Family offices are advisory firms that provide comprehensive solutions to effectively manage the wealth as well as finances of affluent and high-net-worth families. However, with the advancement of technology, there has been a paradigm shift in the way a family office works.
Most of the affluent families do not have the time to manage their own wealth. This is where family business office steps in. They take responsibility for running or advising on managing the finances as well as assets of the ultra-rich and high-net-worth families.
Family office managers understand the requirements of the families and suggest investment strategies accordingly. The family office provides a wide range of services such as tax planning, budgeting, fundamental administration of all financial matters, accounting etc.
Family offices are generally of two types; single family office and multiple family office. Multiple family offices are gaining more popularity these days.
Let’s take a look at some of the trends that will affect family offices in 2019:
Changing investment strategies:
Investment strategies are changing within the family office sector. There has been an increasing emphasis on direct minority-stake investments. Direct investments are expected to grow in the coming years. Another investment strategy that is becoming popular these days is the co-investment deals with other families.
Since the business environment has changed dramatically, efficient decision making has become quite important while making investments. That is why it has become essential for the family offices to conduct a comprehensive analysis of the current market trends to help families minimize risks and reap higher profits.
According to the statistics, family offices are becoming more victims of data breaches and cyber attacks. Family offices need to frame cyber-security policies in order to reduce cyber crimes and ensure safety.
A rise in the number of affluent families:
There has been a drastic rise in the number of affluent families. The main reason for this is the growth of startups and rising economies. That is why family offices are becoming more popular as they can help to manage the wealth and assets in an effective way.
Nowadays, family offices are focusing on succession management to preserve family wealth. Intergeneration transfer of wealth is one of the important functions of a family wealth office.
Since there has been a tremendous change in technology in recent years, it has become important for the family offices to keep up with modern trends. Family offices will need to come up with advanced digital solutions with better engagement tools. They will need to new adopt new technology such as automation, analytics, and artificial intelligence.
The popularity of Impact investment:
There has been a growing popularity of impact investments among the ultra-rich and affluent families. This trend is expected to continue in the coming years as well. Impact investment is the investment made with an aim of creating a social as well as environmental impact along with generating financial returns.
The expectations of the families have increased tremendously. That is why they are demanding greater transparency and accountability from family offices. Greater transparency will ensure more effective management of wealth. That is why family offices need to become more transparent to remain competitive and sustainable.
From hedge funds to private equity:
According to statistics, family offices are drifting away from hedge funds and moving toward private equity. Poor performance and high fees are some of the reasons why family offices are shying away from hedge funds. Rather they are shifting towards private equity because of its high performance.
Family wealth office plays a vital role in managing the wealth and assets of ultra-rich and affluent families. The benefits it offers have made them a more preferred choice among the elite class.