The Role of the Family Office in Managing Art Wealth
By their very nature, family offices are customised vehicles that are built around the explicit wealth management needs of a family and all of its members.
For many of the world's wealthiest families, family offices are playing an essential role in their wealth management strategy by managing the family's investment portfolios, guiding significant philanthropic endeavours, and maintaining a core set of values across generations.
It is only natural therefore, that families who devote great care to cultivating a private art collection should wish to integrate the management of their art with their other family wealth.
The Family Art Council
A family office can provide governance and management structures that deal with the complexities of a family art collection helping the family to avoid future conflicts. A family art council, in conjunction with the other activities of a family office constitutes the best forum for articulating the family's values and vision while maintain an optimal balance of ownership, family and management. The family art council is a governance body that focuses on the collection and is to the family, what the board of directors is to the family enterprise.
Figure 1 below illustrates the relationship that can exist between a family art council and the family office which assists family members with their other ownership and wealth responsibilities including managing joint family investments and family philanthropy. Although they each have a different mission, they are all also well served by some degree of integration.
Having a member of the family art council serve as an at-large representative on the family board will ensure the strategy and preferences for the family collection are appropriately considered. When in session as a family board, the family body takes up ownership, business, investment, and wealth issues across all its enterprises including the family art collection.
A family art council can also serve to educate the family about the history of the collection and it's heritage in a certain time and place, along the with responsibilities and obligations tied to both. Most importantly, the family art council is a vehicle within which to anticipate, air and resolve family conflict regarding the collection.
Because family art collections tend to grow more complex with the passage of time, the need for a family art council tends to be a lasting one. If the family can create a set of rules and procedures for the collection in advance and then seek to apply them neutrally to situations as they arise, its more likely that the decision will be a principled one.
Family Art Council Members
When creating and structuring a family art council, one of the most critical questions which must resolved is who will be members of the council and is there a role for outside advisers and other non-family members? Part of the challenge is to find the answers that are best for the family, that is why it is helpful to have as many family members as possible at the table initially to talk through them. Among the questions to be addressed are:
-Will spouses participate on the family art council?
-At what age do younger family members participate in the deliberations regarding the collection?
-Will all members have a vote on matters regarding the collection?
-Is there a role for outside advisers and other non-family members? If so, what provisions should be made removal and succession?
-How will decisions be made regarding the collection, by consensus? (whereby every family member must agree or no action can be taken) or by majority?
There are no wrong answers to any of the questions above, however the family art council should not exceed 10-12 participants.
Even for families stocked with talented and accomplished individuals, it is a mistake to attempt to develop and implement a governance system for a family collection without professional guidance and support. This process is a complex and nuanced one that calls for some independent vision.
Usually composed of non-family representatives, the curatorial board is separate and distinct from the family art council and helps to identify and prioritise issues objectively and recommend expert art resources to address them.
The function of the curatorial board is to leverage the expertise of its various members including art experts and other art market professionals, and to tackle complex and sensitive challenges facing the collection's legacy.
A family office bolstered by a family art council constitutes the best forum for achieving and maintaining an optimal balance of collection care, sound art due-diligence, and family values and one that fosters a positive family interaction with the co llection.
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