Merchant banking approach of families of wealth
Is a Family Office today, what a Merchant Bank was in the past ?
Let me explain: In former times, the Anglo-Saxon merchant banking institutions, run by entrepreneurial families like the Rothschilds or the Warburgs, were traditionally combining private and institutional banking services for their clients globally. The services they provided very much resemble the needs of a modern family office today. From portfolio management and advice on the whole range of debt and equity products to corporate finance / M&A transactions.
Today, many (larger) single family offices are comparable to the model of merchant banking. They look after the wealth on a holistic basis, deal with the liquid assets, but also venture into direct investments / M&A deals and all kinds of alternative investments and are truly independent by solely representing the interests of their client.
An increasing professionalization of the Family Office is of utmost importance in order to be able to manage and secure the family wealth successfully. Particularly if larger amounts go into direct investments in real assets like real estate or entrepreneurial ventures. The transparency the office creates by way of a holistic reporting enables the wealth owner to get clarity about all costs and (hidden) fees. The Family Office should be in a position to decide on investments and execute the investment policy of the family in an independent and objective manner. It should provide impartial advice on the selection and weighting of different asset classes. It should help to allocate to sectors and geographical regions. And last but not least, the decision whether an asset class should be invested directly or indirectly via funds needs to be taken.