Contemporary family offices have revolutionized the way they work, and are finally up to speed with the ever-changing world. There are more private wealth institutions being set-up globally, and family offices are becoming vital sources of capital for them. They are working as a source of funding, or in partnership with other private wealth investors, capital providers, or venture capitalists.
As compared to tradition family offices, the modern ones, focus on making the best use of capital by finding deal flow in emerging markets such as Blockchain or Cannabis. Modern family offices focus on transparency and provide access to in-depth information, which was never available for traditional models. It is mostly because the former focuses on wisely using the money within a client’s lifetime, while the latter had the goal of preserving the wealth for future generations.
Some of the Most Significant Differences Between the Two are:
–> A shift in investment allocations to current emerging markets, such as Blockchain.
–> Proactive involvement in the affairs of an individual or family.
–> A change in business strategies following technological advancements.
–> Improved transparency and flexibility.
–> Exceptional ability to locate and contact family investors.
–> The goal of putting money to good use in an owner’s lifetime.
Improvements in Managing Family Capital
As family offices continue to grow, so do their impact and influence on private markets. Recently, family offices have reached an entirely new level and are now more frequently chosen to preserve wealth, as compared to earlier. An unpredictable market, a switch in demographics, and technology improvements have changed the way family offices function.
Since family offices also handle newer generations, millennial’s mindsets match their investment interest, and traditional investment choices and strategies just don’t meet their standards. In hopes of securing predictable turnaround rates, family offices have had no choice but to adapt to modern asset classes, like real estate and private equity.
A New Way to Sustain Family Legacies
The family values within a modern family office foundation play a significant role in wealth dispersal. Millenials have taken a different approach in asset management and often make their own decisions or oversee decisions that are made. Since these unique groups reflect their families goal, this aids in offering more opportunities for preserving the family legacy.
Although they have their own complexities, family offices offer many different advantages to their clients. Wealth owners adapt and make decisions by keeping their core family values in mind. It is because of this approach that many family members feel comfortable enough to speak out. It also offers productive ways to solve problems.
This puts investors that want to attract family offices at an advantage. Although it was challenging to find family offices in the past, the right tools can now help them find plenty of information to reach out to family offices. Furthermore, it also helps to tailor your pitch to the prospects requirements and create a long-term relationship—which leads to obtaining capital.
Increase in Direct Investments
The trend of family offices choosing direct investments continues to thrive. They usually choose direct investments because of the substantial amount of control they have over it and to avoid the never-ending fees charged by intermediaries. As compared to traditional family offices, modern family offices have shown a higher exposure to direct deals with other family offices that have similar interests.
Many first-generation family offices show less interest in entrepreneurial experiences, and the choice to move to direct investments have led them to make smarter investments. It is because of this change that many of them have switched to the in-house services of traditional private equity. Better quality investments and an increase in deal flow is the result of this deep-seated knowledge of these institutions.
Technological Advancement in Operations
New technological advancements have contributed to the revolution of family offices and the way they function. It isn’t new for them to adopt innovative technology and sophisticated resources such as Artificial Intelligence to improve productivity. The most significant benefit of switching to AI is, being able to offer human experiences to clients, which opens new doors to raise more capital.
The Evolved Modern Family Office
Although there are plenty of differences between a traditional and modern family office, the former was always considered concealed. Since they wanted to preserve the owner’s wealth for future generations, exposure to information wasn’t considered to be the best idea. However, modern models focus on transparency and solely on putting money to work, which is why they make information available, for better asset management and better turnarounds.