In issue 180 of The Superyacht Report, Katherine Ellis, group director of Boston Multi Family Office, explained how the family office sector is becoming more commercially savvy. There is a growing trend in these organisations where they are actively working to make sure their involvement with the yachting industry is as productive as possible.
“Family offices are private businesses built solely to service the wealth of their owner, or owners. Such a private arrangement is growing in popularity internationally, versus the alternate model of solely using third party wealth managers and advisors,” begins Ellis. “This is largely because of the protective independence and impartiality they offer, aligned solely to the owner’s values, compared to the potentially avaricious service of managers with Assets Under Management targets to hit.”
This impartiality is the essence of why many UHNWIs use family offices. “We work for the clients, without a conflict of interest,” says Neil Richmond, founder of Morpho Luxury Asset Management. “We would always say to clients to look at the entire market, for the most suitable provider for the client – regardless where they are based and who they are – and focus on the best fit, experiences and references.”
Ellis admits that there has long been criticism of family offices (especially those who work with yachts as one of the smaller assets in an owner’s large portfolio) that they do not understand the intricacies of the market. Ellis believes that a key issue found in the yachting industry in the past, is the miscommunication between the various parties involved. “A yacht owner, or their family office, will generally have to work with a yacht manager, charter broker, technical manager, tax lawyer, local representatives, crew employment company, corporate service provider, and the captain and crew to keep their pride and joy afloat. Sadly, the division of labour between these entities and individuals is often poorly defined, and as a result work is duplicated between them, meaning owners pay more than they need to.”
Richmond agrees, admitting that the management of yachts is a completely different kettle of fish from most family office portfolios, “Yachts are in situations that would never ordinarily occur when managing more common assets. So, we are really aware of those differences.” As yachts are typically only a small fraction of a family’s range of assets, Richmond adds that family offices rely on the expertise of advisors within the yachting world to understand the complexities of the market.
To alleviate communication problems between individuals, Ellis explains that many family offices are gradually addressing these issues, and are now offering a range of services to ensure that family offices help – rather than hinder – the daily management of a vessel, “through scrutiny of contracts and suppliers, rationalisation of structures and governance, reorganisation of reporting lines, and an ‘overlap analysis’ process.”
This trend in the family office sector mirrors changes in attitudes and behaviour seen across the market. “Brokers, yacht managers, shipyards, and other stakeholders seem to also be under increasing pressure for transparency and clear delineation of responsibilities and service objectives,” offers Ellis. This is a hugely positive step for all sectors, but most importantly the owner, who receives a higher level of service, knowing that each step of process is thoroughly checked. “Over the course of the next few years, this will hopefully result in a more transparent superyacht services market in Europe and the Middle East,” she adds.
Richmond agrees that family offices need to understand and value those with yachting expertise, “You need to have a family office that has enough invested in yachts,” he says. “They should have staff that familiarise themselves with certain yachting issues and requirements. Those people in the office need to be in charge of communicating all these issues and they need to have all the contacts to coordinate.”
By constructively adapting to the criticisms from the marketplace, family offices will continue to maintain their place as a protective intermediary between service providers and the owner. If knowledge is power then it is the responsibility of family offices to obtain as much as they may about the intricacies of the superyacht industry. However, the onus is on the superyacht market itself to provide insightful and accurate information, from respected sources, to ensure that family offices avoid the flow of misinformation.
Discuss this, and many other ownership-focused issues, at The Superyacht Forum, held from 13 - 16 November in Amsterdam. Click here to find out more.