Family Offices to secure generational wealth, Citadel Advisory

Cape Town - Not only a South African trend but a global one too, the Global Family Office Market Report and Forecast of 2023 estimates that the global family office market reached a value of US$87.18bn in 2022, and with a compound annual growth rate of 7.5% would reach a value of US$133.60bn by 2028.  

To shed light on the inner workings of family offices, Citadel Advisory Partner, Jodi Suchard says these legal entities provide an umbrella of services to support wealthy families, typically in five important ways.

1. Family Offices assist with the cetralisation of family wealth

UHNW families often need extensive solutions for the structuring, centralisation, protection and growth of their wealth by way of a sustainable multi-generational wealth strategy, highlights Suchard.

The process typically starts with a conversation with the head of the family to understand the family’s structure and unique needs. This is followed by the design of a bespoke management solution for the family’s financial and related affairs.

Suchard explains that the overall financial plan for the family may include offshore structuring and tax implications; philanthropy and donations; jurisdiction-specific investments; liquidity requirements; cash flow analysis and diversified asset allocation.

2. Family Offices secure the transfer of wealth across generations

“Centralising the management of family wealth and managing the transfer of wealth across generations are important to consider,” states Suchard. “Securing next-generation wealth is critical to UHNW families. A family office can assist families create and define a clear family purpose and align their investment strategy to ensure their legacy is sustained across the different generations.” 

A well-run family office can support families with the full or partial exit of their business and manage how this impacts the family’s wealth and future generations. Families can be advised on how to invest in intercorporate ventures to achieve optimal results for current and future generations. 

Family offices can also advise families on the integration of their wills and trusts in line with the tenets of their family constitution and carry out the wishes of the family patriarch or matriarch, whose will and testament provided the family with their intergenerational wealth.

3. Family Offices support UHNW families to manage complex family affairs

“There is a definite need amongst South African families with material wealth to have access to a professional family office solution. In most cases these families have very complex requirements around their wealth, business and family; and they need an umbrella of services to support them,” says Citadel New Business Partner, Caren Rennie.

Family offices often assist with conflict resolution and communication within families and may even bring in psychologists and mediators to resolve family disputes.

4. Family Offices provide discretion and privacy

“One of the most appealing benefits of an offshore family office structure is that it can assist greatly in the management of issues around family privacy and discretion for families who want to keep their wealth and affairs confidential,” states Rennie.

These families need a financial guardian, a trusted advisor who shows up as the family manager and a gatekeeper of their privacy.

5. The next generation

“Family offices can also provide strategies for softer issues including family constitutions, philanthropic management, next-generation education and financial coaching, emigration services, dispute resolution, protection of the family brand, personal security, and even aspects such as private air travel,” notes Rennie.   

To govern the family’s affairs, roles and responsibilities holistically, a family constitution sets out the vision and guiding protocols of the family regarding ownership and management of the family wealth, family trusts, and other related entities under the collective ownership of the family. “The purpose is to bring strength, reassurance, and unity around a shared value system. It also defines the leadership structure, tools for succession management, conflict resolution guidelines, risk tolerance and long-term family business goals,” she explains. 

Philanthropic endeavours are also important to UHNW families. As the first donor-advised fund of its kind in South Africa, this is what the Citadel Philanthropy Foundation specialises in. It enables families to set up one foundation with many sub-accounts and vetted beneficiaries, without additional costs or an administrative burden.

In conclusion, Suchard says: “A family office solution is essential to protect family wealth across generations in accordance with the family’s values.”