Family offices are moving ever more into the spotlight, through both their increasing involvement in high profile investments but also the sheer growth in numbers. For an idea of how much, consider that Singapore alone has registered over 600 new family offices during each of the last two years.
But wealth owners contemplating whether to set up their own family office face a complicated decision-making process, one that needs to take into account the extent they want to be involved in their wealth management, what non-financial services are required and succession considerations, amongst other factors. Simplified, it needs to answer the fundamental question: “What do I want my family office to achieve?”
It’s usually when significant assets to manage (often +$100m has been touted) and the desire for ongoing control in this process combine with growing estate, philanthropic and lifestyle management needs that either a new single family office is born or a multi-family office is sought as a solution.
The costs of running a single family office aren’t insignificant, especially as greater needs require larger teams to deliver, with one side-effect being that multi-family offices have gained momentum in recent decades and new alternatives have started to emerge. One of these is the virtual family office, effectively made up of specialized professionals that pool their talents together to offer a holistic family office solution but as independent service providers. Being outsourced means they are not a dedicated resource at hand, and if only used as needed can make for a greatly-reduced overhead.
Recently there has been another alternative or variation on the theme, the digital family office, which can combine a tech-enabled high-touch service delivery along with an offering seen in popular wealth management platforms and sometimes proprietary investment technology to offer a more accessible solution than the aforementioned options.
While definitely geared towards ultra-high net-worth individuals rather than multi-generational families, exploring these solutions provides some ideas as to where family offices could also improve their offering.
A whole new breed of tech-enabled services
Launched in 2022 and dominating the headlines in this space is Arta. The brainchild of a former Google executive and backed by some of the most well known venture capital firms, it’s billed as the digital family office that aims to democratize sophisticated finance through technology. While their platform allows members to aggregate assets, control their investment allocations, access expert services and take a line of credit, it’s their focus on accessing investment opportunities through an automated AI-managed portfolio offering that has arguably raised the most interest.
Also emerging from a technology-first mindset is Compound, which launched in 2019 to specifically bridge the gap between traditional financial management offerings and the vast number of new wealth owners from tech companies. Founded by two software engineers, the solution offers members hands-on advice from a team of dedicated financial, tax and investment advisors together with a dashboard where they can monitor investments, plan cash flow and simulate taxes.
Perhaps the most obvious expression of how different this is to the traditional family office approach is that a potential client can jump straight into a demo account on the platform – no lengthy meetings, proposals or NDAs to wade through beforehand.
Farther is another provider in this space, but notably different in that it delivers both advisor- and client-focused solutions, providing tools to help wealth advisors scale in parallel with an offering for wealth owners that, similarly to Compound, combines high-touch services with a modern wealth management platform.
All of these offer a compelling option for wealth owners and provide family office-like capabilities but with easy access and affordable monthly fees. Perhaps one advantage over a traditional family office setup where teams often operate without much outside exposure: these all involve a diverse client base from which they can accumulate broader strategic insights to improve their overall knowledge.
That said, while it’s never been easier to find a technology-based solution to manage your wealth as an individual, the demands and intricacies presented by both the financial and non-financial needs of a larger multi-generational family are complexities usually better suited to a dedicated team.
These digital alternatives do however push future-focused family offices to evolve, to provide a combination of high-touch services and technology-enabled capabilities that go beyond wealth management to manage across wellness, estate planning, lifestyle, philanthropy and all the other needs that make a family office different from just a regular company.
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