Multi-family offices expand their scope to include working for the family business

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Behind the advertised services of most family offices is a bustle of activity that manages and preserves their clients’ family wealth, from overseeing investments and structuring trusts to defining governance among stakeholders.

What’s often overlooked is how family offices can lend their expertise to the operational businesses that created and built financial prosperity for the family in the first place.

“It’s a lot less common for family offices to deliver services to the family business,” says Tina Di Vito, Canadian family enterprise leader with EY, based in Waterloo, Ont.

“These companies already have their own executives, staff and board of directors, so typically there isn’t a need for a family office to cross into the family business realm.”

A more common occurrence, particularly in single-family offices, is for certain staff from the business to take on responsibilities related to the personal affairs of the company founder’s family. Over time, as the family’s financial and personal needs become more complex, these staff members may form the core team of an embedded single-family office that might handle both business and personal matters, or focus entirely on the family.

“Historically, the reason why very wealthy families have a family office is because they wanted to separate the management of their personal affairs from corporate affairs,” says Di Vito. “So they formed these single-family offices with staff that managed the family’s wealth, perhaps identified private equity opportunities, and also looked after household matters like hiring a nanny, landscaper or a security guard.”

Economies of scale

With the emergence of multi-family offices, the scope of services available to wealthy families has, in some cases, extended to include certain aspects of a family’s operational business. That’s because the economies of scale achieved by a multi-family model typically allows these offices to hire a full slate of staff, some with skills and knowledge that would also be useful in a corporate setting.

This access to in-house human resources, combined with in-depth knowledge of clients’ often-complex financial and relationship structures, puts family offices in a unique position to help with certain business matters, says Jason Vincent, president and co-founder of Matco Financial Inc., a Calgary-based multi-family office.

“We’ve worked with some families for over 25 years and we’ve been extremely involved in all the specifics of their family wealth,” he says. “So when they have an active business that they need help with, they’ll often look to us because they know we have the financial, management and oversight expertise.”

Help with developing strategies for optimizing a business is a common request from enterprising families, says Vincent. As first- or second-generation company owners start looking toward retirement, they’ll also turn to his office for support with succession planning.

“We have the resources and experience to train and mentor family members to be within the business,” he adds.

Andrew McQuiston, co-founder at Calgary-based West Oak Family Office, says an important component of succession planning that family offices are well equipped to deal with is the creation of rules of engagement for offspring and other relatives who want to join the family business.

Like governance agreements that provide a system for decision-making and conduct in matters related to the family wealth, rules of engagement within a family business succession plan define expectations and standards for kin working in the company.

“For example, the rules might require you to have a degree and to gain work experience in every aspect of the family business,” says McQuiston. “In essence, the rules spell out how you earn a seat at the family business table, but also how you lose a seat.”

Kelly Demo, a founding partner at West Oak, says family offices can also serve as a referral hub to a well-vetted network of specialists such as accountants and lawyers.

“So if your business is involved in a wrongful dismissal suit, you can lean on a family office to find you a lawyer who deals with employment and contract law,” says Demo. “If you’re looking to lease or buy office space, your family office likely knows a really good real estate lawyer.”

A ‘tight circle of trust’

Di Vito says these connections to tried-and-true experts are invaluable, especially for wealthy families who want their family and business affairs managed within a tight circle of trust.

While family offices are used to navigating their clients’ financial structures and relationship dynamics, getting involved in the family business can present new challenges and potential conflicts, says Vincent.

For instance, where it makes more sense to sell the business rather than pass it on to the next generation, the family office advisor might run up against the company founder’s wishes. Or in cases where the family wants to use its wealth to back an offspring’s new business, the family office may need to help persuade other clan members to support the proposed enterprise.

“Part of the skillset we bring is our ability to navigate these situations because of our relationships with our clients,” says Vincent. “We’ve gotten to know them and their family members very well, and that’s a big part of the reason why they also trust us to help them with their business.”