The Virtual Family Office: Attractive to Clients of All Stripes

The Virtual Family Office: Attractive to Clients of All Stripes

The family office has long been the preferred realm for high-quality investment advice.

These privately held companies, serving a single, very wealthy family, offer the very model of focused investment and planning services – but only for the few who can pay the piper. To spread the benefits, multi-family offices are available that serve multiple clients, providing individualized financial, tax planning and bespoke services. They’re cheaper than single-family outfits but still offer a satisfying level of personalized service.

The family office concept is many centuries old, while the multi-family variety stretches back to the 1980s, at the dawn of the latest global explosion of wealth. Forty years on, we’re still in the expanding riches phase, driven by innovative industries, advancing technology and new possibilities for endeavor among ever-greater segments of the world’s population. Meanwhile, all that wealth needs someone to manage it.

Evidence shows the preference of the affluent for the multi-family model: a 2017 study showed that around 75% of very wealthy respondents favored the concept, while only 15% said they liked wealth management companies. A stinging assessment, perhaps, but one that comes down to individualized service – a theme that will likely ring in our ears for many years to come.

One would think the ultra-wealthy would prefer single-family offices and in many cases, they do. However, the multi-family model offers advantages, primarily of scale: more experts, more product choices, an expansive range of tailored services. In the end, though, even rich families must watch the bottom line: single-family offices are very pricey. Multi-family practices bring similar services at a more manageable cost.

A new solution gaining attention is the virtual family office. It sounds dauntingly technological, but for once in our world, it isn’t – although new technology plays a hand. These offices attract customers by combining the attributes of family and multi-family offices. The key to the matter is outsourcing, a concept that has been gaining popularity in family offices for some time.

The virtual family office is built around a single family. The firm delves into the intricate skein of elements that make up a high-net-worth family: asset structure, investment preferences, legacy plans and often-tangled human relations. Following this intimate study, a tailored wealth management strategy emerges.

Bespoke products can be created by outsourcing to professionals who enjoy skills beyond those found in the office itself – this is the ‘virtual’ part. Complex solutions that require a specialized team to manage become available, while customizable extras – for example, travel services are popular – can be easily added to the mix.

Success rests on three pillars. First, there’s the family itself: call it the human element. Advisors must intensively investigate the clan and foster clear communications, both within the family and with the office’s staff. A firm understanding of the family’s financial plan, once established, is essential: whatever steps they prefer in life, everyone must dance to the same rhythm. It’s not an easy matter, but investment professionals have been doing it for centuries.

The virtual family office’s team forms the next pillar. They work in smooth coordination and are adept at leveraging the latest technologies and organizational structures. They enjoy exceptional contacts in the financial services community, know who offers the most exciting new products (and the reliable tried-and-true) and can provide cost-effective access to attractive financial planning solutions via outsourcing.

The best virtual family offices share a key characteristic: they abhor the slapdash and live by systemization. Coordination and collaboration are true watchwords at the firm. Stone-set policies assure accurate assessment of results, identify shortcomings and provide useful critiques. The continual, systematic search for new opportunities and a determination to provide ever-improving service to clients are paramount. These factors form the virtual flesh and blood of the most successful virtual offices.

For more information, please read:
The Future: The Virtual Family Office | Financial Advisor

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