What type of family office is right for you, and when is the right time to establish one?
Just like an investment company, a family office needs a robust and transparent structure with clearly defined rules and processes for governance and decision making to run smoothly and fulfil its core function of protecting and growing a family’s wealth. This is true of both single and multi-family offices, which, depending on location, can both be subject to external regulation. This is especially the case for multi-family offices, which arguably attract more stringent regulatory interest as they are managing external wealth alongside their own. Even so, a family has a fair amount of autonomy when it comes to structuring its family office, and we observe some variation in structure amongst the six offices we interviewed.
The UK’s Applerigg successfully ran its multi-family office Sandaire, which serviced around 20 families, for more than two decades before selling it and reinventing itself as single-family office. Established in 1996 following the sale of family-owned insurance company, Provincial, and now in its fifth generation, Applerigg’s management has always been delegated to non-family executives. But a recent, streamlining-focused shake up now means a single external organization manages most (90 per cent) of the family’s wealth and operations.
Financial and strategic decision making is overseen by a Board of Directors, with close involvement of the (non-family) CEO.
A fifth-generation family member has been Non-Executive Chairman of Applerigg since 2020.
Fourth-generation family member and founder of Applerigg, Alexander Scott, says that since the launch of his multi-decade career the role of the family has always been ownership, oversight, and strategic asset allocation, and that a family constitution and process of governance involving non-family executives has helped to protect the business.
“When we sold [Provincial], we recognized that whereas a family business holds a family together because there's a clear sense of purpose and direction and responsibility towards it, when you take the business away, as we did by selling our core business, there's a risk that the family drift apart and become less coherent in their approach to the task at hand, which is to act as good stewards of their wealth," says Scott.
When third generation family member Heinrich Jessen took over the reins of the family office—then based in Switzerland—from his father in the 1990s, he set about simplifying its structure.
The decades-old office had been established in the 1950s by the family’s second generation, who considered Denmark home but were doing the bulk of their business in Asia. Today the Swiss office remains, but Jessen’s focus is very much on Singapore, where he lives and established and co-owns a multi-family office, Aglaia, that is deliberately simple and transparent. His partners in the family office oversee its day-to-day running, freeing Jessen to focus on other family business ventures. Aglaia was established in 2011 and manages the wealth of several families, including some of Jessen’s own. Its operations are separate from Jessen’s Swiss family office, and the family business. “When I joined the family business in the mid-nineties, I was introduced to its complexity. I’d come along to these bi-annual meetings where we’d have to spend a whole day going through the structure and reminding ourselves [of how it all worked]. And I never quite understood it.
At the Tsao Family Office in Singapore, the family’s four second generation siblings take turns filling the role of chairperson for three-year terms.
This system has been in place since this iteration of the office was established in Singapore 2017. The original office was founded in Hong Kong by the family patriarch more than 40 years’ earlier, and handed over to one sibling, Dr Mary Ann Tsao, over dinner one night in 2014.
Dr Tsao spent three years taking care of the family office before her siblings also came onboard to relocate and establish the current family office to manage the family’s wealth, which has its foundations in the maritime industry. “Fundamentally, the family office runs like [my father’s] company did. There's a family council, which is like the board, which my three siblings and I make up. Policies and the like are decided at the board level.
In one Chinese family office we surveyed, family members fill senior roles and are closely involved in the day-to-day running of the family office.
One second generation family office representative that we spoke to, who has asked to remain anonymous, says their parent has been the sole chairperson since the office was founded approximately 20 years ago. They themselves are the Vice-President and CIO, managing 100 per cent of the wealth and investment decision making internally. The office also manages the wealth for two other families and from structural and governance perspectives, operates much like an investment firm. HT Capital, which has offices in Beijing and Hong Kong, began growing its team and professionalizing its structure and operations around 2015.
Before that time, decision-making was ad hoc, with the family patriarch driving the company’s focus and having the final word. Now a seven-strong investment committee, which comprises family and non-family members, reviews potential investments and votes on whether to pursue them. The office was founded off the back of a successful legacy business in the pharmaceutical industry and now has hundreds of investments all around the world. Investments have been underway since the 1990s, but the actual single-family office was formed some years later. Investments are overseen by both internal management and external advisors or wealth managers. “We’re now in the process of obtaining licenses to operate a multi-family office in both Hong Kong
and Beijing. We have been partnering with other family offices for quite some time, and people often ask us for advice. A multi-family office is the next logical step,” says spokesperson Margaret Zhao, who is the oldest of the second generation’s five siblings and has been involved in the family business since completing her postgraduate studies in 2015.
Maitri Asset Management, a Certified B Corporation multi-family office headquartered in Singapore, was founded as the Tolaram Family Office in 2015. The family’s business roots can be traced to the textile trade in 1948. Today, through the Tolaram Group, the family is highly diversified, with businesses ranging from logistics and distribution to consumer goods. “[The Group] is split into the family office, which manages the passive financial wealth of the family, and what we call our corporate arm, which manages the operating assets of the family,” explains non-family CEO Manish Tibrewal. The family office was formed as part of a broad restructuring of the family’s assets, to create a long-term vision for the family’s legacy. It was also created to facilitate the entry of the family’s fourth generation into the family business, who are likely to be less involved in its day-to-day operations than previous generations. A major liquidity event also took place around the same time. In 2019, Maitri obtained the licenses required to become a multi-family office and is now growing that part of its activity.