offices, often seen as uniquely insulated from the current market
turmoil, have been attracting more clients in recent months.
Dan Jones spoke to Dr Steen Ehlern, head of
Ferguson Partners Family Office, about the industry’s
philosophy.
Dr Steen Ehlern, managing director of Ferguson, told PBI that
private banks can learn lessons from the success the family office
industry has enjoyed over the past decades.
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“The key is humility and to really understand and respect clients
for what they have achieved,” he declares.
For Ferguson, that humility is borne out not just in client
relationships but also through the way it views its own role in the
marketplace. Ehlern is an advocate of third-party outsourcing, and
does not see it necessary for family offices to overreach their own
boundaries.
“Often, it is about co-ordinating and keeping the family together
in terms of ‘hard’ and ‘soft’ factors,” he says.
Ferguson, a private multi-family office (MFO) headquartered in
London and Zurich, has for its part its own core competencies
centred around legal issues, structuring, set-ups, property and
co-investment opportunities within its network of business
owners.
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By GlobalData“We have a structure and an optimisation as a family office, as
well as niche/specialised real estate, consolidation and reporting.
But you do not always have to reinvent the wheel – you can also buy
elsewhere”, Ehlern says.
“It is important to know your own limits. There is a danger in
saying ‘the talking is over’ and moving from there – but we always
have a lot to learn from clients – it remains an ongoing dialogue
and exchange of experience”.
Multi-family offices can also learn a considerable amount from
family- or partnership-owned private banks, Ehlern adds, noting the
sizeable research departments of such institutions makes it
advisable family offices tap such resources for their own
members.
The question of nomenclature is one that has long been an issue for
the wealth management industry as a whole, and is now increasingly
relevant within the family office space. Multi-family offices with
over $100 billion in assets, for example, raise the question of
whether they are in fact family offices, institutions or something
else entirely. Families and family offices themselves are often
also considered, in Ehlern’s words, more as ‘instividuals’ in their
behaviour.
Similarly, the private banking philosophy which has been the
foundation of the wealth management industry in Europe is very
different from the US history of family-centric wealth
enterprises.
Industry interest in the concept of the ‘family office’ has led the
term to “become awakened again – a renaissance”, says Ehlern – and
that has also led to a concurrent rise in the number of
international financial jurisdictions seeking to become a focal
point for such ventures.
“Increasingly, different jurisdictions, are competing with one
another, in order to offer themselves as a hub,” Ehlern says.
“It makes sense to have a choice of jurisdictions for different
nationalities and cultures; for example in Asia, there is space for
both Hong Kong and Singapore to present themselves as such. They
are all finding a niche of their own.”
Yet the rise of family offices in Asia has thus far largely been
confined to single-family offices (SFOs), with Ehlern pointing out
that the scale is not yet sufficient for families to engage in the
kind of information exchange typically found within MFOs.
The competition between financial centres for family office
business is only likely to intensify, however, as clients seek
refuge in locations and institutions perceived as being less
exposed to the current financial whirlwinds.
“Banks inevitably undergo a number of directional changes, even at
the best of times. There is less fluctuation in a family office –
they are in it for the long haul,” asserts Ehlern. “Banks have to
learn to diversify their services in order to match the needs of
UHNWI – it is not just about asset management, its about
sustainability, the way in which advice is delivered and much
more.”
Ehlern sees client relationships, the perennial lynchpin of private
banking philosophies, as fundamentally more complex than is often
made out.
“It is not a subservient relationship,” he insists. “Clients also
want a sparring partner, an advocatus diaboli. True partnership and
trust evolves when you have known each other a long time – in good
and in challenging times. Bankers have to be aware that families,
too, go through ups and downs. You always have to be prepared for a
change in fortunes as well as wealth owners. Family offices are
about the ‘human side’ of wealth management and family
businesses.”
The need for private banking diversification also feeds into
Ferguson’s attitude towards service & provider selection.
“We are fond of niche providers – we like to have specialists
rather than plain vanilla services”, acknowledges Ehlern.
But this does not constitute a desire for complexity.
“The patriarch or matriarch does not always require Rolls Royce
solutions,” he adds. “It is a question of what fits best, about
reducing complexity, and whenever adequate, simplifying.”
As family offices gain prominence and extend their reach, the
tendency is for them to become more of a kind with their private
banking providers – as per original definition. July 2008, for
example, saw the announcement of a global strategic alliance
between Rockefeller & Co and SG Private Bank.
For Dr Ehlern and Ferguson, the answer to that problem is to take a
different tack altogether.
“Growth as such is not our aim,” he says. “We would rather have
fewer clients in that regard – it is a question of philosophy,
compatibility and ethics.”
