Family Office is not a new concept. Wealthy families have always needed to manage their assets and family interests and this has traditionally been carried out in various forms such as;
- An asset holding structure like a trust
- A trusted advisor such as a lawyer or accountant becoming directly employed by the family to help manage things
- The Finance Director or other employee of the family business being asked to help with the family’s personal assets
- A stand- alone entity employing a team of investment professionals and other specialists
- Or a member of the family taking full time responsibility for managing the family’s assets
With increasing wealth and the globalization of families and businesses, the need for wealthy families to professionalize their family management and wealth management has come to the forefront of discussions and has given rise to the emerging Family Office.
A family office can take any shape and form depending on the specific needs of the family it serves. It is a way to consolidate the management of the family’s assets and investments, so that at any given time the family has a consolidated view over the performance of all of its assets at home and abroad and can enjoy flexible decision making without having to go through multiple service providers, wealth managers, lawyers and tax advisors.
The family office structure increases the families’ control over family matters and the level of privacy, since information is restricted to a smaller number of people. A family office supports legacy planning and the transition of wealth from one generation to another, whilst ensuring that the family values set by the founder transitions from generation to generation.
Nigerian families have seen firsthand, the rise and subsequent fall of dominant family businesses in past decades because of a lack of structure and protective measures around the family business and family wealth, coupled with poor succession planning.
Gone are the days when the key to the success of a family business was stored solely in the mind of the founder who failed to share the vision, the success formula and long term strategy with a worthy successor, be it a next generation member of the family, or by appointing a competent team of professionals to ensure that the vision outlives him or her and transitions from generation to generation.
So, what is a family office? It is the crossroads where the family wealth and the family’s management meet. It is an ecosystem of professionals, systems and processes developed to manage the family to ensure that the wealth is generated, protected and sustained for the family and future generations.
A family office can be as small or as big as a family requires, depending on the size of the wealth and the various endeavours the family is involved in. Families can hire a full compliment of staff to handle their affairs or, with the growth in technology in recent times, a family can subscribe to a virtual platform where all the family information is stored and managed virtually.
Once a family has determined the ideal structure of their family office to meet their needs, the next big decision is choosing a family office location. Which country has the political, economic and regulatory landscape that best suit the needs of the family?
Choosing a family office jurisdiction traditionally is driven by various factors, such as the location of the family members, where the family wealth is generated or where the family assets are held. Other factors, such as talent availability, ease of travel, tax reporting régimes, also play an important role in the decision. With Covid-19 restrictions on travel, Nigerian families began to look closer to home, where there is greater access to advisers with local knowledge and expertise and closer proximity to where the family wealth is generated. The Covid-19 pandemic accelerated the desire for setting up a family office in Nigeria because families have access to more affordable overheads at home and technology has made it easier to access talent anywhere in the world through remote working.
Just as the pandemic brought significant and noticeable changes to everyday life, it has brought noticeable changes to the way that wealthy families manage their wealth and plan for succession, with increased focus, bringing about the growing family office landscape in Nigeria.
If you are interested in setting up a family office or you would like to enquire about family office services please contact: Nike Olakunri Director, Family Office & Private Clients KPMG Nigeria Email: nike.olakunri@ng.kpmg.com or visit Family Office - KPMG Nigeria (home.kpmg).
