Decoding Family Office

A clear objective, good governance and a shrewd business sense are required to script success.

- Rajiv Agarwal

FAMILY OFFICES, OR FOs, are becoming increasingly popular. These are primarily set up to preserve family fortunes, but they also focus on non-financial goals such as education or philanthropy. However, there must be a clearly defined objective for setting up a family office, and the entire family should be aligned with it. Globally, family offices are set up by ultra-high-net-worth families with an investible corpus of $250 million (₹1,664 crore) or more. In India, this amount could start from ₹ 100 crore.

A Single Family Office, or SFO, can be set up to look after the assets of one family, and the financial goals would include evaluating investment avenues and monitoring investments and cash flows. An SFO could be run by a member of the family or by a professional CEO. Having a family member at the helm would probably ensure greater control over investments, but the people involved need to consider whether the family member is the best person for this task. Consequently, the family member is often assisted by a team of professionals or he/she supervises a professional or a team. Things work out well when the entire family is united for a purpose, and the SFO reflects this unity of purpose in its investments policies. It could also prevent conflicts due to disagreements on investment choices. After all, the risk-return trade-off is an area of much debate and concern as the perspective varies widely from person to person.