Is it time for a family office?

We have still not cracked into this corporate structure in Malta, even though family wealth is rapidly growing.

Many families are shy to enter this corporate space as they fear that it will attract attention to their statement of affairs, besides reinforcing an impression of superlative wealth. In simple words, family offices manage and has oversight of a family’s wealth including their financial and property investments, involvements in corporate enterprises, besides being responsible for estate management and tax planning. These offices serve the needs of families who are shareholders in businesses and work to provide them with their desired lifestyle and investment returns.

The idea is to have a most professional, proactive and dynamic approach towards wealth, and that of designing strategies through investment policies that increase wealth while mitigating against risks. It is also a veritable and effective vehicle to transfer wealth from one generation to another. This is perhaps the biggest benefit one can attain from family offices as families struggle on succession, inheritance and tax planning.  A small team of professionals at back office coordinates with investment and financial advisors, legal counsellors, accountants and asset managers – ensuring that the right advice is given which is specific and focused on the unique needs of the family. It also gives an opportunity to the family to take corporate social responsibility in earnest, in designing a strategy for family philanthropy.

There are also risks involved. The selection of the people sitting at back-office is critical, making sure of their trust, integrity, loyalty, professionalism and coordinating abilities.  Since most of the professional advice and execution is outsourced, time and speed become of essence in decision making not to lose opportunities and to take advantage of others. Furthermore, there is always the risk of loss of confidentiality given the number of outsourced professionals circling around the office.

Family offices are costly, and they are generally recommended for families with wealth of €100 million or over. They usually cost around 1 per cent of the total wealth value. Smaller asset portfolio families can opt for services through multi-family offices which provide the same service at more accessible costs.

About the author(s)

Joseph F.X. Zahra is a Malta based economist with over thirty five years of corporate leadership and business consultancy experience.