All family members attended educational conferences to understand the workings of family offices and to network with other families. The family office board began participating in investment reviews with investment managers. They also reported annually to the rest of the owners in a formal shareholder meeting.  
Through this process, the family members came to appreciate the importance of a clearly defined vision and appropriate oversight for their investments. Their father was pleased that a structure was in place that would ultimately allow the next generation to take over family office oversight.  

Getting Started
As this case illustrates, having a clear plan for the family’s involvement in family office operations and investments is crucial. It’s also important for wealthy families to educate children about general management and investment decisions, estate and trust structures and investment terminology. While not all family members will need to sit on the family office board, those who do serve should understand how to manage internal personnel and advisors, review financial statements and strategically decide how services are provided.  

Developing an education plan may seem like a daunting task, but the following steps will help guide family members through the process:

1. Align the family around the need for education.

2. Ensure that members of the family’s next generation opt in and understand the requirements of participating in the family office board.

3. Create an education plan and time line.

4. Identify education resources. Many investment advisors and groups offer educational opportunities for young family members. Another option is to enroll family members in an executive education program offered through a university.

5. Take it one step at a time. It’s important to set up a process that provides gradual exposure to new concepts. If participants are overwhelmed, it can deter them from participating. Creating opportunities to interact with people in their own family or other families can make the education process more enjoyable.

6. Continue to invest. Investment concepts and board responsibilities will be a new experience for most family members. A one-time program will not be enough to establish comfort in the board role. Family members will need ongoing exposure to family office activities, such as meetings with investment advisors and board meetings, to help to increase their confidence.  

When a family office is set up, the primary goal often is to protect and grow family wealth by providing high-quality, dedicated services in a secure, confidential environment. For families with the level of wealth required to support the cost structure, the benefits of a family office are evident. Less evident are the challenges families face when new leaders take on the oversight of the office without the necessary education and experience.

Jennifer Pendergast, Ph.D., is a senior consultant with the Family Business Consulting Group, a management consulting firm serving multigenerational family businesses worldwide. Learn more at www.thefbcg.com.

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