From comparative obscurity, ‘family offices’, structures that protect and nurture the assets of successful families, have become a major sector in their own right. Management, which could once have been imagined as the family’s lawyer working out of a back office, has become highly professional, with a scramble to sign top talent. For the sector, big questions include how investment behaviour should reflect the values of the next generation, how the original entrepreneurial spirit can be maintained and the role of philanthropy. These and many other issues were addressed at a two-day Family Office Conference held at London Business School on February 21 and 22, under the auspices of its Institute of Entrepreneurship and Private Capital.
The family office sector has $10 trillion assets under management, but is “one area where we really have no clue what is happening,” according to Professor Florin Vasvari, Academic Director of the Institute of Entrepreneurship and Private Capital. To help fill in the blanks, a wide range of family office executives, the families they support, and academics, ranging far and wide across the subject, covered some fundamental topics around this sector at the LBS conference.
A number of themes emerged, from the image of the sector and its relationship with philanthropy, to the role of family members in the organisation and portfolio selection. But one theme that prevailed was the need for long-term thinking.
The principal of one family office said: “Our focus must always be on the long term,” while Herminia Ibarra, Professor of Organisational Behaviour at London Business School, said such organisations needed to be more nimble, innovative and disruption-proof.
She added that dynamic organisations were those that provided a safe space in which new ideas could be proposed. An attendee from Saudi Arabia said respect for elders in his country had the side-effect of providing just such a safety net for family members and those working for family offices.
Parallel to the need for long-term thinking is the fact that, as with many areas of financial services, family offices have been increasingly expected to define goals beyond simply making the best returns. One attendee, chief executive of his own family’s office, said he was planning for 30 years ahead, for being succeeded by the next generation in his current job.
He defined his approach as “purposeful stewardship”, with the portfolio shaped in accordance with the family’s outlook, meaning that his children could see their values being reflected in the way he deployed the assets.
“If the next generation doesn’t want these assets, then I will have failed,” he concluded.
Giving away money but not power?
Another attendee, involved in running a family office, said investments ranged across venture funds, direct investment, ESG investments and impact strategies, with the office navigating what he called “overlapping perspectives”. The big question, he said, was how to articulate to different generations of the family what the office was hoping to achieve.
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