{"id":2172,"date":"2026-10-21T08:04:24","date_gmt":"2026-10-21T06:04:24","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=2172"},"modified":"2026-10-19T15:34:16","modified_gmt":"2026-10-19T13:34:16","slug":"creation-family-office-three-questions","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2026\/creation-family-office-three-questions\/","title":{"rendered":"Thinking of setting up a family office? Start with these three questions"},"content":{"rendered":"

For many business families, a family office takes shape before anyone calls it one<\/strong>. Dividends accumulate, a division is sold and the family holding company builds a portfolio beyond its stake in the operating business. Eventually, that wealth requires its own resources, people and decisions.<\/p>\n

Pontegadea offers a well-known example<\/a>. Created in 2001 to reinvest dividends from Amancio Ortega\u2019s stake in Inditex, it has since acquired more than 200 properties across 13 countries.<\/p>\n

While few families operate at that scale, the underlying shift is familiar: wealth generated by the business becomes an undertaking of its own.<\/strong><\/p>\n

The natural question is whether to establish a family office<\/strong>. Discussions often turn immediately to cost, staffing and asset allocation. Those choices matter, but the family first needs to agree on how it will own and govern the wealth.<\/p>\n

Two recent global surveys, by Citi Wealth<\/a> and UBS<\/a>, point to a misalignment between investment and governance<\/strong>. According to their findings, family offices tend to develop their investment processes further than their family governance and succession planning.<\/p>\n

The operating company may have a board, reporting lines and established decision rules, but the wealth held outside it needs its own framework.<\/p>\n

Whether the family manages that wealth through a company executive, a dedicated office or external professionals, it must decide who has authority<\/strong>, how differing interests will be addressed and how managers will be held accountable.<\/p>\n

Three questions to answer before establishing a family office<\/strong><\/span><\/h2>\n

A practitioner-informed study in Family Business Review<\/em><\/a> supports this view, ranking clear governance, preparation of the next generation<\/strong> and agreement on the purpose of wealth<\/strong> as the leading factors of success in running a family office.<\/p>\n

In parallel, it suggests three questions to ponder<\/strong> before deciding how to structure the family office:<\/p>\n

1 – Who decides what?<\/strong><\/span><\/h2>\n

Within the business, owners can rely on a board, a budget process, a shareholders\u2019 agreement and a management team, but these systems do not automatically extend to assets held outside the company<\/strong>.<\/p>\n

Ownership still requires work<\/strong>, however, from setting direction to determining acceptable levels of risk and defining what success looks like.<\/p>\n

Many offices have structured investment processes. Around 85 percent of European family offices <\/a>have an investment committee, and nearly all formally measure performance.<\/p>\n

Fewer than half have board-level oversight or a family council<\/strong>, while only about a third have a succession plan for the office itself. In some cases, the criteria for investment decisions are more clearly defined than the owners\u2019 decision rights.<\/p>\n

A good place to start is with the decisions most likely to cause friction<\/strong>:<\/p>\n

Who approves distributions?
\nWho can modify the investment mandate?
\nWhich matters are for family members to decide, and which fall to professionals?
\nHow will disagreements between branches be resolved?<\/em><\/p>\n

A written distribution policy<\/strong> can set expectations before a request for funds turns into a dispute, while an investment policy statement<\/strong> can give managers a clear mandate and owners a basis for reviewing their decisions.<\/p>\n

Neither has to be elaborate, but both need to spell out what the family has agreed to, who can grant exceptions and how the policy may be amended.<\/p>\n

2 – How will the next generation develop into capable owners?<\/strong><\/span><\/h2>\n

Owner families often dedicate considerable resources to preparing successors for the business<\/strong>, sometimes requiring them to gain experience outside the firm, rotate through different business areas or spend time observing the board.<\/p>\n

Preparation for owning financial assets deserves the same attention<\/strong>, since someone can learn how to run a business unit without acquiring the skills to assess an investment proposal or challenge an adviser.<\/p>\n

Next-generation members may need to evaluate advice, weigh competing needs, make collective decisions and oversee people who manage wealth on their behalf.<\/p>\n

The work can begin before a formal office exists. A younger family member might observe an investment committee, help oversee a modest portfolio or lead a philanthropic project with a real budget and regular reporting.<\/p>\n

The aim is to build responsibility gradually<\/strong>, with feedback along the way. At the same time, the family should set out clear criteria for joining its governing bodies<\/strong> so the path is visible to everyone.<\/p>\n

3 – What is the wealth for?<\/strong><\/span><\/h2>\n

An operating business often gives family members a shared sense of purpose, but once substantial wealth sits outside it, that purpose may be less obvious<\/strong>.<\/p>\n

Will the wealth serve mainly as a safety net, a source of income, capital for future ventures, a vehicle for philanthropy or an endowment for later generations? A family may want to pursue some or all of these avenues<\/strong>, but it still has to decide how to balance them.<\/p>\n

Without that clarity, a disagreement that seems to be about portfolio returns may really be about whether the family should spend, preserve or deploy its capital.<\/p>\n

Owner families place great importance on their socioemotional wealth<\/a>, such as the identity, influence, reputation and continuity they derive from their companies.<\/p>\n

While a shared business can promote these intangible benefits, a shared investment portfolio alone may fall short of holding relatives together as owners<\/strong>.<\/p>\n

Wealth held outside the business calls for deliberate efforts to sustain cooperation among family members<\/strong>. Before deciding what kind of family office to build, families may want to first ask whether they are ready to govern what they own.<\/p>\n

Homepage image: Rodeo Project Management Software on Unsplash<\/a>\u00a0<\/span><\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

For many business families, a family office takes shape before anyone calls it one. Dividends accumulate, a division is sold and the family holding company builds a portfolio beyond its stake in the operating business. Eventually, that wealth requires its own resources, people and decisions. Pontegadea offers a well-known example. Created in 2001 to reinvest […]<\/p>\n","protected":false},"author":2305,"featured_media":2178,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[352,12,14094],"tags":[120222,119634,87878],"class_list":["post-2172","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-family","category-featured","tag-family-office","tag-family-patrimony","tag-governance","megacategoria-mc-family-business"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t