FWR reports from a recent discussion by family office figures about the shape of the industry and how it will change in future.

Family offices are being reinvented.

A “continual state of uncertainty,” accelerated by the global pandemic and economic downturn, has resulted in an emerging “new paradigm” for wealthy families and the family offices that serve them, according to Miguel Lopez de Silanes, Family Office Exchange’s market leader for Europe and Latin America.

The current heath and economic crisis has created new challenges and opportunities that will result in strategic and long-term changes, de Silanes said on FOX’s recent webcast on dynamic forces that are reshaping family offices.

Among the changes FOX’s panel of experts forecast:
-- More risk and crisis management;
-- More - but carefully selected - direct and impact investing;
-- More emphasis on learning programs for “Rising Gen” family members;
-- Enhanced governance;
-- Growing complexity of support services and cost;
-- Increased cybersecurity protection;
-- More technology integration; and
-- Acceptance of virtual environments as the norm.

Wealthy families continue to be drawn to direct investing, with the average FOX member family having investments in between five and 15 private companies, said Gabby Griffin, FOX market leader for business owners and family office executives.

Investment teams feel strain
The organization foresees “a sustainable direct investing ecosystem,” said Jonathan Tunner, director of private investor opportunities, but cautioned that the “landscape continues to be complex and hazy.”

While SPACs have proven to be a bright spot for wealthy families interested in direct ownership, Tunner warned that family office investment teams are feeling “strain beyond just sourcing and competing.”

Indeed, “Black Swan” events such as the financial crisis of 2008 and the 2020 pandemic have caused family offices to carefully “reassess every facet” of their direct investing strategy, Tunner said.

Families are also reinventing themselves by a “heightened commitment to family learning,” said Mindy Earley, chief learning officer for FOX.

Indeed, wealthy families are “doubling down on intentional training for future leaders,” according to Earley. Younger family members are focusing on defining future roles, developing leadership roles, understanding family dynamics and becoming more active in investment strategies, she said.

Younger family members driving social responsibility
And impact investing is clearly a priority for these younger family members, according to FOX.

Diverse views on social responsibility and the purpose of wealth have become cornerstones of “the continued evolution of the modern family office movement,” Griffin noted. “The world is becoming more complicated and how families adapt to change is a critical issue.”

As an example, Griffin cited a closer alignment of a family’s investments and philanthropy endeavors with “personal values,” a trend “largely driven by the Next Generation.”

FOX CEO: Complexity’s impact
In the current environment of rapid change, increasing complexity will impact services and costs for family offices, said FOX chief executive Sara Hamilton.

“Integrating hundreds of different services into one client experience” will be a major challenge for family offices in the years ahead, according to Hamilton. “Understanding complexity allows family offices to unravel the mystery of cost,” she told the webcast audience. “And complexity will also determine the service delivery model and cost allocation.”