Delve into the Family Office sector on that has almost 5 trillion US$ of the world’s wealth under its management. Learn why it is quintessential to build relationships with Family Offices, especially if you are targeting HNWIs.
As wealth continues to soar, not only does it increase demand for global mobility (residency / citizenship by investment) and private banking solutions but also the need for more family offices.
The Family Association Magazine recently quoted that over 75% of the Ultra High Net Worth Individuals (UHNWIs) surveyed by AES Nation preferred to work with a multi-family office (MFO) and a mere 15% opted for wealth managers. It is evident that for those professionals who seek to expand their network and engage new, affluent clients – building relationships with MFOs is critical for their success.
The Rapidly Expanding Family Office Industry
The Global Family Office Market study that was recently published offered a detailed analysis of this sector and highlighted the growth trends and potential of the family office industry. HSBC Bank (United Kingdom), Northern Trust (United States), Bessemer Trust (United States), BNY Mellon Wealth Management (United States), Pictet (Switzerland), UBS Global Family Office (Switzerland), BMO Financial (Canada) and Abbot Downing (United States) were all included in the study.
A few trends that were identified in the Global Family Office Market study, were the rising demand for family offices in both Asia and Latin America, as the number of wealthy individuals in these regions continues to boom. Brazil’s wealthy class in particular, even with all its complexities, was identified as one of the most lucrative markets to watch in 2020.
This surge in wealth in Brazil has been particularly noted by Portuguese investment migration professionals who have had a general increase in the number of Brazilian HNWIs that are investing in the Portuguese Golden Visa.
As businesses continue to expand and family wealth grows, so do the number of family offices established to manage these fortunes. There are now more than 3,000 single family offices (SFOs) and hundreds of MFOs in the US alone. EY has estimated that there are over 10,000 SFOs globally which is a significant amount considering just over a decade ago they had reported an estimate 1,000 SFOs globally. What is clear, is that there is an undeniable growth in the family office sector.
Therefore, it is paramount that investment migration experts continuously expand their B2B network. Collaborate, implement preferential agreements and associations, and reach a wider group of affluent clients by fortifying their ties to SFOs and MFOs.
What is a Family Office?
Family offices can take many forms and range from virtual offices, to multiple family offices, to in-house dedicated advisory offices that manage the wealth of one or a multitude of affluent families’ wealth and legacy.
The average family office oversees $500 million – 1 billion. Several of these have to oversee hundreds of employees, legal and fiscal matters. Their role is to coordinate the flow, investment, and distribution of wealth throughout the family as well as undertake succession planning and estate planning.
a. The Single-Family Office
The single-family office an take the form of a private wealth management advisory firm that protects, manages and preserves a family’s wealth, offering advice and strategic implementation. Whilst SFOs are most popular with ultra-high net worth individuals, the key drawbacks are the costs involved in establishing them and ‘boxed-thinking’ over time.
b. The Multiple Family Office
In the case of Multiple Family Offices (MFOs), there is a depth and breadth of services, expertise and know-how which is available to the various wealthy families that use them. MFOs are sprouting up globally yet the key hubs are still London, Switzerland and to some degree Hong Kong and Singapore. Whilst these can be established by a group of aligned affluent families, on the whole, MFOs are advisory firms which serve a select group of affluent families.
c. The Virtual Family Office
In this digital age, it could easily be argued that every family office is ‘virtual’ in one way or another. But a virtual family office is designed specifically around the family it serves. It is a team of experts that are outsourced working for their own firms, yet delivering a cohesive service together in an organized, well-knit and flexible manner. What differentiates it most from a MFO is that the virtual family office team members normally have an interpersonal relationship with the family they serve and they are bespoke.
In order to maximize the success of a virtual family office, the team is usually coordinated by a central liaison who ensures everyone is putting the family’s best interests at the core of its strategy.
Read more:How Unprepared are Family Businesses for Succession Planning?
Serving High Net Worth Individuals
Whether you work in traditional wealth hubs around the world; London, Dubai, New York, Singapore, Hong Kong, Switzerland etc… or in a flourishing wealth hub globally – collaboration is key. It is what unlocks doors to new leads, associates and ultimately clients.
Yet a notable difference between more affluent bourgeoisie, nouveau riche and the ultra-wealthy is that as wealth grows, the ostentatious displays of it markedly peak then fall.
Whereas UHNWIs prefer to keep a veneer of privacy around their families and assets. Hence, in order to truly engage with family offices, one must consistently respect the need for confidentiality, trust and the power of networking. In an era of Messenger bots and AI at the forefront of our customer service – building actual interpersonal relationships, face to face is of paramount importance.
No single adviser can be, nor should they aspire to be, a jack-of-all trades. Private bankers and immigration lawyers should continuously be seeking to expand and fortify their relationships with wealth managers and family office professionals. Cross-pollinating their expertise and mutually adding value to the services they can offer their book of HNWI clients.
The Accumulation of our Social Capital: Our Network
We often hear how ‘it is not what we know but who we know’ and this timeless truth stands perseveres as we see the fruits of networking, both in the online and interpersonal space, every day.
In The Forms of Capital, Pierre Bourdieu perfectly articulates the concept of ‘Social Capital’ as the “aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition – or in other words, to membership in a group – which provides each of its members with the backing of the collectivity-owned capital, a ‘credential’ which entitles them to credit, in the various senses of the word. “
