Family office governance can be complex, and many family offices use a board of directors or advisors to help.
“Having a board can really help by bringing in best practices regarding how you can continue to grow your collective assets,” said Joshua Nacht, senior consultant with The Family Business Consulting Group.
The Single Family Office Compensation Report from Morgan Stanley Private Wealth Management and Botoff Consulting found that 60% of family offices have a board. The percentage is lower for smaller offices and higher – 71% — for family offices managing more than $2.5 billion.
A board can help with fundamental decisions such as deciding what type of family office will best serve the family: concierge services, investments, operating businesses. “You can mix and match any of those pieces based on what the family wants. Some are quite complex in their structure,” Nacht says. “Obviously that requires thoughtful leadership and effective governance to meet those goals.”
Gary Katz, CIO and chief legal officer for Downtown Capital Partners, LLC, has seen the value a family office board can provide from two perspectives: He has set up a board for his family office and also sits on the board of another family’s family office.
His own family office’s governance structure consists of himself, his two sisters, and a trustee.

“We need three of us to agree in order to do anything,” Katz says. “When we were setting up our family office and I told the lawyers that there were three sibling family units making up our office, they said, ‘An odd number is perfect – you’ll never have a stalemate.’ But we thought this was a terrible idea: We didn’t want to have a split in our family where it was two siblings allied against the third. We deliberately added this fourth vote, with the idea being that you need 51% to make a decision.”
When all three siblings agree, they don’t need to involve the trustee.
“But if we do face a situation where the three of us can’t agree on a major decision and we find ourselves voting two against one, instead of having a knock-down drag-out family fight, we can go to the trustee and each side can make their case to a neutral third party,” Katz says. “A good trustee will mediate the situation. If that doesn’t work, hopefully the trustee can help identify a ‘third path’ that moots the dispute. Failing that, the trustee will exercise his/her judgment and choose to support one of the two irreconcilable positions.”
If the trustee sides with the one sibling who disagreed with the other two, then the status quo remains — “but hopefully the family has been saved from a vitriolic split because the ‘fault’ lies with the neutral trustee, not a ‘holdout’ sibling,” Katz says. “If on the other hand the trustee agrees with the two siblings in the majority, you now have three votes that are sufficient to move forward and the dissenting sibling can’t be accused of being a ‘holdup’ vote, nor can the majority siblings be accused of rolling over the one in the minority. The hope is — and this has indeed been our experience — that although there may still be some resentment over disagreements, the fact that the two were able to convince a neutral third party hopefully would take some of the sting out of being in the minority.”
This novel structure has been in place since 2001.
“Most people want to avoid a stalemate, and we wanted to create a potential stalemate,” Katz says. “While we have reached the ‘mediation’ phase, we’ve never been stuck in a stalemate where a formal vote by the trustee was needed. I think the structure pushes everyone to act reasonably and moderate strong positions.”

Katz is now applying what he has learned from working with his own family to serving as one of three independent board members of an unrelated family office.
“When I accepted, I assumed that sitting as a neutral outsider in someone else’s family would be infinitely easier than making investment decisions and working on governance issues that affect my own children, nieces, nephews, and cousins,” Katz says, “but I have learned that it is a surprisingly weighty responsibility.”
Katz views a family office board member’s role as “ensuring that ‘peace and prosperity’ flow from the family office to all the members of the family.”
“On the prosperity side, while I and the other outside board members have investment experience in the family’s primary business focus area, the members of the family who work full time within the office thankfully do a terrific job, so on the business side our board is able to focus on long-term strategy rather than putting out fires,” Katz says.
As far as helping to keep peace in the family: “Regardless of how well aligned the values are within the family, as an outsider, you can see not only that everyone loves each other, but that families are complicated,” Katz says.
Serving on another family office’s board “has totally changed my perspective about the extent to which there are tensions below the surface of my own family,” Katz says. “As an outsider I can see how even when a family acts unanimously, some decisions inevitably lead to hurt feelings. Paying attention to the subtle realities of a family’s dynamics by getting to know all the stakeholders in the family business takes real work as an outsider. It requires time and emotional focus. Our job isn’t for people to bring their grievances to us and for us to say who wins, but to help them focus on a process that on the one hand allows points of friction to come to the surface rather than fester, but on the other hand leads them to be resolved.”
Katz says, “I recommend that everyone who has a family office try to serve on the board of someone else’s family office. It will help you navigate your own family far more successfully.” He points to several ways his work as an independent board member has changed his interactions with his own family:
- “Comments made in a boardroom or by business colleagues that would be completely innocuous can become explosive if said by a cousin or sibling you have known since childhood. I sat in more than a few high-power boardrooms while I was a lawyer at Skadden Arps, and everyone in business knows there’s politics in every boardroom. But I’ve learned it’s much more intense when there’s family involved.”
- “Being on this board has really helped me see that in every family there are people who are more active in the business and those who are less active. The people who are less active are not necessary less intelligent, although they may have less direct business experience. One thing we do as outsiders on the family’s board is help translate questions from the less business-oriented family members — people who never went to business school or have never managed a bond portfolio but who are extremely accomplished in their own field — into language a business person is used to hearing.”
- “Another thing I’ve learned is the incredible amount of jargon business people use that takes relatively simple concepts and makes them unintelligible to non-business folks: words and phrases like EBITDA, leverage, PE multiple, SWOT analysis, and SOFER spread, just to name a few. The flip side of that is that a family member who is a mechanical engineer or runs a nonprofit with dozens of employees may have a profound insight to offer the family business CIO, but lack the vocabulary to express it. I think one of the most powerful services independent board members can provide to a family office is to help bridge these communication gaps.