A family office's operations cover much more than investments. The team also keeps the business running, coordinates with outside advisers, and gives the family a clear view of its finances. These processes help the office stay organized as its investments and responsibilities grow.
Keep the business running
An average-sized team may include a CEO, a CIO, and one or two analysts or associates. Alongside investment work, they handle employee issues, keep the business stable, and make sure there is enough cash on hand for payroll.
Small operational issues can take up a lot of time as the team expands and investments become more complex. Clear processes help the office keep these responsibilities in view.
Screen opportunities before committing time
Fund manager pitches, direct deals, meetings, emails, and calls can create a steady stream of incoming opportunities. The office needs a way to prioritize relationships and assess whether a proposal deserves more attention.
A quick initial review can screen out opportunities that are a poor use of time. Junior analysts can review the more promising deals before the team moves to in-depth due diligence.
Make due diligence fit the family mandate
Due diligence should establish whether a fund manager or investment fits the family mandate and meets the family's and CIO's criteria. That work helps the office avoid fraud, underperforming managers, and poorly structured investment banking deals.
The process should be applied before a commitment is made. The family's criteria give the team a basis for deciding which proposals merit further review.
Monitor the portfolio
The amount of market monitoring depends on how closely the family invests directly in public markets and other liquid securities. Portfolio monitoring also covers direct investments, real estate, and private equity funds.
Direct investments rarely need daily attention unless the office has a Chief Direct Investment Officer covering that area. The team's monitoring work should reflect the kinds of investments it holds and how involved the family is in managing them.
Keep learning from peers
Speaking with other family offices and investors who face similar portfolio challenges gives the team a way to share best practices. Ignoring those conversations can leave the team stale and slow to respond or make tactical moves to defend the portfolio.
Build reporting into operations
The office creates documentation for accounting and tax purposes, as well as regular reports for the family. Reporting may be weekly, monthly, or quarterly. It can be complex, and specialized or custom-built software may be needed to capture where money is invested and what those investments are worth.
The team also uses reporting systems to communicate investment returns to stakeholders. Accurate reporting depends on capturing the current holdings and their value.
Coordinate with outside advisers
Tax, insurance, risk management, and investment consultants may be involved in transactions, pending legal agreements, or private placement opportunities. Coordinating with them is part of the office's operational work, alongside investment review and reporting.
Action checklist
- Assign responsibility for employee issues, business stability, and payroll cash.
- Create an initial process to assess incoming opportunities.
- Use junior analysts to screen promising deals before in-depth review.
- Check each manager or investment against the family mandate and criteria.
- Monitor liquid securities, direct investments, real estate, and private equity funds.
- Set a regular schedule for family reports and accounting and tax documentation.
- Coordinate with outside consultants on transactions and agreements.
- Speak with peers facing similar investment challenges and share practices.
From the book
"An average-sized family office team consists of a CEO (often a family member), a CIO, and one to two analysts or associate-level team members. "
"At well-known single family offices, staff must coordinate and prioritize relationships amid a constant flow of in-person meetings, a bloated email inbox, and a seemingly endless barrage of phone calls. "
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