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Optimum Governance for a Family Office: Transparency is the Key


February 23, 2023

In the family office world, the issue of governance is prominent. Discussions, theories, and various approaches to governance are the subject of numerous books and conference sessions. Governance ultimately provides the policies, processes, and oversight by which a family can work with its family office to maintain unity and trust in managing its wealth and business affairs.

Generational change and the ceding of authority to new family members are often significant drivers for concerns about governance. Original wealth owners usually establish a family office structure to meet their goals and needs, with other family members and generations being beneficiaries but with limited or no control. When that wealth owner transfers control or passes away, the dynamics in the family come into play and can affect the relationship with the office. The office could fail at one end of the spectrum because it cannot adapt to meet conflicting needs and goals. Conversely, a well-considered, enforceable governance structure can empower the office to help the family do bigger and better things. The ownership transition can become an opportunity for the office to achieve more.

The Relationship between Transparency and Good Governance

Transparency is an essential component of good governance in a family office. Transparency includes how the agreed-upon values and goals of the family are quantified and seen to be accomplished. It is how the office can demonstrate the value it adds and raise the trust level it needs to function. However, transparency isn't easy to achieve. The operating structures of most family offices are not designed to facilitate transparency because of the various manual processes in their operations and workflows that are difficult to observe and chronicle. Changing to a more modern operating model is the starting point to help an office become more transparent, have a culture of openness, and increase efficiency and trust.

A modern operating model that ensures transparency and good governance requires technology to implement, support, and maintain it. Systemizing business processes and workflows provides the required transparency and enforceability around what is being done, how it is done, and the outcomes achieved. It also allows the office to empower employees to make better decisions because the information is more accessible and communication is simplified. Roles and responsibilities are clearly defined, allowing employees to take ownership of tasks and workflows. This sense of ownership facilitates more positive outcomes when dealing with various family members and their needs.

Transparency isn't about everyone in the office knowing everything that is happening. It's about ensuring everyone has the information they need to do their jobs effectively while being able to audit processes easily. Employees play a huge role in maintaining this approach. New employees, especially, must understand and accept what it means for their day-to-day work. Transparency should be part of the mission and philosophy of the office, which is an extension of the goals and values of the family they serve.

Why the Right Technology is Essential

The right technology is the foundation to break down communication barriers in an office, making it more transparent and compliant. The right technology can also bring other factors around control into play to support good governance, such as operational efficiency, risk mitigation, and the ability to audit and enforce policies. It also helps an office transform its image in the eyes of family members, so they see it as a value center instead of a cost center. Good technology can provide more time for staff to focus on new goals, in-depth analysis, improved oversight, better planning, and insights. It can help provide the "value" that moves the office and staff from being the recorder and reporter of historical data (i.e., a "cost") to becoming a strategic asset to the family.

Achieving this level of transparency and operational improvement often entails a radical change for family offices. It requires an integrated platform with capabilities to model each family office's unique operations. But it's a transformation that can revolutionize the management of single and multi-family offices. A truly integrated platform can facilitate the implementation of good governance through best-practice business processes and workflows and deeper transparency, in which complexity is made simple. The right platform represents a strategic solution in which the office has all the information to coordinate tasks, solve problems ahead of time, audit all processes, and meet family goals. When you think about a 360-degree governance view and being successful as a family office, transparency, control, and a single data source needs to be a priority.

A technological platform this complex and capable might sound impossible, but a platform like AtlasFive provides family offices just that. Additionally, an offering like our Administrative Family Office™ provides family-level governance in an automated, digital manner for family offices of all sizes and complexities.


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