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The Explosive Growth of the Family Office in the Twenty First Century

26/03/2021 / THOUGHT LEADERSHIP

Why are so many family offices being set up now? Is there a better alternative to having everything ‘in house’?

Despite all the negative reports one might read in the media, the world is actually getting better.

Generally, health care systems, standards of living /sanitation and access to education have greatly improved over the last one hundred years. Even in some of the poorest places in the world things are generally getting better, not worse.

So for those in the top wealth percentile, things are markedly improved, and with this comes an even greater need to manage one’s time and money more effectively. However, there are a number of key reasons why we have witnessed an explosion in the setup of family offices in recent years:

There are more people with more money

The world has witnessed more stability in the last half century than ever before, despite global pandemics and financial crises.

There are also now more ways of making money. New technologies have enabled tech and fintech giants to grow into overnight successes, and in some cases, push aside the more traditional wealth generators.

Regional trends- The international power or rather money shift

It is no longer just the USA and Europe with a high number of wealthy individuals and families. Clients in other regions, including Asia, Africa and the Middle East, are also now need help with with managing wealth and all the issues that go with it. Consequently there is a greater need for families to seek professional assistance, not necessarily based in these regions but from those that understand what is required. For example, Switzerland remains a leading provider of family office services often as has always been the case to non-residents.

The glossy/shiny appeal versus the traditional silent types

There is a divide in the world of the HNWIs – there are those that like to remain under the radar and those that like to make their wealth known.

In today’s world it is more acceptable to flaunt your wealth, when previously it was viewed by many as vulgar. One only has to look at the rise of Instagram influencers, to reality TV shows and families that make money just by being filmed 24/7. Wealth is glamourous in ways it never was before. The fact that this wealth is more visible has in itself made the family or private office more visible. Because of this, we are able to physically count the existence of the more ‘open’ family offices today.

We are seeing more and more families investing in start-ups and developing an entrepreneurial mind-set. Family offices and private offices help both those who like to keep quiet and those who more openly demonstrate their wealth.

Globalisation- The complexity just keeps on growing

It’s a much banded about phrase, but it has certainly contributed to the growth in family office set ups. COVID aside, people are much more mobile than ever before. They travel and live internationally on a scale that is unprecedented. As such, HNWIs develop multiple residencies and citizenships along with a varied global asset book, whilst often easy to accumulate this needs careful management from tax considerations, to estate planning, to insurance coverage and beyond.

The world is also tied up in more red tape than ever before. Legislation, regulation and reporting requirements seem to expand year on year- advice needs to be sought in multiple jurisdictions and applied to each HNWI’s set up.

Enter the family office, whose role it is to source, manage and apply all this advice and coordinate reporting. However, even the single family office can struggle with the complexity of how to manage all these assets and their various reporting requirements plus all the planning considerations that need to be adhered to. In this instance they may seek support from an external professional services provider.

So do all HNWIs need a family office?

Yes and no.

For some the full blown family office, with full time staff doing all a family’s corporate and personal administration, accounting, investment management and reporting actually makes sense. This can however be a large outlay, not all families need this.

There are additional costs and responsibilities as an employer that don’t make sense for those that are HNWIs but not necessarily UHNWIs. So there is a need for something else.

So what can families do instead?

Firstly, have a real think about what is important to them. This may be freeing up more time to run their business or enjoy family life, have assistance with managing various advisers and implementing their advice, setting up fiduciary structures or taking care of travel arrangements, property management or seeking guidance on family governance. With this remit they can now effectively seek a solution to the problem.

One such solution is the virtual family office or private office run by a professional service provider.

Even those with fully fledged single family offices can benefit from outsourcing some of their administration and reporting to a professional private office, which can help and support them, filling any gaps in expertise and just lending some overall professional guidance. Such providers can also be called in on a temporary basis to cover leaves of absences or as a general backup.

Can’t my Executive Assistant just take care of it all?

Whilst your EA is very competent, they may need some additional support. Both your EA and you may value the checks and balances that engaging a professional private office can give. A simple ‘4 eyes’ when dealing with certain matters can help reduce errors, bring comfort and often provide a better second solution

Any professional private office provider who truly values clients isn’t there to take over from your existing team or your family members who you value. They are there to support them.

Private office providers such as JTC Private Office have spent years working in this field, building the right contacts, refining their knowledge of fiduciary structures, regulation and reporting requirements. They have also gained empathetic learning and invest time to understand clients themselves. This is a very personal professional relationship.

Any private office provider is literally worth their weight in gold if they are able to make the right connections for you, handle tasks efficiently and effectively, free up your time and help make you, your family and any team you already have feel supported. The key is finding the right one for your needs.

A private office provider such as JTC Private Office that has a global footprint, years of experience and a wealth of useful contacts can help you unlock time and help preserve your wealth. Above all, it needs to be someone you can trust and depend on.

key contact

Victoria Blackburn

Senior Manager