Hiring for SFOs

A single‑family office (SFO) and its composition is as unique as the fingerprint of the principal who founds it. SFOs and the way they are staffed will vary greatly and will depend on a number of key factors.

Family governance and involvement are key considerations when setting up an SFO. If a family constitution or other similar governing document has been signed, then such document may assign roles and responsibilities to family members, as well as establishing who might partake in the management of the family office (FO) at different levels.

Further considerations include the value of the assets to be managed and whether the investment management function is to be performed internally or outsourced. Similarly, reflection around the type of assets to be managed will affect staffing requirements. Business assets may need to be handled by an individual with knowledge of the family business, whereas personal assets that include special assets such as jewellery, precious metals, digital assets or collectibles may require the assistance of an external expert for their storing, insurance and proper management.

The jurisdiction in which the FO is established might have specific exemptions or requirements for local hiring, applicable to FOs. Thought should be given to immigration planning and local regulatory requirements for directorships, the filing of accounts, licensing, audits, the holding of annual general meetings, economic substance, tax returns and registers.

Philanthropy is often an important consideration for an SFO. Unique anti‑money laundering and know‑your‑client requirements pertaining to philanthropic structures and the assessment of charities may well require staff with specific experience, or the engagement of a compliance service provider to help the SFO navigate around these often‑complex conditions.

An SFO setup is often quite informal and might include heads of different asset types reporting to a trusted advisor to the family principal, a chief executive or head of FO role. This person will often act as the conduit between external providers and the family members themselves.

Outsourcing

Depending on the size of the FO, many of the functions mentioned above may be initially outsourced with some roles to be internalised as the FO grows and expands its team.

It is common to see the segregation of duties between FO staff and providers, such as a private bank or a licensed trust company. Where there is a segregation of duties, it is often useful to establish service level agreements (SLAs) between entities so there is a clear definition of services, and which party is responsible for their delivery. These SLAs, alongside a clearly defined business plan, will help the FO determine what roles they wish to onboard and which they choose to outsource as the business grows and changes.

The right fit at the top

As in all organisations, having the right people in the right roles is integral for the success of an SFO.

Many job postings for ‘head of family office’ or similar titles list requirements for applicants that almost seem unattainable. For any one person to possess all technical abilities and experience in multiple practice areas is extraordinarily rare. Therefore, hiring the right person often takes time and patience, with a level of compromise to be expected.

SFOs must hire individuals to run their operations with a background in the areas most important to them, but also with a willingness to learn about subject matters with which they are unfamiliar. These generalists should possess a keen sense of risk in order to assess when more formal advice must be taken or a subject matter expert should be called in to assist on a particular transaction. The applicant’s moral and ethical standards, as well as their emotional intelligence, should be assessed alongside their professional qualifications to ensure a good fit with the family’s beliefs and practices.

The promotion of and adherence to the ethos of the FO and ensuring staff morale and productivity are key responsibilities of the ‘head’ of the SFO. Thought should be given to the succession of these key individuals so that knowledge, experience and values are not lost to the organisation should a change in this role occur.

Measuring the success of the SFO

As in other businesses, FOs should consider solid goal planning and employee review strategies alongside their financial forecasting and budgeting. Employees need to know what is expected of them and must be clear on objectives and specific targets they are expected to meet. Unless roles are clearly defined, there can be a tendency for overlap and, conversely, gaps in the performance of certain duties.

The success of FOs might be measured on the analysis of financial return, but may well also include personal educational advancement, effectiveness of communication, adherence to family beliefs and delivery of philanthropic efforts and community support. Individuals need to be willing to work toward financial and non‑financial targets and objectives.