Starting or creating a family office
What Separation of Duties Is Practical for a Small Family Office?
Short answer. Even a small office can separate requesting, approving, paying, and reconciling transactions. Assign distinct steps to staff, family approvers, or outside providers, then document who covers each role when someone is unavailable. Add a second authorization for significant transfers and use third-party statements to check records independently.
A small family office can separate duties by assigning different people or controls to request, approve, execute, and reconcile important transactions. The goal is to make sure one person cannot initiate and complete a significant payment without another check.
Assign Distinct Steps
Map the recurring processes that involve money or sensitive records. For a payment, one person can gather the invoice and enter the transaction, an authorized family member or manager can approve it, and a different person can release it or review the bank activity afterward. For an investment, one person may assemble due diligence, a committee or authorized family member may approve the commitment, and an operations role may handle documents and funding instructions.
A small team may not have enough employees for a different staff member at every stage. In that case, use the family, a board member, an outside bookkeeper, a bank control, or an independent adviser to provide a separate check. A governance framework can assign the responsibilities and clarify who can step in when someone is unavailable.
Use Controls That Fit the Team
Set dual authorization for significant wires and checks, and require supporting records before release. Limit access to accounts and files according to each person's responsibilities. Reconcile account activity against statements from the bank or custodian, and have someone other than the person who entered the transactions review the reconciliation when feasible. Keep an audit trail of approvals and changes to account access.
It also helps to write down a backup plan. If the person who normally approves payments is away, identify the alternate approver and any limits on that authority. Staff should know how to handle a payment that appears urgent, is missing documentation, or involves a conflict. A clear exception process keeps a temporary workaround from becoming the ordinary method.
Document and Revisit the Process
Describe each process in plain language: who starts it, what information is needed, who approves it, how it is completed, and what record is retained. Keep instructions current as roles change. The operational processes guide can help the office map repeatable work. The partners and service providers guide may help identify outside support for functions a lean team cannot independently separate.
In my experience, a small team benefits from simple controls people will follow every time. Start with payments, account access, and investment approvals, then extend the same thinking to hiring, records, and vendor selection. Talk with your attorney or CPA when the office's structure creates legal or tax questions.
Typically, no single employee, whether they are a family member or not, should have the ability to withdraw large sums of money from the business, and if someone is allowed that privilege, it should only be after receiving approval for that movement of funds.
Sources: How to Start a Family Office. Informational only, not financial, legal or tax advice.