Ten Single Family Office blind spots

There are ten key pitfalls of which Single-Family Offices (SFOs) should be wary. They both emphasise and highlight the need for professionalism in comprehensive wealth management. Over the next few weeks, I hope to equip SFOs with actionable insights to sidestep common mistakes by illuminating these pitfalls. Although each family office has its distinct characteristics, the advice presented here serves as a valuable basis for informed discussion and self-assessment.

Misstep #1: Prioritising individuals over objectives

In establishing a SFO, families often prioritise appointing a Chief Executive Officer (CEO) without first assessing the need and purpose of the family office. Successful businesses, in contrast, start by identifying their objectives. This CEO-first mindset in the SFO industry overlooks the importance of defining the office’s goals and purpose, which should be the family’s responsibility.

Instead of focusing solely on individual appointments, families should actively engage in defining the SFO’s objectives. This ensures alignment with their strategic vision and long-term goals, leading to a more purposeful and successful endeavour. 

When selecting key personnel, families often consider familiar professionals like bankers and lawyers. However, this approach varies by region. In developing countries, the emphasis is often on trust over competency, leading to family members being appointed to top positions. Cultural norms and a sense of stewardship also play a role. For example, in some Asian cultures, daughters may oversee the family office while sons lead the family business. In Western societies, the tendency for some families to prioritize competency over familial ties is presumably influenced by their personal belief in the reliability of the rule of law.

It is not always easy. The Family Office Operational Excellence Report 2024 from Campden Wealth and AlTi Tiedemann Global found that the pools of talent can be limited and that recruitment can be challenging. It found that 67% of small family offices, 66% of midsized family offices and 56% of large family offices had struggled with recruitment. 

Selecting key personnel involves a complex interplay of cultural values, legal systems, and the need to balance trust, competency, and family unity. Each family’s approach reflects their unique circumstances and societal context.

To choose the ideal candidate, start by clarifying the family’s objectives and aligning the SFO’s purpose to serve them. This alignment significantly influences the SFO’s operations and outcomes.

This misstep highlights the importance of prioritizing objectives over individuals in SFO creation. By focusing on the family office’s purpose and necessity, families can lay a solid foundation for future success.

Misstep #2: Neglecting to create a mission statement

While a family mission statement is essential for setting the overarching goals and tone for an SFO, many SFOs operate without a mission statement of their own. This oversight does more than just hinder the SFO’s ability to set a clear direction; it also compromises its effectiveness across multiple dimensions – from stakeholder engagement and resource allocation to decision-making and cultural cohesion.

The report from Campden Wealth and AlTi Tiedemann Global, for example, found that 38% of family offices didn't have a mission statement at all. 

The absence of a dedicated mission statement for the SFO is a significant oversight. While the family mission statement lays out the general framework and values, a specific mission statement for the SFO is essential for guiding its tailored activities. This dual approach not only ensures that the SFO aligns with the family’s goals but also equips it to navigate its unique challenges.

A mission statement serves as a primary tool for exploring, aligning, and formalising the SFO’s purpose. Creating one offers valuable insights into family priorities and what truly matters. It also provides a means to measure the SFO’s success in fulfilling its purpose and can effectively guide decision-making, innovation, and improvement.

While some may view a mission statement as fluffy or academic, it offers several tangible benefits. 

First, it outlines the SFO’s core values and goals, serving as a guiding principle. Second, it helps the SFO maintain focus and effectively allocate resources. Third, it fosters unity among family members, staff, and stakeholders. Next, it provides a reference point for evaluating opportunities and initiatives. Then, it enhances both internal and external communication, potentially attracting like-minded partners. And finally, it encourages a long-term perspective, helping to maintain continuity across generations.

In short, a mission statement is a foundational tool that provides clarity, focus, and strategic direction, contributing to the SFO’s long-term success and sustainability.