Here is a roundup of some of the points covered during a panel at Family Office Exchange's Wealth Advisor Forum called "What families say they want and need."

At Family Office Exchange’s 2015 Wealth Advisor Forum, Amy Hart Clyne, executive director of the Knowledge Center, talked about what wealthy families say they want and need, and how advisors should respond.

Clyne ran through eight key family office “elements,” including: vision (designing the client experience); leadership (developing family leaders); transition (addressing family risk); governance (formalizing structures and processes); financial security (supporting direct investing); risk management (guarding privacy and data security); integration (leveraging the cloud); and sustainability (delivering education programs). Here is an overview of the first four.

Client experience

In terms of designing the client experience, Clyne said one of the biggest challenges advisors face is around demonstrating alignment with family values. FOX research shows that “the basics aren’t being covered,” she said, with only 27 per cent of 92 respondents saying they have a process for documenting each client’s personal and financial goals. Sixty-one per cent said they do not have such a process, and 12 per cent said this is a work-in-progress for them. Meanwhile, 38 per cent of 84 respondents said they have never conducted a client satisfaction survey; 24 per cent do this annually, 18 per cent every three to five years; 15 per cent cited “other;” and 5 per cent said they do this every other year.

FOX believes that taking a strategic approach to designing the client experience is the best way to promote client engagement and long-term relationships. Indeed, advisors that are able to stand out in what has become an extremely crowded market will be those with the greatest aptitude for client engagement, Cerulli Associates said in a recent report. But to do this, advisors need to help families define their goals and values, and then frame everything they do in terms of these, Clyne said. But crucially, all this needs to be measured.

Leadership

On the topic of leadership, Clyne talked through some figures that show how families are training their leaders today. Fifty-one per cent of 70 respondents cited attendance at advisor meetings and 43 per cent cited participation in board meetings, followed by: industry conferences and forums (34 per cent); participation in due diligence processes (30 per cent); participation in board committees (24 per cent); family office internships (20 per cent); and having a next-generation investment pool (11 per cent). This highlights that there are opportunities for advisors to train family leaders within their ecosystem, and not just within the family office ecosystem. “Advisors, in our view, are in a unique position to provide value in molding future leaders, and, if you can take the time to serve as a mentor, a coach...we think it will pay off,” Clyne said.

The opportunity for advisors here lies in helping families assess the current versus future state of their leadership practice, Clyne said. In doing so, they must help the family establish a “development framework,” which requires understanding the family dynamics, identifying family goals and ultimately helping them develop the next generation of leaders.

Transitions: addressing risk

The risks perceived by families and their advisors often do not align with the severity of their exposures, meaning that family office executives must develop new techniques for assessing risks and monitoring them, Clyne said. The challenge is that family members are often reluctant to discuss risk - particularly those that they cannot see or understand.

Clyne noted how one FOX family office client has changed the focus of his executive team from investments to risk. “I'm now comfortable that this goal permeates everything we do, from managing the dead tree in the back yard to the risks of owning a sports team, to the need for privacy and other personal security measures,” he said. “I sleep better at night knowing my team has a risk mentality.”

Governance

Moving on to the topic of governance, Clyne said FOX has found that leadership succession is the most important governance-related issue according to family clients, cited by 31 per cent of 85 respondents. After this is formalizing governance – developing a process that is fair and transparent for reaching decisions as a family (21 per cent); growing/sustaining wealth (19 per cent); involving and preparing the next generation (15 per cent); family continuity (9 per cent); and inter-generational communication (4 per cent).

FOX advises families to consider and ask their advisors the following: are the governing boards functioning well and making progress on established goals? Is the mechanism for family decision-making clearly documented and effective? What can the board do to help the family make positive decisions and address their enterprise goals? What governance initiatives should the board address in the next 12 months? Clyne said advisors need to provide education about the importance of formal governance for sustainability by incorporating this into their service offering.

“From our experience, the family tends to know when is the time to formalize governance, because the patriarch or matriarch is gone, and there is no clear leader or sense of direction for the family,” Clyne said. “Then is the time for the family to bring in an outsourced resource to discuss issues that need to be addressed and to lead a conversation that no family member can lead without risking the fear that they are forcing their view on the rest of the group. We see this as an area of real opportunity.”