The sale of a business replaces one complex asset with many. The question that follows is less about where to invest than about who holds the whole picture.
From one balance sheet to several
While a founder runs a company, wealth is concentrated and legible. There is one business with one set of accounts, and the founder knows every line. A sale changes that overnight. Proceeds arrive at one or more banks. Advisers who were engaged for the transaction remain involved for the structures they created. A holding company may sit alongside a personal portfolio, a property, an art collection and the first philanthropic commitments. Family members who were not part of the business now have a stake in what the business became.
Within a year, a family that used to read a single management report may be dealing with three or four custodians, several discretionary managers, lawyers in two jurisdictions, an accountant for each entity, and a set of statements that arrive in different formats and currencies, and never on the same date. Nobody has done anything wrong. The wealth has simply become distributed, and distributed wealth needs coordination.
What the coordination problem looks like in practice
The symptoms are familiar to anyone who has been through a liquidity event:
- No single document shows total exposure to a sector, a currency or a counterparty.
- Two managers hold overlapping positions, so the family is paying twice for the same risk.
- A decision taken with the lawyer is not reflected in how the bank has booked the asset.
- Cash sits uninvested in one account while another is borrowing.
- A family member asks a simple question – how much do we have, and where is it? – and the honest answer takes a fortnight to assemble.
Family-office research points in the same direction. Deloitte identifies risk management, succession, cybersecurity and digital transformation as the areas demanding most attention from family offices, and the European family-office research published by HSBC describes a breadth of challenge that goes well beyond selecting investments – governance and succession prominent among them. The problem after a transaction is rarely a shortage of good advisers. It is the absence of anyone whose job is to make the advice add up.
What consolidated oversight does
A family office, whether established by a single family or shared with others, exists to carry that job. In our experience its practical value lies in a handful of disciplines:
- One view of everything. A consolidated report that brings every entity and asset class on to one page, in one currency, with one valuation date. Not as a convenience, but as the basis on which allocation decisions are actually made.
- One investment framework. An agreed strategy that sets objectives, liquidity requirements and risk limits for the family as a whole, so that each bank and manager works inside the same boundaries.
- One point of coordination for advisers. Lawyers, accountants and bankers continue to do what they are engaged to do, but the family office ensures that each knows what the others have done, and that strategies align with one another.
- One place for the family. A forum in which decisions on investments, distributions, property, philanthropy and the preparation of the next generation are discussed and recorded.
What it is not
A family office does not replace specialist legal or tax advice. It depends on it. Our role at Otoma Group is to supervise the banking relationships, to hold the consolidated picture and to make sure that investment decisions sit within the planning our clients' legal and tax advisers have put in place. Where a question of law or tax arises, the specialist answers it; our contribution is to ask it at the right time and to ensure the answer is carried through everywhere it matters.
Starting point
For a family coming out of a transaction, the first task is not an allocation. It is an inventory of every account, entity, adviser, obligation and reporting line, followed by a decision about who will keep that inventory current.
Everything else follows from there.
Which relationships are earning their fees and which are not. Where liquidity will be needed in the coming years and where it will come from. Which structures still serve a purpose. What each adviser has been told, and whether it agrees with what the others have been told. Otoma Group works through these questions with families in the months after a transaction, and continues as the family's point of coordination once the arrangements have settled.