Home COLUMNS AND OPINIONS Behind the wealthy is a ‘family office’

Behind the wealthy is a ‘family office’

by biasharadigest
Personal Finance

Behind the wealthy is a ‘family office’

family business conference
Delegates during a family business conference in 2017. PHOTO | DIANA NGILA | NMG 

A list of Kenya’s wealthiest families was published recently and most of those who made the billionaires list’ were families from the political class. Some have interests in the stock market while others have diverse investments including banking, real estate, retail, petroleum and manufacturing.

I believe there are many other silent billionaires missing from the list because they are not public figures. One thing that was common as I perused through the list is that most run family-owned enterprises.

Every year, a global ranking of the world’s wealthiest individuals is published. From my analysis most are those with interests in ICT. The founders of Facebook, Amazon, Alibaba and Google fit in this category. They are followed by those with diverse investments on the stock market and those in real estate, manufacturing, fashion and luxury and retail investors. Of note is that high net-worth individuals from Asian countries have increased over the years.

Three other things stand out about those who make the list. One, they are from particular families, like was the case with two siblings in recent rankings. Second, some of these families have amassed generational wealth. Lastly, some individuals’ source of wealth is due to investments in ICT.

From my observation, here are my conclusions. High networth individuals are not only good in acquiring but also prudent in managing, preserving and growing wealth.

Some of them resort to using ‘family offices’ so as to adequately manage, preserve and grow wealth. The family office has been in use from the 19th century.

A family office is an advisory unit comprised of professionals hired by the family leaders to manage their wealth portfolio. A family office could also be a professional services firm that specialises in offering advisory services to wealthy families. It is made up of professionals like financial advisers, tax consultants, accounts, lawyers, and image and fashion consultants. These professionals are put on a performance contract and earnings are tied to the performance of the investment.

The advantages of having a family office include the introduction of expertise in managing the wealth, therefore leading to overall risk reduction. A family office frees up members of the family to focus on the endeavours of acquiring wealth and minimises stress.

It is also a great tool for mentoring the younger generation into wealth management as family offices conduct trainings and mentoring sessions for the family. This in turn promotes generational wealth and helps the family establish a legacy.

The family office is a useful tool for eliminating succession wrangles and also assists in dispute resolution.

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