This is a summary of another of the panel discussions held on April 23, in New York at the Family Wealth Report Family Office Investment Forum. 

As part of our coverage of this publication’s recent forum on investment for family offices, here is another panel discussion presentation from the Citco Group of Companies, aka Citco. The panel examined what diversification and areas such as private markets mean in practice.

Managing a diversified global family office has become increasingly involved in recent years, amid changes to the complexity in the investment landscape.

Greater exposure to private markets, reporting, and ongoing regulatory upheaval are combining with traditional headwinds that family offices face from areas such as succession planning to add pressure.

During a presentation in New York, Citco, a network of independent companies worldwide which has provided family office services for more than 75 years as part of its service offering, shared  their strategy for helping family offices to overcome these challenges.

The Citco formula
Citco’s Niall Gallagher, managing director, Citco Trustees (Cayman) Limited, Simran Sandhu, head of ESG, institutional services and fund of funds product, and Ernesto Mairhofer, head of private wealth and family offices, discussed how Citco has been supporting families with their investment structures, portfolio reporting, fund administration, and estate planning solutions for eight decades.

The essence of lasting prosperity
Seventy per cent of wealthy families lose their wealth by the second generation, and 90 per cent by the third (1). 

While wealth is fleeting, legacy endures. True family prosperity isn't measured in assets alone – it's about preserving values, creating impact and, most importantly, maintaining harmony among beneficiaries across generations.

Trust is fundamental to achieving this, but what can erode trust is opacity and complexity. Therefore, radical transparency is needed, empowering families to build clarity and confidence, enabling them to focus on what matters most.

The evolving landscape and growing uncertainty in the market are compounding these challenges, with Citco’s team highlighting several key challenges facing family offices:

1. Family offices are increasingly running sophisticated investment strategies where asset allocation to private funds and direct investments are increasing. This is adding to operational complexity and the need for multi-asset expertise to manage these portfolios.

2. There is a lack of holistic reporting that unifies all assets. With complex portfolios comes the need for additional and enhanced portfolio reporting to manage risk and exposure. A combination of liquid and illiquid assets in portfolios makes data-aggregation a challenge, meaning that it can be hard to understand the overall risk and exposures in portfolios.

3. Document management is also a demanding. Family offices need a secure way of storing family documents so that they can be easily accessed via beneficiaries across countries and continents. Additionally, the operational challenges of investing in complex private markets are compounding the need to improve document management for investment operations in order to handle increasing volumes and avoid document drudgery.     

4. Among some of the trends and challenges we see with family offices, it is central to highlight the importance of robust succession planning. Many family office surveys indicate that this as a top priority, but unfortunately only one-third confirmed that they have a formal succession plan. 

Ensuring a smooth transition from one generation to the next one can be complex, particularly when multiple families members are involved, with each person potentially harboring different ideas and long-term ambitions.

5. The evolving regulations and reporting requirements can be demanding for family offices, as they need to stay up-to-date and ensure adherence to legal and regulatory frameworks which are constantly changing. This task becomes more onerous in the context of increasingly internationalized ultra-high worth families who may live in different countries and have their assets spread across different jurisdictions. This results in the need for family offices to track developments and navigate the regulatory landscape at both the local and global level.

6. Procrastination is something that we repeatedly see with some families; they know that they need to do something, but they postpone it until it is too late. Sometimes they have very robust structures for their investments but have weak (or no) structures at all for a smooth transfer of wealth.

7.As family offices transform and embrace technology across family management and portfolio management, this is adding to the need to manage information security and cybersecurity risk. 

8. Choosing a professional, internationally recognized business partner is key. Citco’s experienced group of trustees offers uninterrupted services without potential conflicts of interest.

Conclusion:
To effectively manage these challenges, families need more than just a service provider – they need a trusted partner with proven expertise and a comprehensive understanding of multi-generational wealth management. The right partner should combine deep industry experience with cutting-edge technology solutions, to ensure that families can preserve both their wealth and their legacy for generations to come.

At Citco, we’ve been majority-independently owned from the beginning, enabling us to better serve our partners. We cultivate a culture that puts clients at the center, because your satisfaction starts with our independence. With over 70 years of experience serving the world's most sophisticated families, Citco is a true global solutions partner that provides the expertise, technology, and trust needed to overcome complex challenges and secure your family's lasting prosperity.

Footnote

1, A 20-year research project on 3,200 families by US-based wealth consultancy Williams Group shows that 70 per cent of wealthy families lose their wealth by the second generation, and 90 per cent by the third.