Digital Innovations Transforming the Multi-Family Offices (MFO) Sector

Digital Innovations Transforming the Multi-Family Offices (MFO) Sector

Heritage Partners’ Founding Partner and Head of Family Office, Rob Ioannou shares insights on digital innovations transforming the customer experience in MFO space, managing the impact of COVID-19 and what’s unique about Sri Lanka family offices. Below are the excerpts of our interview.

Take us through some of HP’s key priorities for 2020/2021.

Rob Ioannou: Our goal is to become the preferred choice for families in Sri Lanka and select frontier markets in the region who are looking for an independent and innovative advisory approach in managing their family office affairs. To achieve this goal, we are working closely with local business families to build their knowledge and understanding of how a family office can be relevant, thereby enabling them to grow and sustain their own family enterprise.  Clearly, the COVID-19 pandemic has thrown many families and their businesses into disarray, impacting on carefully thought through succession plans, transition events such as an IPO or international expansion, and, in some cases, even threatening the future of entire industries.  As families figure out how to navigate these tumultuous and extraordinary times, our priority is quite simply to support the families we work with in order to help them get through this period and emerge on the other side in the best possible shape.  When we are engaged on a new mandate, we usually like to say that our client is the family business system and we try and help them achieve a sustainable equilibrium between both the family and business.

What is the unique proposition of Heritage Partners?

Rob Ioannou: From the outset Heritage Partners has always aspired to be different from the crowd.  Whilst most players talk about their ‘holistic’ offering we find that many so-called family office providers are typically only interested in the asset management of a family’s liquid, financial investments.  For Heritage Partners, advising families on their financial investments is actually only a small part of what we do.  Regardless of the size of assets under advice (AUA), we engage our clients with a simple and transparent retainer.  This enables us to work with families seamlessly across a range of different issues straddling all four pillars of our service proposition – investing, planning, giving, supporting. Since its founding in 2019, Heritage Partners made a commitment to the families we serve, promising to provide independent advice and guidance on the financial as well as non-financial issues that matter most to them.

For Heritage Partners, advising families on their financial investments is actually only a small part of what we do.  Regardless of the size of assets under advice (AUA), we engage our clients with a simple and transparent retainer.

As a veteran private banker, what attracted you to Sri Lanka?

Rob Ioannou: If you have ever visited Sri Lanka, you will understand why I shifted base here! After spending the last 12 years living and working in a fully developed – if saturated – market like SIngapore, I was looking for the right location to build an independent advisory business in an under-served region with significant growth potential.  Sri Lanka, long known as the “Pearl of the Indian Ocean”, is now rapidly developing following the end of its 30 year-long civil war in 2009.

Moreover, being based in Colombo as an independent advisor to families enables me to be jurisdictionally neutral and tap into a network of banking, investment and estate planning solutions for clients across the major European, Middle East, as well as Asian financial hubs.   In my role I continue to be a bridge between Europe, the Middle East and Asia for entrepreneurial families, connecting clients to opportunities along the new Silk Road.  I believe this is relevant now more than ever, as the combined economies of Asia Pacific will become larger than the rest of the world combined in 2020, for the first time since the nineteenth century, notwithstanding the COVID-19 pandemic.

How is digital innovation transforming the customer experience in the MFO space?

Rob Ioannou: The constant innovation we are witnessing in digital services is transforming the customer experience in both big and small ways.  For example, at a basic level, a small MFO like ours can rapidly adapt to new technologies as well as customer preferences by embracing videoconferencing applications such as Zoom and Microsoft Teams.  Moreover, client contracts and letters of engagement are digitally signed using applications like DocuSign, eradicating the need for snail mail.  These technologies help us remain connected to clients in-country as well as around the globe, which is especially handy during these COVID-19 challenged times.

More strategically, the rapid proliferation of new platform and investment companies is giving families greater choice at a fraction of the price when it comes to banking, investment, execution and custodial services. This is nibbling away at the space traditionally occupied by private banks and asset managers.  MFO’s like Heritage Partners are well placed to help families understand and choose the right platform for them whilst ensuring the safety of their assets.

I like to say that our business is a combination of ‘high tech’ and ‘high touch’.  Digital technologies are tremendous enablers but ultimately, they do not replace the importance of face to face discussions with our principals.  That is why we still enjoy welcoming our Sri Lanka based clients to the privacy of our heritage bungalow, located in the heart of Colombo’s Cinnamon Gardens district.

The rapid proliferation of new platform and investment companies is giving families greater choice at a fraction of the price when it comes to banking, investment, execution and custodial services.

How has HP managed the impact of COVID-19 and what challenges does it bring over the next 12 months?

Rob Ioannou: As a young start-up with a strong technology platform and systems behind us, I can honestly say that the pivot to a WFH environment was seamless.  This was especially helpful when we had to work under a strict lockdown for over 60 days in Colombo earlier this year.  Our newest team member happened to join us literally the day before a strict curfew was imposed in Colombo.  Fortunately, he was able to complete all on-boarding formalities remotely and he rapidly settled in and hit the ground running.

On the other hand, on-boarding brand new clients understandably suffered a temporary set-back as family priorities shifted to more immediate needs.  Nevertheless, our base case assumption is that, if anything, the Family Office is likely to become more – not less – important, as business families seek to preserve and diversify their wealth, manage (multiple) risks, and try and find their way through this crisis.  As a result, we see the Asian Family Office moving out of the shadows and increasingly playing a more central role in the affairs of business families here in Sri Lanka and across emerging/frontier markets in the region.

In the recent news, we understand that Sri Lanka family offices are blooming with interest from Chinese investors, what is your verdict on this?

Rob Ioannou: Chinese investment into Sri Lanka through its Belt and Road Initiative (BRI) has been attracting growing global interest due to the country’s strategic geographic location along east-west shipping lanes, along with Indian security concerns regarding a Chinese military presence in the Hambantota port, and concerns that Sri Lanka has fallen into a Chinese debt ‘trap’ due to commercial financing of the BRI projects.  Until recently, however, there was little empirical research analysing the impact of Chinese investment into Sri Lanka, leading to misconceptions.  This gap was filled by a March 2020 study by the Chatham House Group on Chinese BRI investment into Sri Lanka which reports that cumulative Chinese infrastructure investment into Sri Lanka between 2006 and 2019 reached USD 12.1 billion.

Contrary to popular opinion, however, Sri Lanka is not in a Chinese debt trap. Its debt to China currently amounts to about 6 per cent of GDP. However, it would be fair to say that Sri Lanka’s generally high debt levels show the country needs to improve its debt management systems to avoid potentially falling into a trap.  Ultimately, a crucial development challenge for Sri Lanka is how best to maximize the benefits from Chinese infrastructure investments while minimizing any potential costs to ensure net benefits to the country.

Contrary to popular opinion, Sri Lanka is not in a Chinese debt trap. Its debt to China currently amounts to about 6 per cent of GDP. However, it would be fair to say that Sri Lanka’s generally high debt levels show the country needs to improve its debt management systems to avoid potentially falling into a trap.

Anything new on the horizon to look forward to?

Rob Ioannou: Yes, lots!  The current global health crisis appears to have ignited philanthropic intentions among some of the families we work with who have told us they are keen to define their legacy and uplift the hardest hit segments of their local communities.  We are excited to be working with two such families who will be launching their charitable foundations later in the year.

***

>> To read more about this story and other exclusive features about the global private banking landscape, download the latest issue of Global Private Banker Magazine HERE.

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