John Bender's family founded publishing house Matthew Bender & Co, whose involvement with law books date back to 1804. It has been part of the Reed Elsevier Group since 1998. He is now involved in family office wealth management in the Channel Islands and Switzerland.
Jamie Cayzer Colvin is a fifth generation member of his family company, Caledonia Investments, which started as a
shipping company before diversifying. The family cashed out in 1987 and consolidated back into Caledonia Investments – a publicly quoted vehicle.
Michael Cunningham is the non-family CIO of Woodford Capital, the holding company of Ireland-based Roche family that is going through a transition into the third generation.
Joanne Macland is a second-generation member of Ireland-based Roche family. The family's holding company, Woodford Capital, has a wide range of investments and acts as a family office.
Constantin Rinn is a director of Auda, the investment arm of the Quandt family office, a German industrial dynasty. The family set up Auda to manage the money belonging to the five daughters of Harald Quandt.
Eric Spaas works for Praxis a multi-family office in Antwerp, Belgium, which serves 20 families. Praxis was also a founder member of the European Network of Family Offices – a network of similar multi family offices in Europe.
Christian Sulger-Buel is from a wealthy Swiss family and founder of Sulger Buel & Company, an executive search company that places candidates for family businesses and family offices.
What constitutes the "right type" of communication between the family and the family office? Joanne, given you are just getting involved in your family office, what you think is the right level and the right type of communication?
Macland: There are four family members but only one is presently involved in setting it up so it is really important to have an information flow to the rest of the family. Presently, that flow of information occurs monthly, but we also have quarterly meetings. If there is an urgent decision to be made then we're obviously all contacted and updated.
Cunningham: The family office has been going for eight years, but it's probably only in the last couple of years that the level of communication has really improved. We had quarterly meetings but once there was a piece of information relating to one of our companies that was picked up by the newspapers before all the family knew about it. We now have a conference call on the first Tuesday of every month, come hell or high water, even if we've got no agenda. Thanks to this all family members are fully up-to-speed with the business and they can bring that knowledge to the meeting.
Spaas: We think that communication is very important, especially when you have different generations involved in one family, and what we try to do is to set up a monthly meeting. Even if there is no agenda, we want to bring the family together and what we have seen in our experience is that there is always discussion – so regularity is quite important. Besides that we also have formal meetings with each individual member of the family because we have learned that family members often want to express something without other family members being involved.
Cayzer Colvin: Our family office is really an investment vehicle and, because it's listed, we have to communicate formally with all our shareholders. We chose to do this because we wanted to avoid spending time discussing corporate governance and family governance issues within the family. If you're a public company you're held by certain rules, but from a communication point of view you just treat family members like any other shareholder.
There is one trend that I am alarmed about in communication. We have gone from a generation where the likes of my mother and aunt were kept in the dark about financial matters until my Grandfather died. There was a general feeling of 'keep the young in the dark' because they don't know how to handle it. But the pendulum has swung too dangerously the other way and the great danger is that young people are burdened with too much information.
Innocence is a wonderful thing and should be preserved as long as possible, so my feeling with communication is that it's got to have a proper framework, you've got to clearly understand what people want to receive, but don't just tell everyone everything and think that's good communication because it isn't.
Rinn: I agree. The Quandts' set up their family office so that all reports go to the board, who filter and consolidate it before making it digestible for the family. Younger family members are not kept out of the business, but are involved gradually. You have to remember that not everybody wants to be involved.
Sulger-Buel: Not everyone is able to communicate or has been trained to communicate, so within a family or a company somebody needs to be in charge of communication. I recently worked with a family – the father is 85, and two of his three sons run the company – that were all over the front pages of the press. They were desperate, they didn't know what to do. They called me and said 'We want you to hire a director of communication'. I found a lady who has been with them for three years and they're very happy but she's had to learn how to communicate both internally and externally – something the family was unable to do.
Can there be too much communication between the family and the family office? How important is it to manage that?
Bender: It depends on the circumstances. In some cases, various members of a family live in different jurisdictions and therefore there have to be separate fiduciary arrangements. As very specific information may only be relevant to certain countries, a monthly newsletter focusing on broad strategic themes may be most appropriate under such circumstances.
Spaas: The family office can play a vital role in filtering the information that family members want. You don't have to give every piece of information to everyone in the family.
Cayzer Colvin: There's a duty for all parties to communicate effectively and to be clear about what they want. This includes the family office, the senior members of the family and those people that want the information. If they are perceived to be too young, there should be mentors in the family that can help to bring them on. One thing I do worry about is having a template that fits all – every family office is different.
Cunningham: As we cater for a very small number of people we provide blanket coverage for everybody but there's also a massive difference between a financial-type family office and one that supports a living, breathing family company.
Sulger-Buel: A useful exercise can be to devise a questionnaire for each family member to find out what kind of information they want and are willing to accept.
Cayzer Colvin: There is also both formal and informal communication. We have informal dinners – recently there were 150 family members and their spouses. It's important just to make them feel that they're included. We encourage all the non-family executive directors to attend and talk to the family – it's interesting for them because the family often knows those companies better than the executives.
How beneficial, or not, to the whole communication process is having family members working in the family office?
Sulger-Buel: If the person in charge of communication at the family office does a good job then it shouldn't matter whether he/she is a family member at all.
Rinn: There's no member of the family directly involved in AUDA's management and I think part of the reason for that is to take the emotion out of the whole process. Essentially, AUDA is about generating investment returns for the family.
Do you think having a family member on board would be difficult?
Rinn: I don't think it would be more difficult for us, but maybe within the family it might create some tension.
Bender: I could be difficult depending on the personalities involved. There can be emotional and political issues between family members that can be damaging for the management of a business. Nevertheless, there are examples of families whose members are active and have worked well in perpetuating a commercial enterprise over several generations.
Spaas: I also agree. As a multi-family office it's difficult and expensive to get all family members on board. I also think one of the advantages of a multi-family office is that it's down to a professional relationship between the family and the staff who are running the family office. It makes it easier, particularly when things go wrong, because if you are fully involved with the family office as a family member it can be very hard.
Cunningham: We have two large equity investments and in many ways it's important that there's an executive from the family office who is heavily involved in either or both of them. I think the best person can be somebody who has got a family interest because they are family companies.
Cayzer Colvin: I agree that the service side should be non-family because there is personal information that is totally private to you and which you don't want to share with another family member, however professional they may be. But I think from the investment point of view it's absolutely critical that the family office has got a connection with family members. I think otherwise you lose that family identity which is so important.
Cunningham: The other big change I've noticed over the last four or five years is that when the younger generation came together they were very much sitting down as brothers and sisters. That has now evolved and, although they're still brothers and sisters, they sit down and focus on the business from a professional viewpoint.
Macland: We spent a lot of time using advisors to get us into that mentality of treating it purely as a business. We've canned a lot of the emotional things because we're more open with each other and bring everything down to a business level.
Cunningham: It's getting them to the stage where they're much more focused on the business and not looking at somebody as the little brother or sister. One of the reasons we have poured so many resources into this is that both sides of the family had a long history of troubles with their own siblings.
Can you structure a family office to make it easier or harder to communicate between the family and the family office? Can you say, for example, that the multi-family office is a better structure to have in terms of communication?
Spaas: No, I wouldn't put it like that. I think that the way we are operating is that we are trying to get some structure with regards to communication and I think the advantage of a multi-family office is that when the family is not involved it's on a more professional basis. That doesn't mean that the family can't make it's own decisions but the decision-making process is prepared by non-family execs.
Bender: It should be possible to have good communication whether in a single or multi-family context. What is important is that the information is relayed on a regular and professional basis.
Cayzer Colvin: I'm very close to my cousins who I work with and I think back to my Grandfather's generation who were all first cousins and the four of them all worked together in the business. Five years ago we went through a dramatic restructuring process where we drastically reduced the number of shareholders, but we feel it has helped a lot.
Bender: The challenges of managing significant wealth require access to the best expert advice, which often needs to be sourced externally. On the other hand, it is important to foster a sense of unity and pride in a common heritage through regular informal gatherings. The latter function should be organised by family members and possibly to the total exclusion of outsiders.
Sulger-Buel: I totally agree that informal meetings between family members are very important and you don't have to have your family officer beside you. But you have to formalise certain decisions and communication because if you don't, one family member will say 'Well, you didn't tell me that' and 'He knows it but I don't know'. It all depends also on what's the purpose of the family office, if it's to act as the glue between members of the family then you will need to communicate much more than if the family office ha another purpose.
Rinn: Another thing which I believe is important is identity. I think that is really core to each family office and I think it should be something that each family office should be founded on.
Finally I want to ask you all about the future. The next generation is communicating in a completely different way thanks to technology such as Facebook, Youtube etc. What role do you see technology having in the family office with regard to communication?
Spaas: We are already using tools such as closed chatrooms where we can communicate with families so I that is the direction we are going. I think it's very important to maintain a certain control, but generally I think it's a positive thing.
Cunningham: the question I have about technology is whether it's learning about family members on a personal basis rather than anything to do with the business per se.
Cayzer Colvin: You've got to be very careful about these new types of communication. I'm not saying you should be in denial about it, embrace it absolutely, but I think you've got to be very measured as it can so quickly backfire on you.
Macland: The only thing we've spoken about is having a centralised, secure e-mail system because we were all doing our own different thing with private information being sent to different host accounts – security-wise it was definitely something we needed to look into. I think we would rather keep communication more formal but maybe we're paranoid about security!
Cayzer Colvin: The point is you can't act like a Luddite when advances in modern communications are happening, but I'm still wary about communicating in some of these applications.
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