Many feel the need to have sounding boards of experts available to them regarding illiquid assets and personal financial management. What gives?
Outsourcing. Once the bane of 1990s factory workers and a fountain of unending controversy as multinational groups steadily shifted their operations from the industrialized world to anywhere cheaper.
In the meantime, the term seems to have softened somewhat. Today, it accentuates efforts by what tends to be much leaner groupings to putter along and focus on their core business and hive everything else off.
Not Soon Enough
But now, on the cusp of the mid-2020s, it seems like family offices are getting in on the act.
A media release issued on Wednesday by Ocorian, a global leader in corporate and fiduciary services, maintains that many of them want to do much less—and relatively quickly. And what are the two things they most want to outsource? Illiquid investment support and personal financial management.
More Expertise
Around 60 percent of them have already hived those two things off to third parties, with a significant proportion of the remainder wanting to follow suit in the next three years.
According to Ocorian, among the key reasons they intend to do so is to improve service levels and the value of external professional expertise.
Global Network
«Family offices expect third party providers to evolve in response to the growing demand for their services – 70% say they expect third party providers to be able to provide access to an increasingly globalized network of administration centers while 60% expect to see more skills from providers such as being able to advise on digital assets,» Ocarian writes.
The third thing they seem intent on getting rid of is family concierge services, with slightly more than half of all family offices currently outsourcing them, and a majority of the remainder following in their path in the three years after that.
Internal Conflict
Reading between the lines, it seems that family offices also seem keen to outsource matters that they feel most uncomfortable with or the ones that are liable to generate the most conflict internally.
The uncertainties and durations of holding illiquid assets are likely to prompt a need for expert handholding while on the personal financial management front – who really wants to be directly confronting that second – or third - cousin about their monthly credit card expenses?
Staying Inhouse
That kind of rationale seems to be indirectly supported by the items at the bottom end of the scale, or the things family offices least want to outsource. Here, only 12 percent intend to shift their philanthropic activities externally.
The same goes for the repository of key documents, family homes, wealth planning, and liquid investments, although managing so-called assets of passion at the midpoint of matters most apt to be outsourced - and those least likely.
Better Governance
«What’s clear from other segments of our research in tandem with our experience is that family offices are increasingly adopting institutional-level governance and investment strategies, with a strong focus on professionalization and diversification. By outsourcing complex areas like private equity to outsourced chief investment officers, they can maintain control over liquid assets while navigating the challenges of illiquidity,» they indicate.
In July, Ocorian commissioned an independent research company to survey 309 family office investment managers collectively responsible for $155 billion in AuM, of which 201 of them worked for multi-family offices.
As part of that, it interviewed them in Bahrain, Bermuda, Canada, France, Hong Kong, Nigeria, Saudi Arabia, Singapore, South Africa, United Arab Emirates, the UK, US, the Cayman Islands, Egypt, Ethiopia, Germany, Ireland, Italy, Kenya, Spain, Sweden, Switzerland, Tunisia, Jersey and Guernsey
