Family offices have made significant strides in professionalizing their governance, management, and infrastructure over the past five years but must brace for further challenges ahead, according to new research by Ocorian, a specialist provider of services to high-net-worth individuals and family offices.
The global study, which surveyed over 300 family office professionals responsible for approximately $155 billion in assets under management, revealed that 85% of respondents believe their family office has become more professional in its operations and structure.
Among these, 19% noted substantial improvements, while 15% stated their offices were already highly professional and required minimal enhancements.
Improvements were observed across various areas, with around half (53%) of family offices developing stronger succession plans, and 48% strengthening or introducing a family constitution or charter for the first time.
Additionally, 46% secured more professional third-party support, and 45% bolstered their management teams.
Further advancements included a more diverse and professionally managed investment portfolio for 41% of respondents, enhanced compliance, tax, and legal infrastructure for 40%, and a more cohesive and robust philanthropy programme for 34%.
Additionally, 11% reported better oversight of all assets owned by the family office.
Despite these advancements, family offices still face significant challenges. Ensuring proper governance to meet the needs and expectations of family members was cited by 86% of respondents as the primary challenge.
Properly managing and aligning investment portfolios with the family’s risk and return profiles was the second most significant challenge (59%), followed by the need for a robust succession plan (44%).
Additional challenges include upgrading technology (40%), maintaining confidentiality and privacy (39%), preparing the next generation for wealth transfer (36%), navigating regulatory compliance (34%), preserving asset value (28%), managing leadership transitions (27%), and ensuring effective investment portfolio management (22%).
Michael Harman, Commercial Director – Private Client at Ocorian, emphasized the positive trend of increased professionalism among family offices, attributing it to the rapid growth in the number of family offices.
“This professionalisation is necessary for family offices to stand out in an increasingly crowded market,” Harman said.
However, Harman noted that despite the sophistication gains, family offices face looming challenges, particularly in regulation and compliance. Over a third (34%) of professionals identified navigating regulatory compliance as a major challenge.
There is a mixed response to how well-prepared family offices feel to meet these demands, with only 18% feeling very strong, 65% feeling quite strong, and 14% rating their ability as average.
Business News Asia