Part 6: Single Family Office Governance

Start with rules people can follow

A first-generation family office may see governance as extra paperwork. But as more family members join in, rules help guide hiring, spending, investment, and operations. Without clear expectations, favoritism and inconsistent treatment can create lasting divisions.

Many offices use a top-down system, with the person who created the wealth making key decisions. Some families also hold council or town hall meetings to gather input. The right structure depends on the family's size, complexity, and needs across generations.

Governance does not need to imitate a large corporation. It should fit how your family actually works, including the time, costs, and commitment that members can sustain. A simple set of rules in writing is a useful starting point.

Make decisions and responsibilities clear

Write down how employees are hired and evaluated. An employee handbook can explain expectations for family and non-family team members. Hiring criteria can cover whether relatives, spouses, stepchildren, or family friends may apply; how compensation and benefits are set; and what reference checks or background checks are required.

Set standards for choosing outside advisers and service providers, too. A referral or long relationship may be useful, but it does not establish whether someone has the right expertise for the cost. Decide how you will assess advisers who handle important areas such as accounting, reporting, software, investment advice, and legal work.

A separate ethics policy can set expectations for acceptable conduct and make accountability possible. The chapter also recommends identifying who will review the office's financial activity. An independent CPA can conduct a reasonability check, while some families arrange a formal annual audit.

For larger families, an advisory board or formal board may help review compensation and strategy, address conflicts of interest, and check financial and accounting systems. Independent directors can bring experience and an outside perspective.

Put safeguards around money and family support

No single employee should be able to move large sums without approval. Review controls for wire transfers, expense accounts, bonuses, and contractor payments. Dual signatures for checks or transfers above a set amount can provide another safeguard.

Set a process for charitable giving. Decide as a family where donations may go, in what amounts, and who approves them. If the family operates a foundation or gives directly to charities, clear rules can help avoid costly problems when requirements are misunderstood.

If the family offers loans or investment capital to relatives, define how those requests are reviewed. Some families limit eligible ventures, require approval from older generations, or ask several senior family members to sign off on a plan.

Clarify who counts as part of the family for benefits such as education support or access to credit. Questions about spouses, former spouses, and children can become harder to resolve as the family grows. Objective rules set early can help reduce bitterness over perceived favoritism.

Keep family members informed and accountable

Regular family meetings give members a place to discuss the business, investments, priorities, and challenges. The chapter describes annual or quarterly meetings as common among families beyond the first generation. These gatherings can also help younger members understand the responsibility involved in maintaining family wealth.

Investment policies should explain how changes are approved, what due diligence is required, how conflicts are disclosed, and who decides on portfolio allocations. Team members at every level can also be evaluated against objective key performance indicators.

Finally, document how records are stored and who may access them. Access to current and past records should be limited and the restrictions made clear in the governance documents.