The traditional model of a family office setting up in a bricks and mortar space and hiring the right professionals to work and subsequently assemble with family members several times of year, where they would plan and talk strategy, are but a distant memory.
For many this movement to an online world has been uncomfortable, but others, especially the newest generation of family members, have embraced it whole heartedly. Change is never easy and moving rapidly to an online world meant that many family offices were not prepared with the right technology infrastructure to make this seamless transition. The rapid momentum of the coronavirus gave family offices no choice but to digitally transform into becoming a virtual family office.
“The younger generation of families have increasingly demanded more access to the day to day running of the office as the economy has experience shifts and shocks.”
The evolution of the family office
In existence since the 19th century, family offices have taken many forms, serving iconic names like Rockefeller, Morgan, Rothschild, to name but a few. Around the world, there are more than 1,900 offices, according to PitchBook, a market research firm that compiled data on family offices. In some cases, there is a single-family office and in others there are multi-family offices which provide many investment management services. Ultimately there are many different approaches.
There are a multitude of issues facing family offices; from changes in tax laws, cybersecurity, regulatory changes, digital transformation and the dynamics of families.
Covid-19 also exposed a number of vulnerabilities in the traditional family office model. Ancient technology infrastructures are a prime example of the challenges facing family offices in a virtual environment. With escalating costs and declining performance with the pandemic impact on the global economy, outdated structures of the office were possible liabilities prohibiting families to meet their long-term vision.
In this rapidly changing world, it is essential to consider future generations—digital natives who grew up with technology and with noble expectations, strong voices and unwavering convictions and demands. It is a generation that generally lives life faster, insists on immediate results and have some significant dissimilar traits from their parents. According to Bloomberg, millennials look to inherit $30 trillion in the approaching decades, so a generation whose needs should not be overlooked.
Family offices are going digital
The global pandemic has opened up the opportunities for family offices to leverage external expertise through outsourcing to enable them embrace new technologies and deploy them at speed. The benefits are reducing staffing costs, and ultimately there is no need to have a bricks and mortar office. One of the main benefits, however, is that technology is enabling family offices to have data available in real-time, at the touch of a keyboard.
“A virtual family office is an agile structure which enables doing more with less - leveraging outsourced specialists, enabling the adoption of emerging technologies and using resources more efficiently and effectively.”