Undoubtedly, more and more (single) family offices are continuously being set-up around the world. This is mainly due to the following reasons:
The significant increase in the number of millionaires / billionaires particularly in the world’s growth regions, the continued strive for self-control over the family wealth ever since the financial crisis, the low interest rate environment, which pushes wealthy (entrepreneurial) families to look for risk-adjusted outperformance and diversify further into alternative asset classes, continued focus on privacy and security of the family assets in times of global (tax and regulatory) reporting requirements, and due to the huge amount of post-war wealth and family businesses that are being passed on to the next generation over the coming years.
Certainly trust in financial advisers and financial institutions is the prerequisite for UHNWIs or families of wealth to involve outside advisers at all. In order to be accepted as trusted adviser and valuable sparring partner to entrepreneurial families, any adviser needs to be able and credible to give independent advice – be it on investment products or paid services. In times of an urge for many financial institutions and asset managers to grow their assets under management following tougher regulatory requirements, advice is very often not truly independent. As a result, more and more families decide to deal with their finances and wealth themselves by way of a do-it-yourself approach. This may be with or without setting up their own single family office, possibly by using dedicated services of multi family offices instead.
This approach for self-control is supported by the ever improving and growing digital offerings in the sector from robo advice to automated controlling and reporting tools. It requires families of wealth to engage themselves more with the intricacies of wealth & asset management and financial planning. But not every entrepreneur is also a seasoned private banker and – in times of so many geopolitical uncertainties – holistic wealth management is certainly not an easy task if your aim is to transfer your wealth securely to the next generation. As a result, financial training becomes crucial so that the current and next generation of entrepreneurial families get the knowledge to deal with their complex finances. At least they need to be enabled to formulate clear and specific demands to the financial services industry before choosing services providers or investment products. The ability to judge performance and risk management is the other prerequisite for self-directed wealth.