Enhancing Resilience and Governance in Family Offices For family offices focused on returns from 'old wealth' or generational income, governance is based on experience and geared for stability

Managing wealth across multiple asset classes and facing complex investment structures and holding patterns to ensure growth and stability for high-net-worth individuals is a huge ask. The complexities have resulted in many high-net-worth individuals leaning on family offices to manage their family's wealth and investments and deal with complex financial markets, changing regulatory norms, and a volatile economic climate. In India, too, following many examples from the US, many high-net-worth families are setting up family offices to manage their wealth.

This shift entails building strong operational resilience and a corporate governance framework. For family offices focused on returns from 'old wealth' or generational income, governance is based on experience and geared for stability. The 'new wealth' family offices usually focus on innovation, speed, and growth. Both need strong governance structures to address family dynamics and succession planning and make for clear-cut divisions between investment and family management.

This is where tech tools can set up check and balance to automate compliance, reporting, and income distribution. They can set a solid framework by automating processes, sharpening decisionmaking, and build resilience. To drive growth and scale, we need to understand the fundamentals of corporate governance and the need to build operational heft to drive growth.

FACING UP TO THE CHALLENGES

Family offices face many challenges, especially in baking resilience and corporate governance into their firms. Often, they grapple with numerous accounts and investments spread across geographies and asset classes ranging from marketable securities and foreign investments to cryptocurrencies. Managing all these accounts at the individual level is counterproductive and could result in gaps in efficiencies in reporting and oversight. The high chance of errors and redundancies creeping into the system makes it more challenging.

Moreover, as families grow, multi-generational wealth management is a new kettle of fish. Earlier, informal governance models based on family ties and an element of trust worked for family offices.

This has changed now, and it is necessary to set a formal structure to fix any governance gaps that may crop up. Moreover, as the older cohort hands control to younger members, the lack of governance mechanisms can lead to conflict and misalignment in decision-making.

Younger family members look for innovative and diversified investments, adding to the operational burden on family offices. Thus, it is important to have a governance process for consistent reporting, transparency, and communication.

Relying on manual handling of financial reporting and compliance issues is inefficient and causes a spike in overhead costs and operational bottlenecks, especially trusts that have strict norms on distribution and managing incomes.

Meanwhile, robust governance structures are important for complex business dealings, such as partnership accounting, when family offices have joint ventures or investments with external partners.