The family office caters for the financial needs of high-net–worth individuals and families. 2020 saw the emergence of new high-net worth individuals and growing expansion of wealth by existing families in the bracket, leading to greater demand for the services of a family office.
As a relatively new industry, the family office sector is gradually gaining more structure, which allows for key insights into the services offered to be uncovered. Dr Edgar Paltzer deals with family offices regularly in his role as an attorney-at-law, offering a second opinion on legal matters and advising on managing a portfolio of valuable assets.
There are growing numbers of family offices coming into operation to meet higher demand from an expanding HNWI demographic. There have been several notable observations within the industry sector throughout 2020, many of which will help guide family offices in 2021 and beyond.
Globalisation 4.0
Globalisation 4.0 refers to the latest phase of global connectedness, in which countries from the developing world are increasingly becoming big players in the global marketplaces. Shifts in society, economies, geopolitics, technology, and the environment have all contributed to a world where developing nations now play a key role in more than half of all trade flows around the world.
Automation and other emerging technologies are driving a new shift in demand for goods produced locally in proximity to target markets. For the family office, this could mean re-evaluating geographic location and strengthening governance structures.
Increased Group Investment Power
Multi-family offices cater to the needs of several high-net worth clients simultaneously. These types of family offices are seeing increased investment power by acting on behalf of a group of clients rather than a single client.
MFOs are able to leverage economies of scale by bundling together the needs of several clients, resulting in better deals for each individual client. They are also able to help investors access transactions with higher minimum allocation requirements, gaining exposure to new assets as part of an affluent group.
The PDF attachment explores the key differences between single family offices and multi-family offices.
Industry 4.0
Industry 4.0, or the fourth industrial revolution, is driving new opportunities and new challenges across almost every market sector. Emerging technologies and advances in existing technologies are disrupting industry across the board, resulting in digital leaders racing ahead of their counterparts.
For the family office, it is essential to note that companies with high levels of digitisation are almost always leaders in terms of revenue growth and productivity. However, most industries today are still only around 40% digitised.
Digital leaders are those that are prepared to meet challenges head-on and take advantage of the opportunities afforded by increased adoption of artificial intelligence and advanced automation. These technologies will accelerate rates of innovation and free up more human time for matters of strategic focus.
Sharing Information
Within a multi-family office environment, unique opportunities are created for the sharing of information. Privacy had long been a key priority for affluent families – the multi-family office facilitates sharing information with a select group of people in similar financial positions, generating new insights and leveraging the experience and knowledge of others.
This can be particularly valuable to families who have recently become affluent, as they can receive guidance not only from the experts at the family office, but also from other clients.
The short video attachment offers some information on why engaging the services of a multi-family office can be useful.