Here is a roundup of some of the key points covered on the CEO panel at FOX's 2015 Wealth Advisor Forum.

Here are some takeaways from the CEO panel at Family Office Exchange’s 2015 Wealth Advisor Forum, entitled Identifying Trends in the Family Office Market and chaired by Alexandre Monnier, president of FOX.

The other panelists included: John Benevides, president at CTC | myCFO; Glen Johnson, managing director at Mirador Family Wealth Advisors; Kevin Tobin, president and chief executive at Marsh Private Client Services; and Dennis Wright, managing director at the Wellspring Group.  

Monnier asked each of the speakers to outline what they see as some of the most interesting, major trends in the family office space today and looking ahead.

Johnson kicked off the session, talking about the US’ aging population and the topic of increased longevity, as well as the skills advisors need in this changing environment. Issues around healthcare have been the focus of numerous industry studies in recent months, with health perceived as the ultimate retirement wildcard as Baby Boomers move into their later years. Johnson spoke about the effect a longer-living patriarch has on family dynamics, and thus the need for a more inclusive type of wealth planning.

“One interesting strand of this is entrepreneurship,” he said. “Generations will have more time with every family, but what they do with that time is critical, for example: is G1 purposeful about the conversations they have with G3 in order to keep alive that story of wealth creation?”

Governance is therefore becoming increasingly important, particularly as families grow. “What do you need to be able to do in light of this?” Johnson said, noting that a big factor is what your team looks like. “Many of us are skilled at doing, but not all of us are very skilled at teaching, mentoring and training. This will be critical as we build teams across generations.”

Furthermore, understanding the difference between an age and health issue is also going to be crucial in 2015 and beyond, Johnson continued. There is a need for more industry training on the early signs of cognitive impairment, for example, so that advisors can handle any unexpected situations delicately and in an informed manner. He noted that, at Mirador, clients’ medical claims were getting more complex over time, so the firm started looking to bring in healthcare support services to families as a way to tackle this.

While these are sensitive/private issues that families may not always feel comfortable talking about, Johnson believes the family office sector is, or at least should be, well-positioned to help. Bringing up the topic of health at the client onboarding stage is one way of showing that this is just part of the work a family office can do, particularly by highlighting the impact health can have on family wealth transfer, decision-making and family governance, etc.  

Meanwhile, Benevides outlined his views on five prominent family office themes, touching on: client demand for access to data; direct investment facilitation; crystallization of the impact investment landscape; increased multi-family office outsourcing and specialization; and greater self-awareness among clients.

Delving deeper into the impact investment trend, Benevides said that - while still in the early days - “we are seeing the signs of a market forming.” He outlined the evolution of the space as having started with program-related investing within private foundations, to: socially-responsible investing; ESG investing; and mission-related investing - all of which are crystallizing under the “impact investing” umbrella.

“From a business perspective, I think there will be direct and indirect revenue associated with this,” he said. The conversations his firm, CTC | myCFO, is having with existing clients are paving the way for new avenues of business while an “unintended benefit” is that related conversations enable the firm to get to know the younger gen - who are usually the proponents of impact investing - more deeply, and faster.

Besides the need for skills in areas such as estate planning, non-profit law and taxes, philanthropic foundation execution and management, and investment expertise, Benevides also mentioned the need for creativity to connect intent with expression. “The most challenging part of this is that there is no scale,” he said. “The nature of what someone wants to do [in the space] is very tailored.”

Monnier noted that professionals at FOX often hear from advisors that demand for impact investing outweighs supply. “Because demand is very isolated and customized, there isn’t supply built yet,” Benevides said. “A lot of people talk about it, a lot of people write checks, and some go further and have a foundation or are active in some way or another. When you get to that level, it is very tailored, hence issues with demand.”

Moving on to the topic of outsourcing and specialization, Benevides said last year there was a notable trend of single family office outsourcing. “We continue to partner with SFOs,” he said. “And I think we will continue to do so in new and interesting ways, but we see more partnering with other MFOs. Today, we serve four other MFOs and are in discussions with four others. I think that is going to be part of the landscape as each firm decides how they can specialize. What I like about the space we all operate in is that there tends to be more partnering and information sharing.”

Integration

Wright then described the topic of integration in the family office space, which he noted is not academic, but practical in focus and about how the sector applies itself.

Five takeaways from the 2014 FOX Wealth Advisor Forum were directly related to integration, and are still very much trending today, he said. They are: advisors and family clients relying more on integration as a strategy for managing complexity, with families increasingly discovering that keeping their advisors in “silos” is not the best way to achieve their goals; SFOs continuing to explore outsourcing; advisor firms and single family offices preparing to fill the human capital gap left by retiring wealth professionals; increased family office professionalism driving up expectations across the industry; and advisors realigning their service models to optimize the client experience.

Central to the above is that that, “if it isn’t already, the expectation for us is going to be that we are team players,” Wright said. In addressing the question of how to meet the need for integration, he said an active focus on strengthening a family’s multi-disciplinary team is paramount. “A definition of ‘team’ I really like is this: a group of people with a full set of complementary skills required to complete a task, job or project. Team members operate with 1) a high degree of inter-dependence 2) they share authority and responsibility for self management 3) they are accountable for the collective performance 4) and they work toward a common goal and shared rewards.”

Asking yourself “what is in it for me” is also key because “we need to believe in what we are doing,” he continued. Families are more confident when a team makes a recommendation, he added, which also allows them to make decisions sooner.

“It’s a little more work on the front end, but I think it really pays dividends in the long run,” Wright said, advising that advisors create a specific and repeatable methodology for building multi-disciplinary teams. This ties in with what Johnson had previously talked about, that, as families grow older and their wealth becomes even more complex, teaching, mentoring and training will be critical as the industry builds teams that can work across generations.

Data protection and security

Tobin of Marsh Private Client Services, the insurer, brought up issues around data security, privacy and cyber threats - a huge topic currently in the family office space and wider financial services sphere. Just as an example, in October 2014 JP Morgan said some 76 million households and 7 million small businesses were affected by a cyber security attack against the firm, which, according to reports, was one of the biggest disclosed breaches to hit a financial institution.  

According to the Deloitte Center for Financial Services’ private wealth outlook for 2015, fraud - while not often covered in the news due the sensitive nature of the sector - does occur and family offices are prime targets, particularly in the areas of expense accounts, payroll and accounts payable.

Identity theft and card fraud is on the rise, Tobin warned, so advisors need to teach themselves and their clients about how to mitigate associated risks. The average data breach costs a targeted entity about $600,000, not to mention reputation damage and impact on short-term shareholder value, he explained. The human dimension to this is key and centers quite simply on awareness. Younger family members especially need to be aware of how their activities on social media (in terms of information sharing, for example) can put their family at risk by way of revealing details that criminals could leverage.