FINANCIAL CENTRE FRANKFURT: Family Offices, Family Governance, Asset Allocation, Motivation & “Annual Family Office Conference” ( Interview – Dr. Henning Schröer, FIDUBONUM)

Dr. Henning Schröer built up a family office for the Merz family in Frankfurt and managed it for more than 10 years. With fidubonum (www.fidubonum.de), he now advises wealthy families on strategy and structural issues, which also includes advice on setting up custom-fit family office structures. Markus Hill spoke with him for FINANZPLATZ-FRANKFURT-MAIN.DE about topics such as family constitution, asset strategy and the requirement profile for family officers against the background of his own experience in setting up a single family office. In addition, his personal motivation for this professional field, his own teaching and publication activities, keyword “Annual Family Office Conference”, as well as his personal views on the Frankfurt-Rhine-Main region were addressed.

Hill: Mr. Schröer, you have set up your company, fidubonum KG, and offer strategy and structure consulting for high-net-worth families. What do you mean by that?

Schröer: High-net-worth families, like all other wealthy individuals, face the challenge of investing their money in such a way that it corresponds to their own risk/return perception. However, they also have to deal with many additional issues: the family has to organize among themselves and clarify who will make the decisions on its assets on its behalf. The centrifugal forces within the family, which tend to increase with the size of the family, must be contained by trust- and community-building measures so that the family remains capable of forming a unified will. And the more complex these family demands and the assets are, the more urgently the family needs a family office, where I help to structure and establish.

Hill: That sounds very complex. What qualifies you for such broad-based consulting work?

Schröer: I built up a family office for the Merz family in Frankfurt and managed it for over 10 years. In doing so, i was able to deal with all the issues mentioned above – and many others – in great detail. Since I have been self-employed, I have also looked after several other families. In addition, I also deal with these topics scientifically, write essays and give lectures. My large network also benefits me, and I often hear how other families have tackled some challenges. In addition, I work with many cooperation partners, from whom I learn on the one hand and who can go into depth on the other, where this is impossible with my generalist approach.

Hill: In a world of ever greater specialization, is such a generalist approach still in demand?

Schröer: Absolutely! In these complex issues, where legal, tax, asset management, personnel, psychological, and planning aspects all come together, you need someone capable maintaining an overview. Where an orchestra of specialists is playing, someone has to conduct. However, many questions are solved by the generalist, and, above all, he avoids some wrong paths. In this respect, generalists and specialists should not be mutually exclusive but complementary. If you had to do without one of the two, then it would be better to do without the specialist rather than the person who can guide the family through this complex process from start to finish.

Hill: Can you describe this process in a broad outline?

Schröer: It should always start with the so-called owner strategy. Here, the family has to be clear about its values and goals and the purposes of its asset management. It also makes sense to define the roles of the individual family members and the rules for dealing with each other. If there is still a family business, the family should also position itself clearly and uniformly to it. The whole thing is best in a family constitution. It then forms the basis for developing the overall asset strategy, determining which asset classes are to be invested in, and with which risk-reward profile. It should then also include tax optimization, the financing structure, and any liquidity requirements. With these guardrails in place, one can then develop an asset class strategy and investment plan for each asset class.

Hill: So you have a roadmap for investing and for some family goals that go beyond that. But the family probably also needs a suitable organization to implement this roadmap, right?

Schröer: Exactly. Structuring this organization is the second essential part of my advisory process. And this part, too, can be divided into three areas: Family governance, which is intended to ensure the cohesion of the family. This involves joint activities, facilities, and communication structures for the family members, but also their education. It also includes crisis and conflict management. The second area is corporate governance. This refers to a company and board structure that conforms to the strategy and is intended to ensure, through monitoring and consulting, that the operational management pursues and achieves the family’s strategic goals. The third area and the bracket around everything is the family office. It can support the other two areas, but also take on tasks that go far beyond them.

Hill: Are there clients who go through this whole complex process with you? Are they your ideal clients?

Schröer: They do exist, e.g. when an asset has been managed more or less alone by the founder of a company and he is thinking about spreading the responsibility over several shoulders because he wants to retire slowly. Or in the case of a sale of a family business, after which the family is suddenly sitting on a large pile of money and one needs to clarify for what purposes, with what goals, and, above all, how it should be invested. In these situations, it is a special privilege to be able to approach all questions in a completely structured manner and to develop and implement tailor-made solutions in a greenfield environment. But it can be just as exciting to support the establishment of a family office, for example, when the strategic framework is already clear and the family and corporate governance structures are essentially already in place.

Hill: Is the establishment of a family office you are special hobby horse?

Schröer: At the very least, I can provide very practical added value here due to my many years of operational responsibility for a family office with a very broad range of services. It certainly helps if you know what processes are required in a family office and what they should look like. Then you can better assess which competencies and capacities need to be maintained in the family office or whether it is better to outsource the service.

Hill: Speaking of outsourcing, does it make sense to have your own family office, given the costs involved, when there are so many multi-family offices that provide a large number of family services from a single source?

Schröer: You’re talking about a broad field here. It’s true that in very few cases it makes sense for a family office to provide every service itself. Even if it were possible to bring the necessary expertise on board, it would certainly not be optimally utilized. Ideally, one should consider for each service of the family office whether it should be provided internally or externally. There are good decision-making parameters for this. If one then decides to outsource, a multi-family office may be the right choice. However, it may be possible to achieve even better results with an individual selection of different service providers for the various tasks. Then it is important to have someone who coordinates these service providers with each other and with the needs of the family. In extreme cases, you can even limit your family office structures to this and outsource all other services. This is called a hybrid family office. This is, of course, very flexible, has hardly any fixed costs, and is therefore also a viable option for smaller estates.

Hill: You’re already anticipating my next question, namely the asset size at which it makes sense to think about setting up a family office.

Schröer: I wouldn’t make it dependent on the size of the assets, but rather look at what services the family office should provide in terms of asset management and family management. In a second step, you can then consider how to obtain these services in the best and most cost-effective way, and then decide whether the whole thing is worthwhile.

Hill: You are a lawyer by training. How did you become a family officer?

Schröer: I am a good example of the raison d’être of headhunters! A personnel consultant who had met me on another occasion remembered my broad interests and wealth of experience when she was asked to fill the position of setting up the Merz family office. It would never have occurred to me on my own to orient myself in this area. But she was right in her assessment that the function of a family officer was tailor-made for me.

Hill: In your opinion, what are the qualities that make a good family officer?

Schröer: Of course, some soft qualities such as trustworthiness, reliability, fairness, and diligence immediately come to mind, but it goes far beyond that: You need to have the expertise or at least a very good feel for areas as diverse as law, taxes, investments, real estate, organization, leadership, project management, and family management. You should not be afraid to make decisions, and you should have the motivation and courage to familiarize yourself with completely new topics again and again. And then there’s the sometimes difficult balancing act between an entrepreneurial outward appearance and a more service-oriented one toward the family.

Hill: That does sound complex. Can you find people with such a broad range of dispositions?

Schröer: That is certainly a challenge. It will not always be possible to avoid compromises. I think it’s important to work out exactly what you need and with what priorities before you start looking for personnel so that you can then consciously decide what you are prepared to do without.

Hill: What about the next generation?

Schröer: Given the breadth of the requirement profile, it is helpful if the family officer can draw on a wealth of experience. Therefore, you will see many gray hair in the industry. But not only that, in cooperation with Prof. Bäuml, I design and chair the annual Family Office Conference, which serves to provide regular training for certified family officers, but is also open to anyone else who is interested. You can also see younger family officers or people from banks and law firms who want to become one. The appeal of this versatile job is high, and it usually pays well, too.

Hill: I saw on your website (www.fidubonum.de) that you are not only active in the field of family officer education with the annual conference, but also with numerous articles and an interesting series on myths in entrepreneurial families. Is it the mission of fidubonum to dispel these myths?

Schröer: I wouldn’t go that far. The myths are a good hook to address some issues that are relevant to my work and to give some suggestions in the process. If you want to use this slightly inflated term at all, I would rather see the mission of fidubonum as the very structured accompaniment of high-net-worth families in transitional situations. Working together with the family to come up with very individual and precisely fitting solutions of a strategic and structural nature is a very fulfilling challenge for me. For the family, external support in this process is extremely important, because it contributes to objectification and professionalization of the associated discussions and decisions.

Hill: Is Frankfurt – or in your specific case Königstein – a good location for a family office consultancy like fidubonum?

Schröer: Definitely, because of the proximity to most financial service providers. However, most of the very wealthy families tend to be located in the south and north of the country, often in very small towns. Frankfurt’s central location in Germany helps here.

Hill: What else do you like about Frankfurt?

Schröer: I came to Frankfurt in 1992, and at that time the city didn’t have a good reputation. That has changed thoroughly in my perception: The skyline has become even more imposing and chic, the massive drug problem at the time has not been solved, but it has largely disappeared from the cityscape, the cultural offerings are often great, and with the Taunus and Rheingau, there are two very beautiful and diverse recreational areas in the immediate vicinity. The only thing missing for perfection is the sea or at least a larger lake in the immediate vicinity, but you can’t have everything. But you can live in the middle of Hesse, among people who make it easy for newcomers to quickly feel at home.

Hill: Thank you very much, Dr. Schröer, for a very interesting insights. I wish you continued success with fidubonum.

Dr. Henning Schröer has built up a family office for the Merz family in Frankfurt and managed it for more than 10 years. With fidubonum (www.fidubonum.de) he advises wealthy families on strategy and structure issues, which also includes advice on setting up tailor-made family office structures.