According to the Africa Wealth Report 2021, Uganda has 1,400 high net worth individuals and 60 multi-millionaires and is expected to be among the strongest performing wealth markets in Africa over the next 10 years. Increasing wealth in Uganda over the decades has created the need for families to professionalize the management of their wealth and businesses hence the emerging family office landscape.
Rise and fall of family wealth in Uganda is common place due to poor succession planning, lack of structures and poor risk management. The common adage “The father buys, the son builds, the grandchild sells and his son begs” is very much applicable. A strong family governance system can mitigate these issues so that families can generate and preserve wealth inter-generationally. One of the ways of implementing a strong governance structure for families is through a Family Office.
The Family office can be defined as a set of structures that families put in place to manage their assets with a goal of preserving wealth and managing their affairs across generations. A family office is designed around the needs of the family and usually has a set of professionals including Investment, taxes, lawyers, and insurance advisors.
According to KPMG (2021), the Family Office is not a new concept. Wealthy families have always needed to manage their assets and family interests and this has traditionally been carried out in various forms such as; an asset holding structure like a trust, a trusted advisor such as a lawyer or accountant becoming directly employed by the family to help manage things, the Finance Director or other employee of the family business being asked to help with the family’s personal assets, a stand- alone entity employing a team of investment professionals and other specialists or a member of the family taking full time responsibility for managing the family’s assets.
Some of the benefits to having a family office to Ugandan families include:
- Succession planning
Family offices assist with legacy and succession planning for families and they play a big role in educating the next generation about family values. The family office structure increases the families’ control over family matters. A family office supports legacy planning and the transition of wealth from one generation to another, whilst ensuring that the family values set by the founder transition from generation to generation. - Increasing globalisation
Wealthy families in Uganda are going global with an increasing number of investments domiciled in foreign countries. A family office can seamlessly deal with administration and effective day to day management of such empires. Family members are pursuing opportunities for work and study globally hence the need for a family office to provide means to preserve the family’s wealth for their members living in other countries. - Centralizing wealth management
Having a family office is a way to consolidate the management of the family’s assets and investments, so that at any given time the family has a consolidated view over the performance of all of its assets at home and abroad. With a family office, the family can enjoy centralised decision making without having to go through multiple service providers.
The structure of the family office
The family office structure is wholly dependent on the unique circumstances of the family concerned. A family can opt to set up a Single Family Office (SFO) which manages the affairs of one family. Here, a family hires staff and basically sets up a separate entity to handle all their affairs. The other option is to use a Multi Family office which serves multiple families. By using a multi-Family office like Greenthos Capital, families can leverage economies of scale while accessing high calibre advice from a team of specialists. This is more cost effective than setting up and managing the family’s own family office.
The global environment we live in brings a unique set of challenges to wealthy families. Diverse risks have heightened the need for families to have robust structures in place to manage their wealth and plan for succession. Having a family office can help such families steward their wealth in a sustainable manner.
*Disclosures: This material does not provide individually tailored advice. It has been prepared without regard to the individual circumstances and objective(s) of person(s) who receive it.
