Richard Joynt, director of a family office based in Jersey, and Patricia Woo, a fund and trust lawyer in Hong Kong, speak to Hannah Downie about how family offices differ in Europe and Asia.

What are the primary drivers for families in your respective regions seeking to set up a family office?

Richard: In Europe, the reasons for establishing a family office can be quite diverse. The term 'family office' encapsulates a number of different organisations, from personal-assistant service providers all the way through to complex regulated investment houses. However, when you look at the big picture, most family offices in Europe are driven by two forces: the desire to be in control of the family's activities, and the desire to maximise returns from existing wealth.

Recruitment can be tough for the family office, as the family will disclose a lot of confidential information to new employees and will want to know they can be trusted

Patricia: Maximising returns is a common theme for both European and Asian family offices. The difference is that many Asian family offices are not yet independent units but a department within the family business that makes investments for the chairman and liaises with private banks and fund managers. Yet I have started to see more and more families looking to set up a family office for first-time succession planning and separation of corporate and private wealth.

How are the professionals in the family office chosen?

Richard: For smaller family offices, especially where there is a need for accounting and back-office services, the head of the family office is often a trusted business advisor who has looked after the family for many years – the accountant from the family business, perhaps. However, when the family office becomes more complex, the family may need to bring talent in from a wider pool, using discreet recruitment agents.

Patricia: Besides trusted business advisors such as the chief financial officer of the family business and professionals who are recruited externally, many family offices in Asia are run by members of the family and relatives who are themselves professionals. Many young members in Asian wealthy families are trained in finance or are CFA charterholders. Some have even worked in major banks or funds before returning to set up the family office.

What are the biggest concerns of the family when interacting with the family office?

Richard: Confidentiality. The family office tends to spend a lot on its IT infrastructure in order to prevent information being accessed by a rogue third party. Recruitment also represents a tough decision for the family members, as they will disclose a lot of confidential information to new employees and they want to know these people can be trusted. As a result, they tend to pay well and recruit good candidates – people who appreciate how to keep information confidential.

Patricia: Many Asian families take time to decide if they want a family office, because it takes a lot of planning and determination to institutionalise family processes. Unlike companies, families are used to dealing more with emotions and less with formal processes. With a family office, what used to be unspoken will be discussed and what used to be intangible will be measured. Both the family and the family office have to put in effort to find the best way to deliver the greatest value.

Does the family usually set up the family office with the intention of it continuing for a number of generations?

Richard: This is rarely one of the main drivers at the outset. These are usually complex families with worldwide assets, whose members, to begin with, are looking to bring order to their lives and have professionals deal with complicated questions from external parties – regulators, tax authorities, company registries, etc. The notion of the family office continuing on to the next generation, or perhaps multiple generations, usually comes later in the thought process.

Patricia: In Asia, yes. Family harmony and filial piety are deeply rooted in our values, so a key mission for family offices is sustainability. It goes beyond maintaining the family business and wealth, and can be about the passing-on of family values. Therefore, some family offices use private trust companies to keep control within the family, and such tools as family constitutions, family councils and family meetings to provide a good foundation for future generations.

How is the success or failure of the family office as an organisation judged?

Richard: Normally in both financial and non-financial terms. The capital base of the family, its increase or decrease, and the income generated from all activities usually provide the benchmark for the family deciding if matters are going well. However, the family also judges the family office staff as other employers might – are they responsive and professional? Do they make progress on important projects? Do they deal effectively with third-party advisors? And, perhaps most importantly, does the family office provide good value for money?

Patricia: I have been advocating the notion of five key types of efficiency for a successful family office: financial efficiency, risk-management efficiency, allocative efficiency, external efficiency and cost-efficiency. Financial efficiency is the first level of efficiency, measuring how financially productive the family is. Allocative and external efficiencies are the benchmarks for how well internal and external relationships are managed. The purposes of the remaining two types of efficiency are to optimise the level of risk faced by the family and control the cost.

Finally, what is the best thing about being in the family office sphere from your perspective?

Richard: No family is the same – each family comes with its own challenges and specific needs. What I find most rewarding is when we provide a level of service to a family, or resolve an issue that has been an unwelcome distraction for the family, that leads to them being delighted. Although they require high standards of service, all of our client families are very appreciative and courteous when we help them through a complex problem.

Patricia: I love my work. I love the interaction and the long-term relationship with the families. I love the innovation possible in the family office space. I always tell my clients that they have the level of wealth and influence to create their own games and set their own rules. A family office is exactly the tool to make that happen. I am not afraid of, and even embrace, a high degree of customisation and creativity in my work with ultra-high-net-worth families. It is very satisfying for both parties.

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.