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Market events cause family offices to go back to basics

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Scandals and widespread investment losses have resulted in family offices going back to basics by enhancing risk assessment and focusing on wealth management services, according to North American Family Office Survey.

Released as part of a new study entitled Building for the Future, the US Trust/Campden Research survey looks at the state of the family office, the most pressing issues they face and the road ahead now that market volatility appears to be subsiding.

The survey found that 23 per cent of family offices acknowledged financial analyst skill shortages and 22 per cent plan to recruit them over the next three years.

Most family offices are returning to core mandates of consolidated control of wealth management. Nearly all SFOs offer financial advisory services (92 per cent offer trust and estate planning, financial planning and tax planning) with a significant minority (49 per cent) offering life management or concierge services.

Family offices are heavily weighting features such as the reputations and recommendations of financial services providers. On a scale of one to five, with one as most important, confidentiality (1.58) and reputation (2.17) ranked among the top criteria for selecting a financial service provider.

Some family offices (28 per cent) are considering opening to non-founding family clients. Their main motivations are increasing their access to investment opportunities by having greater assets under management (54 per cent), and retaining their top investment professionals by providing more opportunities to earn and run more and larger investments (31 per cent). They are focusing on opening an internal hedge fund or private equity fund (23 per cent) or, to a lesser extent, a private equity or hedge fund of funds or diversified investment services (15 per cent).

Though expressing no specific plans to close, 31 per cent said it was a possibility, even if remote.

"The tumultuous economic and market climate of the last thirteen months has exposed the weaknesses and strengths of the family office model, and as a result, we are going to see family offices increasingly concentrating on core competencies and looking to others to provide non-core services," says Mindy Rosenthal, managing director of Campden’s North American business and author of the research. "Now more than ever, family offices will be considering significant organisational changes ranging from consolidation with other family offices, opening services to non-family clients or possible closure."

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