January 11, 2011

Family Office Exchange Reports on Sustaining Small Family Office

FOX finds that ‘sustaining wealth’ and ‘transitions’ are top concerns for family offices

“The cost of sustaining wealth, and generational and leadership transitions,” continue to challenge smaller family offices, according to a new survey from Chicago-based Family Office Exchange, (FOX).

The FOX peer-to-peer network, for ultra-high-net-worth families and the advisors who manage their financial affairs, has released results of a survey it conducted with the Okabena Co., a Minneapolis-based family office  and investment advisor, about “sustainability” of smaller family offices.

The report, “Innovating to Survive and Thrive: Meeting the Challenge of Small Family Office Sustainability,” focused on “sustainability” and “delivery of quality family office services.”

Participants ranked sustainability concerns, according to the report. The top concern, especially for “small family offices,”  was “Cost of providing family office services;” ranking 84%. “Long-term dilution of family wealth,” was the number-two concern, with a 78% ranking. Participants noted that the tendency for each generation to expand in number, diminished “buying power.”

Family leadership,” was ranked number three, with a 73% score. “Several participants described the challenge of identifying members of the next generation with the skills, interest and bandwidth to lead,” the report states. The number-four concern, “Family cohesion,” scored 67%; and number five, “Family office leadership and succession,” stood at 59%, demonstrating the difficulty of finding successors for “executives [that] have unique skill sets and institutional knowledge that is difficult to transfer.”

Service delivery challenges include “managing manual reporting processes, complying with

an increasingly complex tax code and cash flow management;“ most of these, the report asserts, are cost related.

FOX will hold a workshop about these family office concerns in Miami on Feb. 1 for “owners and leaders of family offices with fewer than 10 staff.”

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