As global demand for family offices continues to surge, rising by about 31% over the past decade, SA is experiencing a boom of its own. This elite form of wealth management is evolving rapidly in the country.
Multigenerational family offices have become busier, requiring enhanced governance structures, while a new wave of first-generation wealth creators is finding that their fortunes have outgrown the services of traditional wealth managers.
“They need more planning up front — building the family constitution, setting up governance structures, which includes committees to sustain and grow the family enterprise,” says Stefan Viljoen, head of Family Office in SA at Standard Bank Wealth and Investment. “Family offices essentially run huge family enterprises.”
Families with their own CEOs and directors
With multigenerational family offices, wealth has been preserved and grown over decades. “You might have the third generation exiting the business that generated its fortunes, and now the question is how to preserve that wealth for the fourth, fifth or even sixth generation,” says Viljoen.
On the other hand, first-generation wealth creators are encountering family office structures for the first time. While many usually already have trusts and wealth managers, they are introduced to a new level of governance. They must establish various committees with boards of directors overseeing different aspects of the family’s interests. These usually include committees for investments, philanthropic initiatives, estate planning, and distributions as family members draw funds from family trusts.
Due to the high level of confidentiality required, family offices typically appoint CEOs, often a family member, though it can also be an external professional. This person handles most of the family’s day-to-day matters.
“One family office can grow to 30 or 40 family members. So, you need these structures to manage that level of complexity. We call it the preservation of the family’s commercial endowment,” says Viljoen.
Why high-net-worth families establish family offices
There are two types of family office structures: single-family offices, created by and for one family, and multifamily offices. The latter involves a set-up where professional institutions like Standard Bank Wealth and Investment support multiple single-family offices with shared services.
In some cases, wealthy families may manage tasks such as accounting in-house, but they often lack the banking, fiduciary, wealth management and governance specialists that their growing enterprises require. As a result, they turn to multifamily offices to support them in areas such as wealth advisory, investment management and long-term planning.
Beyond managing wealth, family offices also play a critical role in legacy planning and maintaining harmony across generations.
Destructive conflict erodes wealth over time. So, a big part of the family office’s role is ensuring cohesion
— Stefan Viljoen, head of Family Office in SA at Standard Bank Wealth and Investment
“How do you deal with conflict in the family? It has to be documented, and that’s what family offices do,” says Viljoen. “Destructive conflict erodes wealth over time. So, a big part of the family office’s role is ensuring cohesion.”
As more South Africans join the ranks of the world’s wealthiest, family offices are set to become a defining feature of how that wealth is managed and how it endures. Viljoen notes that, ultimately, a family office is run like a business. But rather than trading in goods and services, it operates in the business of managing family affairs.
“And whether you’re preserving wealth across generations or building new foundations for legacy, it requires structure, intention and long-term vision,” says Viljoen. “It’s not a one-man job, it requires the next level of governance.”
This article was sponsored by Standard Bank.
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