{
  "docId": "019dd923-5e88-73ef-bd58-d60590226592",
  "docSlug": "4dabb861968e8184",
  "documentTitle": "ey family office study client deck asia pacific",
  "authorId": "MorganStanley",
  "authorName": "EY",
  "documentKindSlug": "consulting-deck",
  "documentKindLabel": "Consulting deck",
  "sourceTypeSlug": "equity_research",
  "sourceTypeLabel": "Equity research",
  "presentationDate": null,
  "orientation": "portrait",
  "aspectRatio": 0.707,
  "pageNumber": 22,
  "pageCount": 64,
  "prevPage": 21,
  "nextPage": 23,
  "slideType": "section_divider",
  "function": "transition",
  "density": "overcrowded",
  "nDataPoints": 0,
  "notes": "The slide uses a large vertical 'Section 5' graphic as a design element.",
  "elementsJson": [
    "paragraph",
    "big_number"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-5e88-73ef-bd58-d60590226592/22",
  "deckHref": "/decks/019dd923-5e88-73ef-bd58-d60590226592",
  "deckJsonHref": "/decks/019dd923-5e88-73ef-bd58-d60590226592.json",
  "deckAnchorHref": "/decks/019dd923-5e88-73ef-bd58-d60590226592#slide-22",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "One of the biggest conflicts that can arise within a family office is that between the family that owns the wealth (the principals), and the fund managers and external providers (the agents).",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd952-3408-77db-b487-3cc76b69c537",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.04,
        "w": 0.4,
        "x": 0.51,
        "y": 0.87
      },
      "kind": "paragraph",
      "text": "Even if the incentives are pegged to the outperformance of benchmarks, the selection of appropriate benchmarks itself is a challenging exercise for many family offices.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "39f23cca-e772-4cb5-9bd6-09b02df82938",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.25,
        "w": 0.4,
        "x": 0.51,
        "y": 0.48
      },
      "kind": "paragraph",
      "text": "A feature of this potential conflict is that principals and agents face different utility curves with respect to investment results. Most wealth owners face a diminishing marginal utility curve, which means that they value the next dollar slightly less than the one they already have. This is why investors typically derive more pain from losing money on an investment than joy from making a profit. But fund managers will tend to take more risks in their portfolios in order to beat benchmarks. This is because managers have more to gain from outperforming a rising market (through asset gathering) than they have to lose from underperformance in a declining market, since there are far fewer inflows. This mismatch of expectations implies that wealth owners setting up family offices face agency costs, and have to set up appropriate monitoring and compensation mechanisms to mitigate agency problems.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "4e4716f8-8862-42d5-8ca0-62650c81e1a0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.4,
        "x": 0.51,
        "y": 0.33
      },
      "kind": "paragraph",
      "text": "One of the biggest conflicts that can arise within a family office is that between the family that owns the wealth (the principals), and the fund managers and external providers (the agents). The Credit Suisse Family Business Survey indicates that family businesses are not new to such conflict between principals and agents, with families typically encountering such problems as the business develops. But concerns about tension between principals and agents in family offices bring with them issues that are unique to delegated asset management.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "a546f71f-2212-42fc-a4dd-3a3fb51e2a4e",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.12,
        "w": 0.4,
        "x": 0.51,
        "y": 0.74
      },
      "kind": "paragraph",
      "text": "The length of investment horizon also imposes concerns about tension between principals and agents in family offices. While family offices tend to have a longer-term investment horizon, bonuses and other forms of compensation are typically determined more frequently, often once a year. This gives family office managers an incentive to ensure that the portfolios they manage perform well over that time frame, and can often discourage managers from making long-term investments that may perform differently from performance benchmarks.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "c6d04220-dda2-4475-ae5f-e826ceaac678",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.8,
        "w": 0.2,
        "x": 0.15,
        "y": 0.1
      },
      "kind": "title",
      "text": "Section 5",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1760fa8c-53e1-4275-83e0-cb3af9a5f9c6",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.5,
        "x": 0.35,
        "y": 0.18
      },
      "kind": "title",
      "text": "The internal-external conflict",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "4b2ad6c6-0b8a-4644-a27a-0e7743b81351",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.02,
        "w": 0.2,
        "x": 0.51,
        "y": 0.715
      },
      "kind": "title",
      "text": "Investment horizon conflicts",
      "attrs": null,
      "subkind": "subtitle",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "87e8f542-7d82-49af-80ef-f9ebc8677bb1",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [
    {
      "name": "Principal-Agent Problem",
      "slug": null,
      "matchId": "f7fb1ef1-8216-41b0-a5f8-37b19fbbf69b",
      "evidence": "Discusses conflict between family owners (principals) and fund managers (agents) regarding utility curves and incentives.",
      "confidence": 1
    }
  ],
  "arcBeats": [
    {
      "to": 30,
      "from": 21,
      "beatId": "85c3b719-5f74-4519-b1fe-5b500b7b46b8",
      "arcName": "The Consultant's Gambit",
      "arcSlug": "consultants-gambit",
      "beatName": "Impact & Next Steps",
      "beatSlug": "consultants-gambit-impact-next-steps",
      "evidence": "The deck discusses the costs of running a family office and the process for setting one up.",
      "position": 3,
      "confidence": 0.8,
      "parentBeatName": "Resolution",
      "parentBeatSlug": "resolution"
    }
  ],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}