Markets are down – along with their net worth – and family offices are predominantly worried about one thing: investment returns. But things have changed a lot in the business world. Downturns in the markets have caused the net worth of family offices to go down. So, producing returns on investments has become their main focus.
The main goal of family offices has changed in a significant way
Family offices are built on the idea that a family’s wealth should be passed down from generation to generation. This idea is still very important today. The jobs and responsibilities of these offices have always been able to change to meet the changing needs and wants of the family, which are often affected by how the financial markets work.
A study done by Citi Private Bank showed that the main goal of family offices has changed in a significant way. It was found that family offices have become even more focused on building wealth (74%) and managing investments (55%), while “fostering family unity and continuity” (21%) has become less important. This change is a big change from the results of the 2022 survey, where 34 percent of people said that family unity and continuity were their top concerns.
This change in goals is not a surprise to people who know a lot about the subject. During times of turmoil, family offices tend to put current needs ahead of other, equally important but less urgent issues. During past crises, like the Global Financial Crisis and the COVID pandemic, this trend has been seen.
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During rough times, family offices may lean toward portfolio management, but experts say they shouldn’t focus only on stocks. They stress the value of what is often called the “soft side” of managing family wealth, which is a full approach. This method involves creating a culture of family meetings, learning about the human capital around the family table, and making sure that everyone is actively involved in talks about the family’s goals and ideals.
Family offices are always changing because they are active
Josh Kanter, who started Josh Kanter Wealth Advisory Services, says that focusing too much on the past and being too strict can make it hard to change.
Mark Tepsich, a consultant for UBS who specializes in family office planning and governance, talks about what younger people want to do with their lives. They want to be included rather than in charge. They want a place at the family table where they can contribute and be a part of the family tradition.
Even though many family offices have improved their investment management, they are frequently lacking in other areas, such as planning for the next generation’s leadership and education. Younger generations, whose futures are strongly reliant on the family’s riches, continue to prioritize family unity and leadership.
This is especially crucial for third-generation heirs, who place a higher importance on family connection and continuity than previous generations, where just 21% place a high value on family connection and continuity.
For third-generation families, making money is less important than dealing with important problems. These families know how important it is to teach the next generation how to be good caretakers of wealth and to make sure that the family has the same goals and vision, which requires help from the family office.
To make sure that wealth is passed down from one generation to the next, family leaders must make sure that family members stay linked.
Phil Strassler, founder of the Larry Kraus Tax Institute for Family Offices and a consultant on strategy and business practices for single-family offices, says it’s important to give them the tools they need to pursue their own goals and encourage them to bring their new knowledge and experiences back to the family. This method encourages freedom while keeping the family together and keeping the family office useful.
