A complicated investment portfolio involves many stakeholders and professionals. There is a constant movement of cash. It is not possible for the family principal to authorize every transaction himself or herself, be it an expense or investment. It becomes necessary to delegate authority for approving transactions, while maintaining control and accountability.
The family office should maintain a register of signatories. It defines the following:
- People authorized to transfer funds digitally or sign cheques on behalf of the family principal
- Monetary limit up to which a staff member can sign-off on pay-outs
- The bank account(s) a particular employee is authorized to use for payments
- Personnel responsible for preparing the payment authorization slip and verifying the said slip. These two personnel have to be different individuals in order to maintain a checks and balances system.
This register thus serves as a final point of control for cash outflows. It must be designed as an auditable log that lets the principals verify transactions and identify the concerned people.
The register must be updated every time a staff member leaves or there is a change in authority.
Technology, security and processes also have a significant role to play here.