The rising importance of purpose and long-term value to preserve reputation and wealth for single family offices

By Bobby Stover, EY Americas Family Enterprise and Family Office Leader , and Lauri Oinaala, EY EMEIA Family Enterprise Leader and EY Global NextGen Leader

In times of accelerating – and often unanticipated – economic, social and geopolitical disruption, the strategic role of the single family office (SFO) continues to amplify and expand. With that in mind, EY teams engaged with more than 250 of the world’s leading SFOs to gather and share deeper insights into their priorities in today’s high-pressure and fast changing environment.

SFOs support the legacy and priorities of the family typically across generations. In an environment where changing regulations and emerging technologies create disruption, having a strategic plan and governance systems for the family office, validated and refreshed periodically, is more important than ever before. Most SFOs indicated they have some form of strategic planning and governance construct in place. That said, for too many SFOs these systems are relatively informal and too often can leave gaps in expectations, execution or escalation. 

Taking action on strategy and governance

A trend for leading SFOs is a growing appetite for and commitment to more rigorous strategic planning and governance systems. This has only been reinforced by the pandemic. The greater the complexity and diversity of the family and its assets, the more critical governance becomes. Formal governance structures support the SFO to set clear boundaries, coordinate and prioritize demands. It also enables them to differentiate roles and responsibilities across family and business stakeholders, risk domains and areas of strategic focus.

A hot topic among many families and their SFOs is the growing appetite for defining value and purpose well beyond traditional performance indicators. Most notably this relates to the environmental, social and governance (ESG) arena and other forms of value in their ecosystems such as human capital, societal and community value, and customer and stakeholder impact.

There are many reasons for this shift. Family offices see growing expectations from consumers and society at large as well as the powerful influence of next generation family members. These considerations include – and yet extend beyond – traditional financial performance metrics and we see many families innovating how to incorporate this agenda formally in their strategic planning and governance constructs.

Leading SFOs are already taking action in various ways. According to the survey, 44% plan to exclude investments that do not align to the family’s ethics and values. This may be ESG related or reflect other values of the family. Increasingly these types of protocols can also influence family reputation.

Yet the survey also exposes a potential execution gap. While 83% of SFOs indicate that it is important to measure and optimize non-financial performance, currently only 30% do so to a significant extent. When it comes to measuring performance, across all regions of the world cost rather than value surfaces as the most widely deployed metric for the SFO.  As the goals and aspirations of the family expands, it will be critical for SFOs to be afforded – and take the lead in designing and deploying – next generation performance criteria that contemplates the broader mandate that’s emerging especially as it relates to ESG.

There is a proven tangible benefit to innovating and evolving performance to include new measures. Our survey shows that 58% of SFOs that have included non-financial metrics to a significant extent have performance that exceeds expectations.

Family offices are in an exciting position because some families will be introducing ESG and other new metrics for the first time. This provides the SFO leadership a unique, once in a generation opportunity to influence and proactively shape new performance criteria with the principals and, as importantly, ensure that the operations, infrastructure, strategy and governance of the SFO are properly resourced to satisfy the growing expectations.

To find out more about the EY Single Family Office Study findings, visit  How single family offices are balancing tradition and transformation | EY - Global.


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