Source: Russ Alan Prince from Forbes
Overall, the nature of single-family offices is distinctive compared to other types of organizations. In many ways they are family businesses replete with the complications, drawbacks, and advantages of any family business accentuated by significant wealth. Many times conflicts arise and steps need or probably should be taken to ensure smooth running of the single-family office and the family. In effect, striving for family harmony is necessary.
According to Angelo Robles, founder and CEO of the Family Office Association, “The ability of family members to get along and be supportive is probably a goal of many families irrespective of their wealth. In a survey of 199 senior executives, slightly less than half of them noted that their super-rich family holds a strong desire for family harmony.”
It is very easy for family conflicts to disrupt and sometimes destroy significant family fortunes. The ability to make sure all the key family members are on the same page when it comes to major decisions can be critical to the success of the single-family office including the maintenance or growth of their fortunes.
“The generational differences between single-family offices is very telling,” says Ellie Peters, wealth advisor at LVW/Flynn. “In 1stgeneration single-family offices, nearly two-thirds of the senior executives report the family is very concerned with family harmony. In contrast, only five percent of senior executives in 2nd generation single-family offices say the family is similarly very concerned.”
It is a major transition when single-family offices are passed to the next generation. Very often the founder wants to hold his or her family together. This is much less likely to be the case with the heirs who many times have different perspectives from their parents. As noted, disgruntled inheritors may very well, if possible, disengage from the single-family office potentially eliminating the issue of taking steps to promote family harmony.
Another reason family harmony is less of a concern in the 2nd generation is that it is a fairly common practice for the founders of family offices to structure the single-family office and their wealth by using trusts and other corporate entities in ways that strongly influence how the family will interact in the future. In these scenarios, family harmony is made moot as matters of control are set by legal structures.
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