Family offices should employ non-financial sector CEOs and not financiers if they are to prosper, says a scion of a family business.
Sandy Loder, chief executive of AH Loder Advisers and a member of the UK-based Fleming family, says that business CEOs are much better at building wealth than financiers.
“Business chief executives have more experience than bankers when it comes to managing a businesses,” he says. “And, ideally, this is what family offices should be about, building businesses.”
He adds: “Liquid investments should probably be outsourced and family offices should be more about direct investments, which are more likely to arrest wealth dissipation.”
Loder says that when families sell a business they will experience an evaporation of “emotional ownership”, which ideally needs to be countered by rebuilding the family business via a family office.
“If this is done correctly emotional ownership will be rebuilt. And who is better at rebuilding that business - a business CEO, or a banker?
Loder argues further that families should stick to what they know when it comes to building family offices. “If they made their money in the media world then they should stick to the media business with their family office.”
Loder says this is what the Murdoch family does, as well as the Bamford family, who own the construction machinery group, JCB.
“Their family offices/businesses invest in sectors they know well,” he says.