GUEST COMMENT: How to land a role in a family office
Wealthy families face a dichotomy following the current global financial crisis. Which distressed investments merit investment, and perhaps more importantly who they can trust to provide the impartial due diligence advice on each opportunity.
With the rapid growth in personal wealth in the Middle East and the current nervousness in global markets, we find a new generation of high-net worth individuals (HNWIs) looking for impartial advice. The negativity towards both investment bankers and the institutions has created greater concern over the safety of personal cash assets, the quality and impartiality of financial advice offered and a heightened level of cynicism towards the level of fees charged by these banks.
As a result more wealthy families are deciding to go it alone. As a benchmark, $250m is the minimum requirement to justify the cost of kick-starting a traditional family office, but this could vary significantly depending upon the type of set-up and whether regulatory oversight is one of the operational considerations.
The importance of trust
The dynamic of the people required to run family offices is shifting, with a greater emphasis than ever on trust. After all, the main requirement is to preserve the family's wealth, and a relatively small team can often manage large sums of money.
CEOs of these organizations are likely to be seasoned professionals who started life as a financial analyst, a fund manager, a lawyer who specialized in financial advisory work, or even a real estate manager. One thing they will have in common is international experience in the (either) selection of other fund managers (ie, as a manager of managers) or the appointment of a variety of specialized boutique investment firms for each asset class or perhaps investment strategy.
The CEO would be assisted by one or more analysts as well as back office support staff. Collectively their role is to analyze and select the best funds/managers based on what should be a broad roster of risk-adjusted performance metrics.
The personal relationship between the CEO and the head of the family is key to success. Without trust and transparency this relationship will fail. The CEO will have to instill a high level of corporate governance and discipline to protect the assets under management, as well as profile the individual requirements of the Family, their appetite for risk and investment preferences.
A diplomat and money manager
A high degree of diplomacy is also required as the CEO must be sympathetic to potential sensitivities within the family and demonstrate a high level of confidentiality. Where a family office can fail is when there are too many members are involved in the decision-making process, which stops the money managers from doing their job.
The decision to set up a family office is an important one and should not be taken lightly. Whilst the personal chemistry between the CEO and the family is extremely important there are other checks that should be taken such as police security checks, professional and personal references etc. The wrong hire could cost the Family dearly.
Peter Greaves heads the finance and banking team for executive search firm McArthur Murray, Dubai. www.mcarthurmurray.com
