Nigeria: Family Governance & Governance Of Business (Series 6) - Single And Multi­ Family Offices

Last Updated: 8 November 2018
Article by Emeka Onwuka

The increasingly complex personal, family and business-related issues being faced by high net-worth and ultra-high net-worth individuals and families require equally sophisticated solutions. A family office, as discussed in our previous series, is well positioned to attend to issues and needs of wealthy individuals and families. A family office is an organization consisting of a group of professionals who are responsible for the management and administration of a wealthy individual or wealthy family's investments/ businesses. A family office affords its users access to bouquet of specialized services from various professionals in different fields under a "single roof."

The rise in the number of wealthy individuals and families across the globe has provided a landscape filled with opportunities for various types of family offices to thrive. In the United States of America only, the number of family offices has grown to at least 3,000 single family offices, with assets under management between $1 trillion and $1.2 trillion, while there are also about 150 multi-family offices having assets under management between $400 billion to $450 billion. In Africa, it is believed that there are about 150,000 high net-worth individuals with a combined wealth of about $800 billion.

There are very few family offices in Africa, in contrast to the rest of the world. Only a handful of high net-worth and ultra-high net-worth individuals and families in Africa employ the services of a family office, many still relying heavily on the traditional asset management outfits. Family offices are a major improvement on the conventional wealth management firms as family offices' service offerings are more robust and all-encompassing, ranging from daily administrative needs of the family to management of family investments.

In this series, we will be evaluating both single and multi-family offices, growth of family offices globally and why wealthy individuals in Nigeria and the rest of Africa should start considering engaging family offices, like their global counterparts.

Single Family Office (SFO) and Multi- Family Office (MFO)

An SFO is a private company or organization that manages investments and trusts for a single ultra-affluent family. The company's assets are the family's own wealth, often accumulated over many family generations. In many jurisdictions across the world, given its setup and running costs, the threshold of investable asset in an SFO is typically around $100 million. It therefore appeals to only ultra-high net-worth individuals. The SFO channels all of its attention and resources towards the exclusive benefits of a single wealthy family with the provision of tailored services to such family.

On the other hand, an MFO manages the wealth and personal affairs of a group of wealthy individuals and families. It is usually a firm of professionals offering their services to wealthy individuals and families in general. It can cater to the needs of individuals and families whose investable assets is lower than the threshold typically accepted by single family offices, and this could be as low as $20 million investable assets. SFOs are costly to set-up. It may cost as much as 0.6% of the net asset of the family business to set­ up an SFO. This is another reason why it appeals to mainly the ultra-high net-worth families, who are able to maximize the use of family office, given their net-worth and different family and business needs. MFOs are, however, able to achieve higher cost and investment efficiencies by spreading its cost over larger asset base from various wealthy individuals and families. Keying into the service offerings of an MFO is also cheaper as new families are simply added to already existing platform.

The functions of the SFO and MFO are very similar and can be classified based on the range of services they provide. These functions include:

  • Assistance with risk management through in­ depth evaluation of each potential investment and by diversifying their clients' investments
  • Educating family members on succession and wealth planning periodically
  • Provision of cost-efficient administrative support to the family, from travel coordination to managing household staff
  • Keeping of records of internal family meetings, property title deeds, trust and company documentation
  • Provision of daily periodic book-keeping services and assistance with preparation and filing of financial accounts and tax returns
  • Development of families' philanthropic goals
  • Physical and electronic collation and storage of key family documentation
  • Administration of charitable functions of the family

Need for More Family Offices in Africa

Reports from different sources show that there has been an increase in the number of wealthy and ultra-wealthy families across the globe in the last 10 years. According to a recent report by the Credit Suisse Research Institute, the number of millionaires in the world has increased by 155%, while the number of ultra-high net worth individuals (defined in the report as people with a net worth above US $50 million) increased by 216%.

In Africa, there has been approximately 19% increase in the number of multi-millionaires living in the continent, with individual wealth grossing over $2 trillion. A number of these families are beginning to see the need for family offices as a means of ensuring wealth sustainability. Some have even gone a step further by forming their own very single family offices for that purpose. Interestingly in Nigeria, despite the economic hardship and recession, the country has the highest growth of millionaires (about 5,000) over the last decade. In the recently released Forbes wealth reports, there are 15 Nigerians with combined wealth of over N7.2 trillion.

Unfortunately, there are less than 10 family offices in Nigeria. It is therefore no surprise that an estimated 90% of wealthy Nigerian families lose their wealth by the second generation. Presently, only one or two families have transferred their wealth to the third generation. This trend is easily traced to the absence of and non-usage of family offices in the country, who would have assisted these wealthy families setup and maintain family governance structures that will ensure that the families' wealth and assets are preserved, improved upon and also transitioned to subsequent generations in an efficient manner, while at the same time seeing to the successful running of the families.

It is therefore important for wealthy families in Nigeria and across Africa embrace family office as a very crucial part of the family and family businesses. At the very least, the services of an MFO ought to be engaged to help maintain a sustainable pipeline of family wealth for present and future generations. Amongst other things, MFOs can help review investment proposals to ensure funds are utilised on only viable projects. They can also assist to put investment holding structures in appropriate jurisdictions to ensure maximum returns to the families in a tax efficient manner.

With respect to their MFO needs, wealthy families should engage only seasoned family wealth advisers with global track records and acclaim. Many families, especially in this part of the world, have lost their investments through the wrong choice of advisers. A professional firm with private/ family wealth practice with global standing will be able to properly guide the family towards achieving its objectives.

Conclusion

Making money is as important as keeping it in the family. Keeping wealth within the family and growing the family business is more assured with the use of SFO and MFO, as demonstrated in various parts of the world. Wealthy families in Africa are encourage to employ the services of professionals with adequate knowledge and skill for their SFO and MFO needs. Andersen Tax is a global firm with wealth of knowledge in various areas cutting across Family Wealth Management, Private Client Services, Restructuring, Tax Advisory and Regulatory Service amidst others. We will be happy to advise on family office services to you and your family to ensure family and business goals are successfully met across generations.

Originally published by Business Day, October 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions