Responding to uncertain times

Few single family offices and multi-family office providers were ready for the stress test of the past 18 months. Roelf Odendall, Managing Director of Turnstone Multi-Family Office and co-author of the Family Wealth Guide: The practical guide for wealthy families and family office, shares his thoughts on the 2021 Multi-Family Office trends following the dramatic changes and demands caused by the pandemic.

Roelf explores choice of jurisdiction, socially responsible investment strategies, structural changes, the upcoming generation and more..

Multi-office trends in 2021

Few single family offices and multi-family office providers were ready for the stress test of the past 18 months.  The sudden changed situations in which families found themselves caused cracks, and even breakdowns, in the manner in which families and their wealth were managed. Family office leaders observed significant changes families made to their family office operational processes during 2020 and 2021. While the growth and management of assets remained important, family office leaders prioritised ensuring their own operations could continue and were sufficiently robust to withstand any future stress tests. 

A few thoughts from Turnstone:

Country of choice

The choice of jurisdiction for a family office became more important for reasons other than tax and ease of access.  Travel restrictions meant that principals could not move as freely as usual and could therefore not attend in person to matters requiring attention. Having local professional advisors who could act on behalf of a family became crucial for the execution of day to day activities.

The risk posed by the jurisdiction of family office operations became more pertinent.  It was clear that certain governments lacked the substance and drive to deal with such crises in a manner that fostered trust and stability.  This placed strain on family offices as their future operations were dependent on their ability to continue providing services to families under the most strenuous circumstances.  In the case of individual family members living in multiple jurisdictions, the need for certainty about and confidence in the operations of the family office becomes an essential requirement rather than a preference.

The focus on the sustainability of family office operations highlighted the importance of having an appropriate structure in which a family office can function.  A family office is vulnerable when its operations and functions are dependent on a single key individual. There are examples of the unexpected death of a key individual (in some cases followed by the passing of other senior family members shortly afterwards) that placed their family office in a position where it struggled to function effectively and provide for the family as usual.  A robust structure allows for more decentralised control to mitigate the risk and impact of unexpected deaths.

Upcoming generation

Following the outbreak of the Covid pandemic, wealthy families began focusing more on how wealth is transferred to upcoming generations. In some cases this was driven by the sudden demise of some senior generation members and in others by the realisation that individual family members are not well prepared to receive their wealth. While many families have legal succession structures in place they have realised that their successors are not sufficiently prepared to receive the funds.

Another clear trend was families resorting to on-line platforms for communication and discussions on their wealth.  The upcoming generations mostly lead the design of apps and technologies to facilitate family engagement and activities.

These interactions include adjusting family governance structures to provide for the needs and expectations of upcoming generations. Formal meetings are not as well received as they were by senior generations and now take place in more relaxed environments using well integrated technology.

Investments

Socially responsible strategies (Environment, Social, and Governance) have increased in importance.  Upcoming generations have embraced the principles of ESG and lead their families to make lifestyle changes in accordance with their social responsibility objectives.  No longer are ESG objectives seen solely as investment strategies but they are integrated in the way families live and operate.

Structural changes

We have observed that families are increasingly interested in changing their family offices to focus not only on their wealth, i.e. investments or fiduciary structures, but rather on adopting holistic approaches to their wealth.  There is thus greater interest in designing specific family governance structures, assisting with immigration and securing existing legal structures.

Find out more about why the Isle of Man is the natural choice for Excellence in Finance.

Share