crypto strategy

The five building blocks of the future Family Office

At a time when change seems to be the word of the day, it’s easy to get overwhelmed and forget that this state of flow isn’t a new concept. About 2,500 years ago, the Greek philosopher Heraclitus pointed out that “The only constant in life is change.” So if constant change is something that’s been around for so long, why now might it seem

Philosophically, this could, in part, be because we live much faster lives these days, and thanks to our constant consumption of social media, we might have less time to disconnect. At the same time, we are bombarded with irrelevant social media and news we don’t need to know.

Whether we are looking at these constant changes or whether this change is happening on a personal, professional, organizational or even societal level, it affects us all and everyone needs to be prepared.

Three Drivers of Change in the Ultra-Wealthy Segment

Regarding the private wealth segment, three critical drivers of change are currently playing and changing the landscape of family offices.

There is a new owner of wealth

Yes, we’re talking about the “next generation” of homeowners, and today that can mean anything from Gen Z to surviving spouses to their other halves, ages 20 to 60. But there are also entirely new sources of wealth that bring new types. owners at stake. An important new source of wealth comes in the form of liquidity events from the increasing number of entrepreneurs leaving the businesses they have created.

All founders will eventually leave their companies, and it’s just a matter of when and when that will happen. As many startups also raise funds from family offices, it stands to reason that their founders might be interested in following a similar path with whatever cash they can unlock.

Beyond entrepreneurs there are also entirely new types of wealth, crypto natives or bitcoin billionaires are just one example, and with more changes in financial systems we can only imagine what other types of wealth would still emerge.

A change in personal and societal values

On a personal level, owners are increasingly looking for value beyond the financial returns of their investments. Whether we are talking about more concerns around environmental or social impacts considering factors such as diversity, equity and inclusion or broader impacts on people, this personal drive to do better is evident throughout. around us. A clear manifestation is the increased discussion of sustainability among many financial actors (even if this is largely lip service). What happens afterwards?

At the societal level, there is also an increased demand for transparency and accountability from around the world. Wealth owners need to ensure they are prepared for these new demands and that their investment portfolios reflect their intentions – or there is always the risk that you will be wiped out.

There are new ways to invest

The investment landscape has been no stranger to change since it was codified in the 1700s BCE, where Mesopotamians could give collateral in exchange for a project. Over the centuries, investors have placed value on everything from spices and steel to stocks since the 1600s, when the Dutch East India Company established the Amsterdam Stock Exchange.

One thing is certain, not all investments are made on the stock exchange with listed companies, and during bear markets, bonds and physical assets could come under increased scrutiny.

Today, the focus is increasingly on alternatives and direct investments, as well as new asset classes and new vehicles that were not available before. SPACS was all the rage three years ago, and crypto, digital asset and blockchain technologies have exploded in popularity over the past two years.

The 5 building blocks

So, based on these changes and research compiled from various reports, conferences and interviews over the past two years, the following five building blocks have been identified and described as forward-looking factors that can enable future family offices. Each of them could warrant an entire article on its own, but here’s the synopsis.

1. An organization that enables resilience

A resilient organization can deal with change and organizations need to be agile to prepare for uncertainty. Agility is, in short, readiness by design. With a strategy in place that incorporates a level of preparedness while considering non-financial risks, family offices can be better prepared for future changes.

Beyond the nature of the organization, there is also the composition. Family offices need to reflect their clients and meet them where they are. If the family office is all older generation executives (“Okay boomer”, ring a bell?) or all men where the clients may be younger female family members, there is has an inherent inadequacy.

2. Digital Excellence

Digital is a hygiene factor. Gone are the days when there is a discussion about whether robo-advisors will replace wealth managers or whether private banks can get away with not providing direct feeds to accounts for aggregation. The next generation of wealth owners will expect safe and secure digital tools. Most Gen Zs would rather contact their bank through Instagram than receive a phone call.

Just because you ditched your conferencing service and can join a Zoom call doesn’t mean you’ve moved on to a great digital company. There is still a lot of work to do, some of it relates to actual technology solutions, but a lot also relates to a mindset, culture and how family offices manage internal processes.

3. Transparency and communication

Some might say that privacy is a luxury that wealthy people can still afford. However, most people are beginning to realize that privacy may be dead, especially with the rapid developments in quantum computing and our still-busy lives.

The days of secrecy and family offices operating under the radar are over. Whether it’s the upcoming Panama Papers or the mass adoption of blockchain that will document all transactions, it’s getting easier to access information about anyone and everything.

But this emphasis on transparency is not catastrophic. With it comes the opportunity to tell stories worth sharing, whether with family office owners or with the world. In the words of a psychologist and an economist Daniel Kahneman, “No one has ever made a decision because of a number. They need a story.

4. Network and community

Members of Generation Z understand the power of connection and live their lives by it. They’re not just digital natives, they’re network natives, too, and it’s playing out in new ways.

There have been many discussions about creating a network for co-investment opportunities within the family office space. These deals will most likely continue, but what are the other benefits here, and how might the Gen Z approach change the way it has been so far?

Sharing knowledge is another reason why networking is so important. But according to “weak tie theory,” we can only tap into old knowledge from existing networks – people with whom we share experiences. The theory suggests that new knowledge must come from others outside of your immediate network. This reflection, supported by new family office technologies and the Gen Z mindset, may soon create new ways to securely expand networks and share data with that network that can be mutually beneficial.

5. Transformative impact

By considering what they want to achieve beyond financial returns, investors can have an exponentially transformative impact on the world. This transformative vision, or “goal,” is what the next generation wants to see.

This last building block is not isolated, as it enables the need for transparency, provides stories to share, and relies heavily on the rise of new ways to invest, helping investors be the change they want to see in the world. .

How does it all fit together?

What might a family office look like that incorporated these five basic elements into its design? Working from the inside out, we have an agile and resilient organization that leverages technology to be digitally excellent. Outward-looking, this organization is open and transparent, with a strong network and community within which it communicates, shares and operates.

And for the world, it is possible that this family office and its investments will have a transformative impact on the planet. And to end with one last inspiration on change, “When you’re done changing, you’re done.” -Benjamin Franklin


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