Setting up a family office? Be prepared to have your ego deflated

So you’ve sold your business for a huge amount of money and are ready to set up a family office. But at the same time, you have this terrible sense of loneliness and loss of purpose, despite sitting on a vast sum of money. What’s the problem?

The problem, says Alexander Koeberle-Schmid, a family business specialist and business coach at KPMG in Germany, is that having a load of money, although very nice, doesn’t necessarily replace the sense of purpose you had when you were running your business.

“They (former business owners) will tell you a lot about their business because they identify themselves 100% with their company,” he says. “When they have sold the business, can they identify themselves with the money? This is difficult.”

Koeberle-Schmid believes successful entrepreneurs and family business owners should know about the potential pitfalls, like the psychological issue linked to a loss of purpose after the sale of the business, before setting up a family office. “Families need to develop their own identity through a family strategy process,” he says.

Koeberle-Schmid has just written a book – Das Family Office-Ein Praxisleitfaden (The Family Office – A Practical Guide) in German – that attempts to address some of the issues family offices encounter and what those thinking about setting up a family office should know beforehand. “The book is a practice-oriented handbook for family offices and families thinking about setting up a family office,” says Koeberle-Schmid.

Koeberle-Schmid wrote the book with specialist input from those close to the family office world in Germany, including Boris Canessa, who helped set up the family office for the family that own Henkel AG, one of the country’s biggest family businesses; Peter Preller Diplom-Kaufmann, who works with the multi-family office linked to the family of Harald Quandt called HQ Trust; and Christoph Weber, managing partner and co-founder of a MFO called WSH Family Office.

The authors talked to a number of family offices in Germany about their issues and what lessons they can pass on to those thinking about setting up a family office. Interviews were conducted with senior members of family offices, including Christoph Zapp, who was one of the first to set up a family office in Germany around 20 years ago, and Christian-Titus Klaiber, who is linked to the Leitz family office. Independent analysts reckon there are at least 150 single-family offices in Germany today.

Koeberle-Schmid says the issues that tended to come up the most when speaking to those working at family offices were linked to compliance and transparency concerns. Data security was also something occupying the minds of those running family offices, he adds.