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What makes a successful family office CFO?

By Edward Marshall, Director, Global Family Office Group

January 21, 2019Posted InFamily Office

The chief financial officer (CFO) in a family office is the controller of the family’s finances. However, this should not be confused with straightforward accounting, cash management, and tax reporting. The CFO plays an integral part in all of a family’s affairs, including buying houses or businesses, hiring staff, investment, and philanthropy.

The role can be especially challenging because wealthy families tend to increase in complexity over time, with new responsibilities and assets.  This means that CFOs are not only responsible for a wide range of family needs of which they do not have prior experience, but are often understaffed and have to make do with legacy accounting and reporting systems that sometimes are not set up to deal with these increased requirements.

CFOs with experience from private companies or accounting firms can often find the transition to a family office incredibly challenging because they are no longer specialists focused solely on accounting and reporting, but become ‘generalists’ with oversight of all financial decisions that a family makes. On top of this, as the CFO is often the first C-suite position hired by a family, the expectations and responsibilities may not be clear-cut. As a family’s needs grow in complexity, all staff members end up ‘pitching in’ and taking on more than they may have expected, with CFOs getting involved in investment management and wealth planning. 

It is clear that family office CFOs need to have certain skills and abilities to handle all the demands of the role. So, what sets a great family office CFO apart from an average one? We explore some best practices gleaned from our experience of working with over 1,200 family offices around the world.

Extensive rolodex and contacts list of family offices, experts, and advisors

Family offices tend to be lightly resourced but are asked to manage the complex and ever-evolving requirements of families of significant wealth. This affects CFOs in particular because they often do not have access to the technology they need, which means they may have to develop their own ad hoc systems, tools, and processes for various responsibilities, including financial reporting, tax work, and bill payment. CFOs have to make do with what they have, which means they can spend a tremendous amount of time performing tasks manually themselves.

A great family office CFO has an extensive rolodex of family offices, specialists, and advisors, so they can share ideas, best practices, and get expertise, or perhaps even outsource certain tasks and responsibilities to ensure the family’s requirements are met to a high standard. It is vital that CFOs have access to the right people who can help and work with them to get the right results.

Be a trusted leader and advisor

A family office CFO needs to have strong relationships based on trust and respect with key family members and the entire family office team. A great family office CFO is a trusted advisor to the family principal. As wealthy families are incredibly private by nature, it is important that a family can completely trust CFOs with sensitive information and to be discreet, especially since they are often involved with important decisions earlier than anyone else, both with the family and within the family office.

Successful family office CFOs will understand that they have a unique overview of their families’ entire wealth and finances, and can offer insight and advice into important issues including wealth preservation and generation, succession planning, and risk management. Equally, strong family office CFOs will share their unique insights with the rest of the family office team and keep them informed of any changes and developments so everyone can be as effective and efficient as possible.

Say ‘no’ when necessary

Although all family office staff need to respect that the principal has the final say on many, if not most, decisions, a CFO must be confident enough – and willing – to say ‘no’ and provide candid advice when necessary. Family members and even C-suite family office staff may believe a direct investment opportunity or a property purchase is a good idea and be very enthusiastic or even pushy about it.  However, strong CFOs must be able to assess all decisions in light of the total financial picture that only they have – and be confident enough to advise against a deal if the numbers do not add up or it is not affordable. They must be willing and able to provide guidance for the benefit of the family and its overall wealth now and far into the future.

To find out more about the unique challenges faced by family office CFOs and how they can overcome them, read our white paper: Organizational Design, Strategic Leadership, and Governance Insights for Family Offices.