As the economic impact of the coronavirus pandemic begins to unfold, family offices from across the globe have never been more careful, yet proactive in their approach to wealth management. Globally, there are now more than 7,300 family offices managing assets of about $5.9 trillion according to Campden Research.
Asian rich families are taking a more cautious approach. In a report by Bloomberg, it emphasized that “the reluctance among some of Asia’s wealthiest families to rush for deals is potentially a warning sign for the global economy.” Compared to its western counterparts, whose family offices resemble regular investment firms, Asian wealth tends to be “newer, with the original businesses still at the heart of the operation. This gives them a front-line view of the real economy.” As such, any forecasts suggesting a rapid rebound following a short and sharp recession may not necessarily be accurate.
When it comes to investments, what used to be true just a couple of months ago are now being put under closer scrutiny. Family offices are now beginning to embrace the new normal.
Finding Ways to Make Family Offices Recession-Proof
With the increased market volatility and tension around global trades, many individuals across the world have lost their billionaire status. This worrisome development notwithstanding, family offices are still growing. Older businesses are now cashing out, while the new and recent entrepreneurs who built their business on tech, are taking their companies public, and also seeking new investments. Family offices are the best way for these new entrepreneurs to reach their goal of wealth preservation.
Yet, the business approach of these emerging investors differs from the vintage business approach of older entrepreneurs. Newbies adopt a millennial mindset where access is more valued than ownership. As such, they place little focus on the traditional binary choice of single or multi-family offices, and instead, resort to the use of new and hybrid structures based on cloud space.
When it comes to investments, what used to be true just a couple of months ago are now being put under closer scrutiny. Family offices are now beginning to embrace the new normal.
Even with the low rate of success currently prevalent in online family offices, modular, which allows the family to select services that are regularly on demand, are improving. This has also culminated in the existence of private multi-family offices that allow different families to combine funds in investing in different promising ventures. These organizations then share the available resources, and this has made them more efficient in the digital market and has led to an increased growth, and change in the outlook of family offices.
Add to that, the rise of major technological advancements has brought challenges and new opportunities. It is easy now to have quicker and higher productivity, and fast-growing revenue in digitalized industries, than what was obtainable in the analogue days. Sadly, however, some of the industries around have not achieved more than 40% digitization. As such, many are not primed enough to handle the massive level of change invading their industry. One major factor that will drive this change is AI.
Using Technology to Ride Out the Storm
The development of AI technology is aimed at changing the way people access and apply data in their everyday life and business. The ultimate result is that humans will spend less time on task; they will also be able to focus on other important things and enjoy faster achievement of success of their innovative ideas.
A recent study by UBS Campden Wealth Global Family Office shows that most family offices are getting set for an inevitable recession. This has caused them to seek ways to lessen the risk, increase savings, and grab good investment opportunities.
The rise of major technological advancements has brought challenges and new opportunities. It is now easy to have quicker and higher productivity, and fast-growing revenue in digitalized industries, than what was obtainable in the analogue days.
Aside from modernisation and adoption of the latest digital technologies, investment strategy alignment is another thing most are focusing on. According to the study, the areas of focus for these family offices include private equity funds and investments and real estate.
With all these inherent changes, it is inevitable that there will be a shift in the flow of deals for financial institutions regarding wealth management. ‘Normal’ as we used to know it, is about to change.
