Opportunity for advisers in family offices

A recent report by Netwealth, Why your technology offer matters to family offices, highlighted the value advice firms can offer family offices, focusing on the benefits of sophisticated technology.

According to the report, by working with a financial adviser, family offices could reap the benefits of improved returns by taking advantage of their technological capabilities to help them make better decisions “when markets are volatile and investment opportunities arise”.

Further, as advisers are required to stay up-to-date with regulatory changes, they are thus able to help family offices maintain compliance and utilise technology to conduct thorough audits, further ensuring they meet the necessary requirements.

Working with an advice firm can also help family offices reduce costs, it said.

“By in essence ‘outsourcing’ the administration and technology to advice firms, family offices might be able to decrease their overall investment operating costs,” the report said.

Additionally, advice firms will often have greater access to the newest technology upgrades, offering them greater opportunity for improved efficiency, cyber security protections, and emerging capabilities, such as AI.

Complex asset holdings

According to UBS’ Global Family Offices 2022 report, 57 per cent of family office investments were held in traditional asset classes, while 43 per cent were in alternative asset classes.

Of the traditional asset classes, 32 per cent was held in equities, 24 per cent of which was in developed markets and 8 per cent in developing markets, and the remaining 15 per cent was held in fixed income, 11 per cent in developed markets, and 4 per cent in developing markets.

Within the alternative investments, 21 per cent was in private equity, made up by 13 per cent in direct investments and 8 per cent in funds or funds of funds.

A further 12 per cent was in real estate, 4 per cent in hedge funds, 2 per cent in private, and 1 per cent each in gold/precious metals, commodities, art and antiques, and infrastructure.

With a considerable concentration of investments in alternative assets comes additional complexities in maintenance and reporting. In this, according to the report, lies an opportunity for advisers to highlight their value to family offices.

“Their investment portfolios are becoming more complex as generations pass, and as more investment options become accessible,” the report said.

“Advice firms by their very nature are well adapted and have vast experience in investment management, and as such, are perfectly placed to help family offices overcome these challenges and become better asset managers.”

As their investments continue to become complex, reporting becomes increasingly difficult, particularly when they are held across different countries.

According to the report, advice firms are well positioned with access to sophisticated technology to produce the type of investment reporting they require and have the knowledge to help them manage complex investment portfolios.

Advanced platform technologies now make it easier for advisers to track and manage assets held across a wide variety of exchanges, presenting an opportunity to highlight their value to family offices as they may otherwise struggle to reconcile.

“This is where financial advisers have an advantage, as their technology systems, often an investment platform like Netwealth, and processes are geared to sophisticated investment reporting,” the report said.

Opportunities beyond technology

According to the report, financial advisers also hold potential value to family offices beyond technology, such as offering consulting services, helping support them, and serving as a “sounding board” for executives and family members.

By capitalising on their wealth of knowledge and investment management expertise, advisers have the opportunity to further strengthen their value proposition to family offices.

To achieve this, the report explained that advisers can offer services such as tax and estate planning, family governance and education and philanthropic planning.