The key to a successful family office: The Family Charter

There are many types of family offices, each as unique as the family members they serve. Among family enterprise advisers, the saying goes that if you have seen one family office, then you have seen one family office.

However, there are common themes, governance, processes and roles that differentiate a successful family office – where wealth is managed and transitioned to multiple generations successfully – from one where the wealth has all but disappeared by the third generation.

In setting up for success, the first step for any family office is the creation of a unique and tailored Family Charter.

What is a Family Charter?

A Family Charter, sometimes called a Family Constitution or Family Compass, is one of the most important documents in governing high-wealth families and family offices. It is a framework that helps guide families through uncertainty and ensures they never stray too far from the ideals, objectives, and policies that the family values. It is a living document that sets the stage for a positive culture in the family office and/or business and is tailored to each family’s unique circumstances.

In our experience with family enterprises, challenges will continue to arise as families grow in size, complexity and wealth. The Family Charter is often the precursor to any strategic or family office planning activity and is designed to help controllers of wealth to focus on key family, strategic, leadership, succession, governance and ownership issues as they arise.

The process of creating your Family Charter

Often, the process of establishing the Family Charter is more important than the document itself. The charter should remain a living document, regularly reviewed and relied upon to guide decisions, and updated when necessary to be relevant when economic or family conditions change.

Our approach to creating a highly bespoke Family Charter often entails six elements that address the circumstances and requirements of a specific family.

Questionnaire: Family members fill out a questionnaire covering various areas of the capital, keeping their answers confidential but discussing themes in group meetings to establish common ground and priorities.
Individual meetings: Each family member meets with the facilitators privately to express their views and aspirations, enabling our team to suggest broadly acceptable solutions and address substantive issues independently.
Legacy statement: Writing down the family legacy statement and purpose clarifies the family’s exact objectives for their wealth. The statement ensures that the family’s legacy is upheld and forms the foundation for family discussions.
Considerations: The family's structure, documents, assets, and issues arising from meetings are reviewed comprehensively, addressing matters such as governance, asset ownership, education, and community involvement.
Family meeting(s): A collective discussion among family members based on the questionnaire and individual meeting outcomes typically establishes shared goals and principles, often leading directly to the drafting of the Family Charter.
Drafting the Family Charter: Finally, with input from successful family meetings, the Family Charter is drafted. Though non-binding, it lays the groundwork for any legal adjustments and may involve a family gathering to ensure understanding and cohesion across the family.

What should be in my Family Charter?

As with any enterprise, success comes from managing capital well. Successful high-wealth families and family offices typically address five key capital areas. These areas are often highlighted in the Family Charter and help guide the management of the family office.

Human capital: The family’s greatest wealth, comprised of all the family members and their personalities, ambitions, perspectives and strengths.
Intellectual capital: The collective knowledge, experience and know-how of family members.
Social capital: The quality and quantity of social, professional and community relationships within the family’s network.
Ethical capital: The deepest values, philosophies, beliefs and/or ethos that express the nature of the family.
Financial capital: The money and assets controlled by the family.

Expert advice to guide the Family Charter process

Crafting a Family Charter requires thoughtful consideration, as does selecting the right adviser to facilitate the process. A seasoned adviser understands that a family will have the best chance of transitioning the wealth to multiple generations when they come together with excitement to sign the final document.

If you're considering establishing a dedicated family office or seeking guidance for your existing single or multi-family office, our experienced family office advisers are available to assist you. Contact us to discuss how we can support your family.