When looking at trends that impact family offices one must be vigilant, as it can be complex at times. However, despite the complexity of the movement in the market, trends can also be extremely interesting to watch. Trends that potentially impact private wealth and family offices can be a result of circumstantial events, technological improvements, and political opinions. In this article we will show you how those major trends have already impacted family offices this year, and even for years to come.
Recent Economic Changes have created Industry Growth
According to statistics, the count of family offices, primarily in North America, and around the world grew by 38% since 2017. What does this mean? Competition has steepened.
We can expect to see private wealth on the rise despite the disruption of the pandemic. The family offices grew for a couple of reasons – one of them being that more high-net-worth individuals became interested in preserving and growing their money – for obvious reasons -such as experiencing one of the scariest economic times in recent history.
Another reason was due to a rise in businesses in the Middle East and Asia Pacific, as a result this created a rise in HNWI. But here’s the benefit, as the saying goes, “a little friendly competition never hurt”. You will begin to see service expansion and more creative ways of engagement with you through these offices because they are aware that your options have broadened.
You will have more to consider, and you have the liberty to be a little more audacious about who you do business with. If one office doesn’t meet your requirements, then you can simply go to the next guy. Family Offices will have to gear up and keep up with rapid market changes for this reason.
Managing Director and Chairman of Citi Private Bank’s Private Capital Group, Stephen Campbell, backed this up by also confirming that family offices and ultra-wealthy individuals had positioned themselves well to deploy further capital, especially in private markets despite the pandemic– However he also noted in Citi Banks recent survey, “It cannot be ignored that the survey found liquidity to be at a premium, and clients often willing to sacrifice short- to medium-term returns to maintain that.” This cautionary outlook tells us that while family offices are having a good year they remain cautious as their clients focal goal is to maintain and protect wealth rather than pushing towards more risky developments.
Technology is ever changing, but this year it’s evident that everyone is rearranging themselves to be more digital friendly. Family Offices realize like any other business it is essential to make the proper investments to provide more accurate, more transparent, not to mention more rapid reporting.
This investment for family offices can be better for decision making and can reduce any surprises. Two major emerging technologies are RPA software and Blockchain. RPA software is very similar to the concept of Artificial Intelligence – they both take on the idea of Intelligent Automation – in other words taking on the similar responsibilities of human intelligence. Blockchain on the other hand can offer a more distribution channels for family officers with a large ecosystem.
Another reason for technology advancement in family offices is based around a huge concern for cybersecurity. According to Northern Trust’s 2020 Family Office Benchmarking Survey, of the 78 global family offices surveyed, 96% of respondents said they have experienced at least one cybersecurity attack.
During the pandemic, we witnessed fast decision making from political leaders. These decisions resulted in business lockdowns, travel restrictions, and even a demand to increase transparency protocol was made by government. Many tax authorities around the world are formalizing review programs for high net worth individuals which naturally extends to their family offices. The need for more robust internal controls can be positively correlated with size, and therefore complexity of a family office.
However with constant adjustments family offices are looking to base their decision making around consumer needs rather than governmental changes. What this all means is family offices, like most other businesses and companies, are interested in making their decisions based on broader conversations rather than off the whim of political opinions.
That’s right, proactive family offices are beginning to take more of an active interest in consumer concerns and global concerns than ever before because they know that that sort of proactivity can create more stability for their own business, and it can offer clients more security. Many Family Offices like other companies are beginning to look at long term changes that can outlast the pandemic than making short term changes that will only be considerable to the changes caused by Covid-19.
Preparing for the Next Generation
Family offices are also preparing for the next generation, Covid-19 has pushed a heightened interest for families to prepare for estate and succession planning. Most family offices are doing this through structured education programs that can prepare the next generation to have more practical insight. These programs are offering insight into negotiation skills, trust funds, and investment decisions.
With so many trends to follow in the coming years, it is still critical to keep in mind the fundamental value and foundation that the family office offers its clients that will never change, that is to keep the goals of the family in focus, to make sure those goals align with the ‘times’ and the ‘future’, and to prepare for other generations to be just as dynamic in estate and succession planning than the generations before.
Thank you for your interest in the Deltec Initiatives Foundation. You can contact us using the form below.
Before sending a message to us, kindly note that we do not accept requests for funding. Thank you for your understanding.