Client Affairs

EXCLUSIVE: Advisor, Trustee Due Diligence - The Travails Of Setting Up An SFO

Joe Reilly, July 12, 2013

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Joe Reilly interviews Patricia Angus, advisor and consultant to families and family enterprises, about credentialing wealth managers, vetting trustees and families starting their own investment management firms.

For his regular series of interviews in Family Wealth
Report
, Joe Reilly interviews Patricia Angus, advisor and consultant to
families and family enterprises, about credentialing wealth managers, vetting
trustees and families starting their own investment management firms.

Reilly: Is there anything truly new under
the family wealth management sun?  

Angus: While there are numerous new product
offerings and increased legal structuring for families in the US and around
the world, the issues faced by private clients are timeless. Put simply, we are
born, we need to take care of ourselves while we are alive, and we leave a
legacy behind. The way that the industry has responded to this reality has
certainly become more complex, and the ways that families think about these
realities are changing as well. I recognized long ago that the most challenging
issues were neither financial or technical, and I am encouraged to see the
rapid growth in awareness of this reality across the field.

Reilly: Do you think SFOs can make the
shift to become an RIA and still maintain the "family feel?" What
would you tell a family who is considering taking in outside
clients?  

Angus: This is
a difficult transition and can only be understood through experience. It might
seem that taking on outside clients would relieve some of the challenges of
SFOs, but it creates new ones that are hard to predict. I would recommend that
a family clarify its motivations, and articulate its expectations, before
deciding whether to make the transition. For example, if the family values
control and the intimate culture that an SFO provides, they must consider how
they will feel when they are subject to the demands of other parties who become
clients of their organization. It is important to consider whether and how the
current professionals will adapt to an outward-looking firm, which often comes
with a more sales oriented-approach, vs the relative purity or objectivity of
an SFO. Most importantly, and often overlooked, is whether the family wants to
own and govern a financial services firm. It is a complicated business and
oversight requires a great deal of time and expertise.

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