When a family member exits the family office, the question of a discount on their share is, in most families, a unity-killer. Westwick's view, applied consistently across the mandates we run, is that the conversation is necessary, but it should be reframed before it is had.
Quick definition. An exit from the family office is the process by which a family member separates their share from the family structure. The reasons vary (strategic disagreement, divorce, generational transition, or a personal wish for autonomy), but the mechanics are always the same: assets must be valued, liquidity arranged, and the relationship between the leaver and those who stay carefully managed. How the first exit is handled tends to set the precedent for every one that follows, and is key to maintaining family unity.
The only situation where a discount is genuinely warranted is when the departing member's demand for immediate liquidity forces the family office to sell assets at an unfavourable moment. In that case, the members who remain bear a real, measurable cost. A pricing adjustment simply recognises that cost.
A semantic shift from discount to compensation is also a good move. A discount sounds like a punishment for leaving, and it will be experienced as such, poisoning the departure, and every departure that follows. A compensation, by contrast, is the natural counterpart of an economic impact, assessed fairly and calculated in a way every family member can understand. Where appropriate, an independent valuation expert is brought in, so that nobody relies on the word of an interested party.
The golden rule is older than any formula: every member of the family is to be treated fairly and transparently. The first exit sets the rule for every exit that follows, across this generation, and every one still to come.
Frequently asked questions
Should a family member who leaves the family office accept a discount on their share?
Only when their demand for immediate liquidity forces the family office to sell assets at an unfavourable moment. In that case the members who remain bear a real, measurable cost, and a pricing adjustment recognises it. Call it a compensation, not a discount: a discount sounds like a punishment for leaving and poisons every exit that follows. Where appropriate, an independent valuer sets the figure so nobody relies on an interested party.
How is a family member's exit from the family office valued?
Against an objective valuation of their share, with the same rule applied to every member. The first exit sets the precedent for every one that follows, so the method, the compensation for any real economic impact on those who stay, and the timeline should be agreed in writing before anyone needs them.