Family Office 2.0: Designing a sustainable blueprint for future growth

Single Family Offices (SFOs) and Multi-Family Offices (MFOs) globally are facing challenges brought on by macroeconomic factors and ever-changing expectations from the families they serve.

Some of the key global challenges faced include:

With these factors and numerous others to consider, Family Offices are having to adapt more than ever before.

This is not just a case of performance or client service (which are both critical to success) but it is about the entire front-to-back operating model and how a Family Office can keep up to date with the latest trends while keeping a clear eye on margins.

But with all these competing concerns, it is easy to be daunted and to not know where to start. How can SFO/MFOs make real life changes to their business? How do they identify the real priorities that need investment?

Transformation can be expensive. Whether that is large, wholesale changes to drive the business forward or smaller tactical changes that require time and resources. This might include a new enterprise-wide technology solution that transforms the way business is conducted. Or it may be outsourcing of certain commoditized activities that are not providing value by being in-house. It can also include small areas of improvement, such as process changes.

So how can Family Offices effectively direct their spend? To ensure that small changes are aligned to the overall business strategy and the vision of the families that SFO/MFOs service, it is important to look at the operating model as a whole. It is critical to ensure that individual pain points are not assessed in isolation or improvements are not identified within siloed functions. Family Offices need to take a step back and look at the wider business priorities and ensure that any review of the operating model is aligned to the Family Office’s overall objectives.

It is key that a structured and independent approach is undertaken to optimize the operating model. The evaluation needs to consider both strategic and tactical changes, return on investment and practical and realistic achievability.

An optimized operating model is critical to keeping a Family Office competitive and to ensure the family or families (in the case of MFOs) have access to sufficient scale to exploit their capital and to ease the intensifying pressure on margins.

To effectively transform their operating models, SFO/MFOs should look to take into account:

1. Future proof the business: It is essential to not just focus on the “now” but to look at the strategic ambitions as an organization and to consider any future generational wealth shifts. Designing an operating model built for scale and aligned to the Family Office’s investment strategies and goals, is of paramount importance. It is also vital to consider the nuances of servicing a wide variety of asset classes – both liquid and illiquid, to allow for any potential shift in the market causing a need for further diversification.
2. Build a technology mindset and implement efficient Data Management: Whether that’s a front-to-back solution, automation tools or Artificial Intelligence, Family Offices must always explore ways to increase the efficiency of their operating model through technology. When it comes to choosing a technology provider, it is integral that any third party truly understands the unique complexities of a Family Office. This includes managing multi-generational wealth, the need for multi-custody data aggregation and reporting, complex legal entity structure requirements, demand for digitization and the ability to effectively manage both public and private assets.
3. Have a robust change management approach: It is imperative to have a clearly defined change management process to ensure that any change is aligned to the overall strategy of the organization. Having a structured approach also extends to implementation, to ensure timely delivery, minimizing the impact on BAU and to effectively manage scope and spend.
4. Don’t underestimate incremental change: While it may be cost effective to implement strategic solutions, it is still important to identify tactical opportunities and “quick wins” that fit into the Strategic Roadmap ensuring that benefits can be realized swiftly. Whether that’s by supporting advisors to focus on revenue-generating activities or helping investments and operations teams to increase efficiency and productivity, small gains can help Family Offices to increase revenues and reduce cost in the short-term.

With the industry headwinds set to endure and investor appetites likely to continue to evolve, SFO/MFOs must ensure their operating model is able to face any future obstacles that may come their way.