Episode 14 – Single Family Office & Non-Executive Directors
In our fourteenth episode, Christian Knie, Managing Partner & CFO of Engaged Aviation, and an active member of the GetNED platform joins Yann Mrazek, Managing Partner at M/HQ to discuss the added value of a NED in managing your Single Family Office (SFO).
Key Takeaways
What is a SFO?
A SFO is a private entity aimed as managing the investments and affairs of one single family. The assets under management are the family’s own wealth, often accumulated over several generations. A SFO is restricted to provide services to members of one single family, contrarily to a multifamily office (the “MFO”).
In addition to investment management, these entities typically also provide the following services:
- Succession planning
- Estate planning
- Tax planning
- Accounting and payroll activities
- Legal affairs management
A SFO can be compared to a commercial enterprise. But a very special one as:
- Its only clients are members of one single family and legal entities controlled by them; and
- Its activities are determined by a menu of services that is bespoke to each SFO.
A SFO may remain virtual. Alternatively, it may be incorporated as a distinct private legal entity separated from the family business.
Who is a Non-Executive Director (NED)
- A member of the board of directors providing independent oversight, seeing companies and business issues in a broad perspective and serving on committees concerned with critical issues.
- Appointed due to their independence;
”the right fit for what the organization needs” - ensures objective viewpoints
- challenges the business without preconception or bias
- provides specific business knowledge and experience
- closes vacuum in start-ups and high growth businesses
- introduces a fresh and innovative perspective.
What is the role of a NED?
The NED’s role sticks out by independence and expertise.
- Strategy
- Challenge and contribute to the development of the company’s strategy & form ties with other stakeholders.
- Performance
- Scrutinize and monitor the performance of the management and ensure proper succession planning.
- Risk
- Ensure accuracy of financial information and robustness of financial controls & systems of risk management.
- Governance
- Monitor the system of rules, practices and processes by which a company is directed and controlled.
How does a NED add value to a Single Family Office?
The NED contributes with advisory- and oversight expertise to transform
“founder-led”- into proper governance structures.
- Diversity
- NEDs provide different skill sets for each of the required role profiles, i.e. mainly Advisory & Governance.
- Direct contribution
- Advisory; devising a Business Case to showcase the benefits of a modern SFO (“old” vs. “new”).
- Governance; exercising Oversight & Guidance in respect of the SFO’s Governance- & Board Structure and Financial Planning.
- Awareness Building; Create awareness and advocate the benefits of a modern SFO
- Help morph a FO from a “founder-led” framework to a proper governance structure by identifying needs and advocating the SFO’s benefits.
- Planning and Trust Building
- Devise the SFO’s vision, mission & strategy
- Devise its long-term projection
- Devise the envisaged Corporate- and Governance Structure
- Devise the preferred Jurisdiction & Tax Status.
- Instead of an Independent Member, a NED can be part of an Interim Advisory Board until the development of a fully functioning Board.
- Implementation and Oversight
- Implement a fully functioning governance structure & steadily improve.
- Impose Oversight and Guidance, Governance/Board Structure and Financial Planning.