The demands placed on family offices by ultra-high net worth families are increasing, leading these entities to adopt a more systematic approach to their duties. Family offices are now handling tasks beyond traditional functions such as investing, reporting, and tax filing. They are also responsible for personal and cybersecurity arrangements, managing private aircraft and superyachts, and overseeing art collections. In addition, family offices play a key role in fostering family governance, unity, and continuity, preparing younger family members for their future roles as business leaders and stewards of wealth.
Despite the increased responsibilities, family office executives often find themselves having to prioritize tasks due to limited resources. A survey conducted during the Family Office Leadership Program in 2023 revealed a shift in focus towards wealth management duties, with less emphasis on fostering family unity and continuity compared to the previous year. However, preparing the next generation and ensuring family unity remained top concerns for many families served by family offices.
As family offices face diverse demands, they are professionalizing their operations and skill sets through a process known as “family office professionalization.” This involves hiring highly qualified finance professionals with backgrounds in private equity, venture capital, corporate finance, and risk management, as well as formalizing practices and processes. Family offices are setting up investment committees, implementing investment policy statements, and improving governance, governing boards, and risk plans to enhance accountability and discipline.
Balancing short-term asset management imperatives with long-term goals around family unity is a challenge for family offices. Those that succeed in striking this balance demonstrate their value to the families they serve. Sharing best practices and providing opportunities for idea exchange is important for family offices to learn from each other and enhance their operations. Managing large and complex wealth across different jurisdictions while serving multiple generations requires finesse, making professionalization a strategic necessity.
Overall, family offices are evolving to meet the increasing demands placed upon them by ultra-high net worth families. By professionalizing their operations, hiring qualified finance professionals, and formalizing practices and processes, family offices are better equipped to navigate the complexities of managing large and complex wealth. Striking a balance between short-term imperatives and long-term goals is crucial for the success of family offices, as is the sharing of best practices and learning from peers within the industry.
