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Dynamic dynasties

The most financially sound family office can rapidly unravel if not enough attention is paid to a core principle, i.e. to build and preserve socio-emotional wealth.

Financial success is undoubtedly the primary contributor to the prosperity of any family office, but it's much more than the balance sheet which needs to align. More than ever a family office needs to be thinking about the non-financial aspects [or socio-emotional wealth] that will keep it sustainable.

To this end, perpetuating any family or individual dynasty needs a dynamic approach.

In the latest FS Private Wealth edition, Paul Ramsay Foundation chief executive Simon Freeman speaks about his sudden promotion and coming to terms with managing a $3 billion legacy. Having to quickly find his feet, Freeman kept to the foundation's charter - a document which became integral as the newly-minted chief executive upheld Ramsay's pioneering identity and influence in Australian healthcare.

As Freeman explains, managing a philanthropic foundation means being flexible on the ground and learning new ways of working. He also talks about the importance of sharing information.

That last point was picked up in a recent KPMG study which showed family communication was central to socio-emotional wealth, and families who openly discuss business information are better equipped to identify and promote development. It said business families with high socio-emotional wealth are also more likely to keep control of the business.

In his most recent white paper, Mutual Trust partner Jeff Steiner addresses family office communication and says it is one of the greatest challenges faced in the sector. He also says it's important to define clear roles for each family member as well as engage an education plan to optimise the family's chance of success.  Again, being dynamic and addressing socio-emotional wealth is a key component.

Tellingly the KPMG report also showed about two-thirds (63%) of family businesses had a leadership transition or succession strategy in mind - hopefully one that's dynamic and best addresses the family's affective needs. A similar percentage (60%) also plans to pass leadership on to another family member.

At a time when philanthropic foundations and family offices are gifting Australian universities, museums and galleries some of their largest ever donations, Freeman's comment the sector is in an exciting period ring true. If indeed there is an innovative "wind of change", the most dynamic philanthropists and family office managers will surely be beneficiaries.

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