Family offices are becoming increasingly professionalized, particularly when it comes to the investment function. But although some families are also putting in place more professional governance, that process is moving more slowly, according to Citi Private Bank’s Global Family Office Survey Insights 2023.
The survey found that almost two-thirds of family offices (64%) have an investment committee, and an additional 10% are working on forming one. Just over half (51%) have an investment policy statement.
“Investment is complex, and it’s an industry that has itself professionalized,” says Alexandre Monnier, global head of family office advisory for Citi Private Bank. “That’s where you’re seeing the greatest traction.”
When it comes to professionalizing family office activities beyond investing, the results are more mixed: 70% of family offices have separated the family office from the family business, and 66% say they have clear processes and internal controls. But not quite half (48%) have a governing board, and even fewer have a formal strategic plan (41%) or a formal risk management plan (36%). Not even one-third (31%) have a leadership succession plan.
As for professionalizing the family itself, fewer families with family offices have taken that on. Only 32% have a family constitution, and only 28% have a leadership succession plan for the family.
“The families themselves are taking even more time to become more organized,” Monnier says.
Preparing the next generation to be responsible wealth owners is a top concern, cited by 60% of survey respondents. But only 21% have an education program in place for the next generation.
More professional governance for both the family office and the family can be especially helpful as the family grows.
“If all the decisions are made at the dining room table, for those who are not at the dining room table, it becomes a bit of a black box,” Monnier says. “One of the great benefits of professionalization is you can start to communicate proactively. If you have an investment policy statement in writing, you can send that to every family member.”