Here are some brief views from two senior figures in the world's wealth management sector, talking about family offices and the forces at work upon them.
This news service has run a number of articles looking at different aspects of the family offices space. Here, we talk to Sandaire, the UK-based multi-family office, and Maitland, a South Africa-based organisation, the global advisory and administration firm that has considerable interaction with the family offices space.
Greg Harris, managing director for private clients, Maitland.
What sort of structures are in your experience typically used by family offices when setting up?
Trusts would be the most common structure we encounter, with both commercial and private trustee companies, the latter being more prevalent for larger clients due to the costs involved. For UK clients, we see frequent use of family investment companies and generally more families using investment funds to hold their liquid investment portfolios.
Historically we had seen many offshore clients (resident outside of the UK) structure their holdings of UK property via companies, this changed post the introduction of ATED [Annual Tax on Enveloped Dwellings] and now most are held directly.
We see limited use of foundations although they remain appropriate for specific circumstances.
There has been a bit of a trend of family offices outsourcing functions, such as the chief investment officer role. Where do you see most outsourcing taking place in coming months and years, and what limits are there to how much can be farmed out?
We see most core functions being outsourced in future – the entry ticket for a full service family office is ever increasing and it is challenging to keep professionals engaged in a non-commercial family office.
We think families are best placed buying services in from professionals, and having a project manager (either internally or externally) to manage those service providers in a coordinated fashion. The services we see most likely to not be outsourced are concierge type services which are typically best serviced from a team close to the family and directly under their control. The benefit families get from outsourcing is the ability to access best-in-class skills on a pay-as-you-go basis.
Family offices have their vulnerabilities with physical and digital security, and require help. How serious is the issue of cybersecurity, for example, given the often large sums that FOs oversee?
There is no doubt that cybersecurity is a serious issue for our clients. Weak cybersecurity can lead to both financial and personal security concerns. The most pervasive threat seems to be through our clients social media profiles and/or free email accounts which are used as entry points to clients digital lives.
The battle between increased social media presence, and a need to consider personal security issues, presents an ongoing challenge for clients to manage.