—by Cameron Cooper
Single-family offices are an increasingly popular option for high net worth Australians looking to better manage their wealth and legacy, but drafting in specialist external advisers is often valuable too.
As a growing number of high net worth Australians establish single-family offices to manage their governance, financial and personal affairs, the need for support and expertise from experienced advisers is becoming increasingly important. Though families that use such an entity naturally demand wealth management expertise, trustworthiness and communication skills tend to be just as important. So says Peter Roach, a senior consultant at JBWere and formerly the chief executive of one of this country’s largest single-family offices for more than a decade. “When families engage you, they’re often looking for what I call old-fashioned values such as confidentiality, respect and being discreet,” he reflects. “You must be a good listener; too many wealth managers tell people ‘the way it is’ but for the family advisory work that I do you really have to encourage family members to talk and gain a clear understanding of what’s important to them.”
TAILORED AND TIMELESS
A 2023 report by KPMG cites a conservative estimate of 2000 family offices in operation across Australia, including those that manage wealth for a cohort of families. This represents a doubling since the 2008 global financial crisis, reflecting both significant wealth acquisition over the period and an increasing focus on philanthropy and impact investing. Family offices can formalise and structure such efforts by facilitating the creation of charitable trusts and foundations, or by investing directly in causes that reflect a family’s passions and values.
Though set-up requires significant investment, a single-family office can lead to long-term financial savings by bringing all legal, financial and tax services under one umbrella. They are also useful for managing complex financial structures such as private equity or cross-border investments. Among the critical motivators for many families is a desire for greater customisation of investments, tax strategies and legacy planning than the traditional banking model provides.
Frequently established when the guardians of family fortunes are entering their golden years, these entities map out how wealth and responsibility will flow from one generation to the next. “It is a way for the family to look at the future and consider any governance requirements beyond the lives of some of the senior members,” says Roach, who now advises family offices of varying sizes.
Two key governance elements for an office and its advisers to determine are a legacy statement and family charter. Roach says the former “defines what the family’s all about” while the latter establishes guideposts for all family members as part of their shared values and mission. In the event of a family member requesting access to capital, for example, the family charter addresses questions such as whether the money should take the form of a distribution or a loan. “All of these things can be sensitive discussions if they’re held between a parent and a child,” Roach says. “So we try to depersonalise it by putting in place clear policies that are not aimed at any one person.”
BALANCING SCALE AND STRATEGY
A perennial question is how much wealth is required to justify setting up a single-family office? Roach finds that the model is well-suited to those with assets under management of at least $250m, bearing in mind the cost burden of assembling a team with the skills to adhere to strict reporting and financial requirements. He says the family office landscape is evolving, however, as more people look beyond wealth preservation to consider the lasting imprint of their family’s story and principles. “I’m now seeing people with assets of about $150m establish their own small family offices,” he says. “You’re never going to be able to cover everything internally but a hybrid operational model can be effective at this level.” In this approach, two or three staff members coordinate core functions such as investment management, governance and reporting with external advisers who provide specialised expertise in domestic and international market trends. According to KPMG, around a fifth of Australian family offices have less than $25m assets under management, while the majority fall within the $250-500m range.
The primary objective of any family office, emphasises Roach, is to mitigate the potential for family discord both in the near and distant future. Achieving this goal often requires making challenging decisions. One such decision, which he terms “pruning the family tree to promote growth”, involves the careful exclusion of family members whose personal values or objectives have diverged significantly from the family office’s established culture and strategic aims. This process, while potentially difficult, is sometimes necessary to maintain the integrity and effectiveness of the family’s wealth management strategy.
BRIGHTENING HORIZONS
Roach expresses satisfaction at the ripple effect he has seen within the family-office sphere, observing that philanthropy has become embedded in the core values of numerous families managing wealth across generations. As the industry grows, he anticipates the management of ESG principles will become increasingly prominent. “ESG resonates with young inheritors who are pursuing purposedriven investment, so it’s a real emerging theme,” he says.
The gravity of being entrusted with a family’s legacy is not lost on him; “The thing that exercises the minds of a lot of families with significant generational wealth is family ethos and leaving their mark on the world.” He adds: “Single-family offices are a great way to bring those dynastic dreams to life.”
The information contained in this document has been prepared with the permissions of the JBWere Family Advisory and Philanthropic Services Department and gathered from multiple sources believed to be reliable as of end of September 2024. JBWere and their respective related entities and each of their respective directors, officers and agents (‘JBWere Group’) believe that the information contained in this document is correct and that any estimates, opinions, conclusions contained in this document are reasonably held or made as at the time of compilation. However, no warranty is made as to the accuracy or reliability of any estimates, opinions, conclusions or other information contained in this document. Any information contained in the article is intended to be of a general nature only. JBWere Limited (‘JBWere’) did not take into account the investment objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Accordingly, before acting on any information contained in this article, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your advisor. Issued by JBWere Limited ABN 68 137 978 360, AFSL 341162.