A family office is a private team that looks after the money of one family, or of a small group of families. The family either hires staff directly or appoints a firm to do the work. In India the reason for setting one up is usually not investment returns. It is that nobody can any longer say what the family owns. The money sits in the operating company, in personal accounts, and in property bought in the eighties. Some of it is in a trust created in 1998 that nobody has opened since. A family office puts all of it in one place, and that part works. This piece is about the point at which it stops working. That point is not a failure of the office, and it takes most large families by surprise.
What a family office does
The team runs the investments. It handles tax, accounts and regulatory filing across every company, trust and individual the family holds. It carries the administration. Property records, insurance policies, loan documents, and the signatures of a dozen relatives who have been signing things for thirty years. Most usefully, it produces a single set of accounts. A family with three or four businesses can finally say what the group is worth. It can also say where the money sits and who owns which part. In many Indian families that has never existed on one sheet of paper.
What a family office cannot decide
None of that answers the questions a family actually gets stuck on. Those questions are not about money, so a team that handles money cannot settle them. The office can state precisely what the group is worth. It cannot say who runs the group after the founder steps back. The office can hold the shares of a dozen people. But what a share is worth inside a family is not what it is worth outside one. That number is set by who has worked in the business, who married in, and who left for Singapore in 2011. No valuation report supplies it.
Why the office cannot help
A family office answers to the person who set it up, and in India that is almost always the founder. Everybody else in the family is looked after by it. None of them instructs it. So when the founder is the one who cannot decide, the office has nobody to ask. It waits. Take the ordinary case. A founder says he will hand over in March. In March the reason is a new plant, and then an audit. Nobody in the family argues either time, because nobody in that house has ever said no to him. The shares do not move, because no instruction has come and none is coming.
The person who knows everything
The head of a family office is usually not a family member. She has often held the role for a decade, and she sees every number before anyone in the family does. That creates a position nobody planned. Requests to the founder go through her, and so do refusals. When two branches of the family disagree, both of them telephone her. She ends up holding information from both sides while owing loyalty to neither. She has done nothing wrong. But a family that needs an honest conversation cannot have it with her. She knows everything, and she also has a job to keep.
What is actually blocking the family
Underneath a stalled decision there is nearly always something nobody has said out loud. One brother has stopped speaking to another, and each asks after the other through the auditor. A daughter-in-law who came into the house at twenty-one has never been asked her view at a family meeting. A son was told the handover date twice and has heard nothing about it since. A daughter with the same degree as her brother was never asked whether she wanted to join. Her father would say he was protecting her from it, and he would believe that. None of this appears on a balance sheet or an agenda, so the family office never sees it. It is still the reason the paperwork has not moved in two years.
What families do about it
At this point a family usually brings in someone from outside, who is neither on the payroll nor in the family. That person spends months in private conversations, one person at a time. Not only the shareholders. The wife, the mother and the in-married are seen too, because they move decisions without ever attending the meeting.
Then there is one meeting, and the thing nobody has been able to say gets said in front of everyone. Why an outsider can do that when the family cannot is set out at when the family cannot speak.