What independent oversight can a family establish over its multifamily office relationship?
A family can establish oversight through an independent committee or director, separate custody and reporting, written conflict disclosures, documented investment policies, performance reviews, and outside audits. Separating advice, custody, measurement, and approval helps prevent one relationship from controlling every decision.
Create an independent oversight group
The family can appoint an oversight committee or board that includes independent members. The group can review fees, services, conflicts, risk controls, reporting, and major decisions. Its charter should document responsibilities, meeting schedules, approval limits, and escalation procedures. Source: EY Family Board Guide.
Separate custody, reporting, and approval
The family can keep assets with a qualified custodian that provides statements directly to family members. Direct reporting creates a separate record for comparison with multifamily office reports. The family can also separate wire initiation from approval, require dual authorization for cash movements, and give the custodian clear written instructions. Source: SEC Investor Bulletin, Custody of Your Investment Assets.
And one thing that was interesting is that only 37% of family offices have a formal investment committee. In other words, most family office decisions are just getting made by the principal and the CIO.
Make conflicts and results reviewable
Ask the multifamily office for written disclosures covering revenue sources, affiliations, referral arrangements, proprietary products, and relevant trading controls. The family can commission an independent accountant to review fees, transactions, and controls, then compare results with its documented investment policy and agreed benchmarks. Establish a process for reviewing or changing the office, custodian, or outside manager when service, reporting, or independence falls short. Source: CFA Institute Standard VI(A).
Related guides
- Family Office Due Diligence: A Practical Guide for Multifamily Offices
- Family Governance With a Multifamily Office
- Access to Alternatives Through an MFO: A Practical Guide for Families