with their wealth for free. By creating such committees, families can keep the costs down, and advisors can benefit from references families make to their networks.
Angelo Robles, founder of Family Office Association, noted that SFOs in particular have been weighing their options carefully about whether to keep services in-house or to outsource them, but are more focused on creating these specialty committees to be sounding boards for their families. The concept has gained traction this past year with the families’ younger generations as they can equate a family committee to a similar board of directors at any given firm, he said.
Bob Casey, senior managing director of Family Wealth Alliance, said that he is also seeing the trend as a move toward more formal governance structures. “Many SFOs are struggling and are not economically viable, and expenses are such that they’re having difficulty,” said Casey. To combat this, many are setting up these structures to make sure the family office works properly and multi-generational family members work together to find a solution.
MFOs have started getting in on the act, noted Paul Karger, managing partner for Boston-based MFO Twin Focus Capital Partners. “Such committees can aide not only in educating the family on matters at hand, but also gather a collective voice in the overall decision-making process,” said Karger. “Given the dynamics of varying family members, and based on level of interest, we generally encourage each individual family member to use one’s natural skills in indentifying their own desired role within the family committee.”
Twin Focus works with traditional advisors such as attorneys, accountants, investment management consultants as well as specialists in arenas like hedge funds and private equity to staff committees. “We’ll also work with consultants in areas such as philanthropy that may help not only to work with the family to identify charitable endeavors, but also possibly help with the due diligence process involved around grants and gifting,” Karger added. –K.O.