Why you should audit your family office?

Audit Family Office Liposter

Many ultra-high-net-worth individuals value the convenience and support they receive from the professionals in their family office. Engaging one or more trusted professionals to manage their investments and oversee their assets is an effective strategy for many ultra-wealthy families.

But can they be sure their family office is effective? Sometimes complacency and comfort become the norm, in a field where job security often depends on personal relationships with the senior family members.

This is why we feel that an outside audit is so important. An outside professional who understands both financial markets and comprehends the core competencies of how a family office should operate, that can source answers to questions like these:

• How does my family office compare with others of a similar type?

• Does my family office have the right procedures in place?

• How well is my family office performing on a risk adjusted basis?

• Is there a mismatch between my financial goals, risk tolerance and the decisions made by my family office team?

• What is the appropriate size for my team? In one recent audit, I found a family office with seven times more people than necessary.

• Where are assets being held? Do you have the right reporting system to understand where they are? Is the monthly reporting easy to comprehend? In a recent audit I found a family office using an Excel spreadsheet to track their positions and performance, providing the family with a more than 250-page report.

• If the family office is using multiple banks or brokerage companies, what fees are those institutions charging and do they seem appropriate?

• How modern is my family office platform? Does it take advantage of new technology?

Think of an audit like an annual wellness checkup. It is the opportunity to discuss changes in personal values, investment goals, risk tolerance and family dynamics. A post-audit meeting also provides an opportunity to bring younger family members into the conversation, giving them an opportunity to get to know the professional team and build a relationship with them. This will also increase the longevity of the family office.

But if the team at your family office is not up to the task or no longer fit with your outlook or values, then it is time for a change. An outside professional can help you source more suitable professionals and take on the emotionally difficult task of ensuring a smooth transition or integration. Once the audit of your family office has been completed, you will have a better understanding of where you stand. Hopefully all is well, if not you can make a well-informed decision about next steps. If the team is doing a great job, you should let them know and perhaps offer a bonus.

If there are issues that need to be addressed, we can sit down with you and your current CEO / COO for a discussion about the points requiring improvement from the audit. The end result will benefit you and your family.

Think of an audit like an annual wellness checkup. It is the opportunity to discuss changes in personal values, investment goals, risk tolerance and family dynamics. A post-audit meeting also provides an opportunity to bring younger family members into the conversation, giving them an opportunity to get to know the professional team and build a relationship with them. This will also increase the longevity of the family office.

But if the team at your family office is not up to the task or no longer fit with your outlook or values, then it is time for a change. An outside professional can help you source more suitable professionals and take on the emotionally difficult task of ensuring a smooth transition or integration.

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