There is big move to provide a “family office service” or FOS.
Often, this is an attempt to wedge in product rather than a thoughtful exercise in meeting the demands of this cohort. Some firms seem to be more nuanced in the way they are approaching this – by building technical and operational infrastructure that can be plugged into or partnering with fintech offering something unique (eg. Digital Asset Custody).
The rise of the “virtual family office” lends itself to this FOS model as they are looking to internalise select aspects such as investments or PAFs and hope to outsource the rest to one counterparty.
Wealth managers are moving heavily into this area, with a focus on “total office” services, not just the investment piece. Traditional Wealth Managers, if you speak to long term clients, are moving more towards a Virtual FO model.
The idea is to act as more of a client guide and advocate across services such as OCIO, OCOO and OCFO. This also allows for all strategies be delivered through one branded office. The have developed and ecosystem that is there to assist single and multi-family office space.
Demand is for the ability to leverage the inhouse speciality of the asset consultant or wealth managers, make it available to offices that would normally have several counterparties to assist and then become their number one counterparty.
We have seen this effectively used for technology and infrastructure, accounting and tax, investment due diligence etc.
One major benefit of establishing a stand-alone FOS is the ability to house strategies that can be tailored for this client type. Current examples we have seen:
• Board management – quarterly meetings, specific calls to action
• Risk and Resilience services - reviews and analytics
• Special projects – education, specific structural due diligence, adhoc project work
• Platform(s) – intermediate and manage the investment platform to be used by FO and UHNW clients.
• Investment Governance – investment policy and strategy, implementation, and monitoring of portfolios.
• Accounting Book of Record integration to the investment office
• IT and other “plug in” infrastructure
Move this from the side of someone’s desk. Successful firms in this space assign a marketing budget and specific RM resource within a branded Family Office Services unit. There wouldn’t be a requirement for other staff or specialists to fall under this banner, the office can take on relevant elements from each business unit.
A head of FOS would also need to understand the wealth management space as this will be the most likely conduit for FO access. Leveraging wealth relationships across MFO, OCIO firms would require an investment and communication element, being able to determine best fit for current and new.
A head of FOS would be similar in job description to an independent adviser. One that acts as a conduit between internal teams and the client.
I have seen successful launches of FOS utilizing one staff member with specific experience in the SFO space (usually worked within one). Connectivity and bona fides are the hardest aspect of uncovering opportunities within this cohort and worth hiring for.
It is very difficult to introduce products if they have no brand recognition or referral partners. Feedback from family offices has been that it would be preferred to have one centralized branded offering like. A positive comment from family offices when introduced to the offering was the use of Family Office in the title as it provided a banner for the interaction and provided easy context for clients.
One positive aspect of this client type for those building a specific service for this client type is that it is constantly changing, both from a structural point of view and the generation that is managing it. We are seeing a state of flux as the new generations are taking control or affecting the way the investment office is managed. For some providers, this is a benefit as they move away from the previous generations’ advisers. For more traditional offerings or legacy relationships, this should be a cause for concern as family members seek out their own counterparties.
Content and Collateral
There is a significant amount of thought leadership that is potentially very helpful for those managing a business, however they are not specific to those that now run a Family Office.
When Hall Road provides content to this cohort, the most positive feedback and clicks is for those pieces that:
• Provide actionable and practical advice (https://canadianfamilyoffices.com/commentary/ten-operational-risks-to-keep-an-eye-on-at-the-family-office/)
• Provide introductions to reputable family office specialists https://www.cfainstitute.org/en/research/foundation/2019/investment-governance-for-fiduciaries)
Hall Road has assisted wealth managers, big 4 professional services, investment consultants and asset managers build a family office services, please reach out if you would like to know more.
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