One of the main concerns of very wealthy families in Kenyan society is how to establish and maintain a legacy for their children and for generations to come. A lot of wealthy families incorporate their children into family owned enterprises to ensure that the legacy is maintained. While it has worked well and a number of legacies have been established in such manner, family owned enterprises have their own unique challenges including succession issues and capacity issues. Sometimes lack of proper preparation of the heirs to the family owned enterprises or even lack of a suitable heir may mean the destruction of the legacy. This is also apparent in royal lineages, where an unsuitable heir could mean the beginning of the end of the dynasty that may have lasted for generations. Other than family owned enterprises there are many other tools that wealthy individuals use to establish and maintain their legacies.
However a fairly new concept will soon be available for wealthy Kenyan families seeking to maintain their legacies. The concept was introduced to me by a family office expert, Mr. Sunil Sanger of Orion Advisory Services and when he took me through the concept I felt that it is a very timely concept for wealthy Kenyan families, who sometimes do not optimize on their wealth due to lack of expert advice. According to Mr. Sunil, the family office has not yet taken root in Kenya but is common in other jurisdictions.
A family office is an enterprise that manages all the investments and trusts on behalf of a wealthy family. It is specifically set up for that purpose and in the event that it is incorporated as a company, the objects would be very specific that the company has been set up to manage the assets of the wealthy family. Family offices provide a number of services to wealthy families but mainly provide investment and financial services at a flat fee.
Unlike a personal financial advisor, the family office expert takes time to understand the history of the family, the family members, the goals, values and principles of the family and incorporates all that when he is offering investment advice. A family office expert goes deeper than a personal financial advisor. In terms of say the nature of the family, the family office expert would draw up property pre-nuptial agreements for any of the children of the family wishing to get married. In terms of incorporating the family’s values and goals, a family office expert would know which investments to avoid taking into account the family’s goals. This value addition is not available with personal financiers.
A family office takes away from the wealthy family, the headache of day to day management of their wealth and leaves all that to an expert to handle. All the family needs to do is relax and reap even more benefits from their vast wealth.
Family office experts are trained in finances and investments. Some of the advice a family office expert would give is on diversifying a family’s portfolio to include assets like stocks, investment in kind and others. They make their decisions based on their expertise and considering the family’s goals.
They also incorporate offshore trusts for the family to ensure that all the wealth owned by the family is not limited to one jurisdiction. This is prudent especially in times when the political climate is uncertain.
Family offices also include an element of proper estate planning using tools like trusts to ensure that the family’s wealth is at optimum level. They manage the tax aspects and costs to the family to ensure that these are kept to a minimum. A family office will ensure that the wealth of the family is not squandered and that costs are kept to a minimum. Some family expenses like holidays and ceremony expenses like weddings, are all handled by the family office in a professional manner. Some family offices go a step further and incorporate lawyers, financial experts, property managers and others so that all family professional needs are handled from the family office
Some very wealthy individuals like Oprah Winfrey have sought the services of family office experts to manage their large fortunes. The Rockefeller foundation could be one of the earliest models of this concept. The foundation was began in 1882 to manage family wealth and bring family cohesion. Almost 120 years later, the Foundation lives on
The cost of running a family office would not be too much so as to overweight the benefits. The value addition is a plus and the time saving aspect of a family office is also attractive.
It is time to consider setting up a family office and engaging experts to maintain your legacy for your benefit and benefit of future generations.