Like nearly everything else in the world, family offices and the way they are structured have evolved over the past two years. While some of this is driven by financial considerations such as changing tax laws, it is also largely due to shifting attitudes about wealth (and the obligations of those who have it) and even the dynamics of the family unit post-quarantine. Moreover, people who staff family offices are seeking new ways of working that allow them to excel at their jobs while creating more balance in their lives.
A family office provides many benefits; however, that doesn’t mean the decision to form one should be made lightly. First and foremost, the expenses involved are substantial enough to give even ultra high net worth (UHNW) individuals pause. Second, a family’s particular needs and goals must be considered. This explains, in part, the recent increase in multifamily offices, in which families come together for more investment power and perhaps around a particular ideology. Whether you are in the deliberation stages or are rethinking a family office already in existence, one thing is clear: employing cutting-edge technology, particularly all-in-one solutions, can help maximize wealth, reduce risks, and streamline lifestyle management.
1. Empower Principals
Gone are the days when people relied solely on their financial advisors and received hard copies of quarterly reports. Now principals and, hopefully, their heirs, take a much more active role in the management of their estates. Technological advancement made this possible. However, all-in-one solutions take it to a whole new level. Providing financial information shared directly within the tool, allows stakeholders to have 24/7 access to their data at their fingertips. They can also be kept abreast of investment opportunities – both the risks and rewards – and make informed decisions about them in real-time.
Keep in mind it is not solely about financial instruments. An often overlooked aspect of wealth is one’s physical assets. Not just items used regularly like appliances and vehicles, but those they’ve stored away, forgotten they have and don’t even like. An ugly diamond ring holds value nonetheless and therefore must be taken into account as part of the complete portfolio. Yes, an involved client will do the legwork of assessing these items and their value; however, all-in-one solutions make this infinitely easier. Within the tool they can create a digital catalog; complete with photos, videos, and documentation about the chain of ownership which they can reference as they decide what to keep, donate, or sell for a profit. A fun side note: for passionate collectors of wine, artwork, stamps, etc., these catalogs can make an enjoyable hobby even more so.
2. Intergenerational Continuity
One of the greatest concerns for families is how to create wealth that will be sustainable for decades to come. Properly executing succession planning remains a challenge, with even “too big to fail” fortunes dwindling to a pittance by the time the wealth originator’s great-grandchildren come of age. There are several reasons for this. The main being the reluctance of many principals to discuss finances with their kids. For some, the topic of money is taboo! Some prefer not to share their early hardships. Why bother when the money will always be there, right? As a result, kids often grow up not knowing how much they stand to inherit, let alone how to manage it.
Millennials and boomers digest information in completely different ways than their parents and grandparents. In fact, the thought of wading through paperwork is as outdated and tedious to them, as taking a horse and buggy to work. Having the access to data that an all-in-one solution provides will increase their knowledge, interest and emotional investment in their financial affairs. This accessibility is critical since these generations also tend to be less trusting of financial experts and want to take the reins themselves.
3. Enhanced Communication
Most importantly, such tools facilitate transparent communication amongst family members. There are several reasons for this, including the inevitable shifts, mentioned above, in values and ways of doing things that occur with each generation. For example, while older principals have traditionally given back to society through philanthropy, millennials and boomers are committed to conscious capitalism. Their investment strategies are motivated and informed by their desire to do good and participate in activism. The messaging feature in all-in-one solutions allow relatives and other stakeholders to engage with each other in real-time and in one secure location, without having to comb through lengthy email threads and run the risk of missed information and misunderstandings.
This communications hub is also invaluable for those running family offices, especially for those who manage clients’ lives along with their portfolios. Whatever their job description, staff can use all-in-one solutions to facilitate transparency with the “boots on the ground”. Whether they are appraisers brought in to assess the value of artwork in the home or onsite estate managers and others who deal with the day-to-day logistics. Through the messaging feature the family office can stay on top of everything from the budget and home renovations to the clients’ social calendar from anywhere in the world. In addition, they can access and share all documentation, whether it’s about a large event on the property or the regular ordering of products such as favorite foods, fresh flowers, and so on. They can also more easily manage the family’s travel, spanning from private plane bookings to the retrieval of clothing from various residences and storage facilities, so they can be shipped to the destination. Stellar communication and ease of access are key, especially when they are juggling so many moving parts for multiple families.
One of the things the pandemic brought to the forefront was our reliance on technology. While the benefits have certainly outweighed any cons during this challenging time, we have become more aware than ever of the risk too much screen time poses to our health. We’ve also realized that jumping from various apps and platforms can actually create mental fatigue that affects both mood and productivity. All-in-one solutions drastically reduce this issue by centralizing activities in one secure space.
The new year has brought with it continued uncertainty, but also much hope and many new opportunities to build a better “normal” than we had before. In doing so, we’ve had to up our game on several fronts, including how we consume, process and share data. For family offices, all-in-one solutions are the next logical step, empowering staff and their clients to collaborate more efficiently in the management of wealth, the protection of legacies, and the preservation of family relationships.
Jason Shelby is the VP of Sales & Marketing for EstateSpace. EstateSpace provides individuals and family offices a platform to simplify estate management for more owners.