Investment committees increasingly making family offices’ final decisions

Investment committees are increasingly making the final decisions on global family offices' major investments and structuring as the professionalisation of the sector accelerates, a study from Ocorian has shown.

The research highlighted a growing trend of greater professionalisation around governance, structuring, and investment portfolio management at family offices.

Almost half (47 per cent) of family offices said it was now an investment committee that was the ultimate decision maker when it came to major investments or structuring.

Just 6 per cent of family offices still had their founding family member as the ultimate decision maker, while 39 per cent said a member of the next generation was in charge of final decisions.

Meanwhile, 6 per cent of family offices used external advisers as the final decision makers, and 3 per cent used a family council or board.

All the family offices surveyed agreed that their set up had become more professional over the past year and they had made several changes to achieve this.

More than half (54 per cent) had developed a more diverse and professionally managed investment portfolio, while 51 per cent had secured the support of more third-party professionals.

Almost half (46 per cent) said they had strengthened their compliance, tax, and legal infrastructure, while the same proportion had developed a stronger succession plan.

All respondents had a formal governance structure of some sort, with 65 per cent having an investment committee with independent members and 60 per cent having a next generation advisory board.

Over half (56 per cent) had a formal risk committee, 54 per cent had external independent trustees or a board, 35 per cent had a family council, and 18 per cent had a family constitution or charter.

However, Ocorian noted that family offices were still facing several challenges, especially when it came to regulation.

Just 8 per cent of respondents said they were very well advised and well equipped to meet the current global regulatory demands they face.

Around three quarters (74 per cent) felt they were in quite a strong position to meet these regulatory demands, while 18 per cent said their ability to meet them was average.

“Family office operations and management is becoming increasingly professionalised, and many have already made significant changes to their governance structure and the way in which investment decisions are made,” commented Ocorian commercial director, Dion Yee.

“Many are looking to the future and to succession, and investment committees are taking the place of founders when it comes to decision-making, instead of this automatically defaulting to the next generation.

“However, there is still work to do, particularly with global regulatory demands constantly changing and increasing in complexity. Many are still looking for professional advice to navigate regulatory issues.”

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