As the human and economic toll of the coronavirus mounted in the first half of 2020, organizations of all kinds were forced to consider what the future of their operations would look like in a post COVID-19 world. Family offices were no exception.
Rapidly fading are the days when a family office would hire the right staff members, provide a space where they could work and then convene the family members a couple of times a year to discuss the strategy.
Most of these physical offices now stand empty as working from home has become the new normal. At the same time, family members—especially the younger generation—have been demanding ever more access to the office’s day-to-day workings as the economy has experienced wrenching change.
The answer, for many family offices, is to become a virtual family office.
But getting there has not been easy. Many family offices were simply not equipped with the technology to support a seamless remote work environment. They needed to quickly upgrade their technology and temporarily outsource back-office functions-all of which changed the way offices met the needs of individual family members.
As this coronavirus pandemic heads into the second half of 2020, family offices will have little choice but to evolve as the digital transformation is forcing them to begin exploring the new world of a virtual family office.
Family offices have existed in many shapes and sizes since the 19th century, serving names like Rockefeller, Morgan, Rothschild and others. According to PitchBook, a research firm that compiles data on family offices, there are more than 1,900 offices around the globe, with more than 800 in the United States.
And there is no set approach. In some cases, multifamily offices provide investment management services to a range of families. In others, a single family office has several generations to support.
Families are dealing with a number of issues such as cybersecurity, tax law changes, regulation updates, family dynamics and the digital transformation. With all of these variables in play, the mobility and intellectual horsepower of the single-family or multifamily office structure is debatable.
In addition, there are a number of vulnerabilities in the traditional family office structure that were exposed during the pandemic. A perfect example of this was outdated technology where working from home was a challenge. As the costs to manage the business climb and performance fades because of economic conditions, the structure of the office might limit the ability to meet the family’s goals.
The Next Generation
According to Bloomberg, millennials are set to inherit about $30 trillion from their parents in the coming decades.
Those in the next generation share very different characteristics from their parents. First, they are always connected. This is a generation that grew up with technology and demands full transparency to data and information with no disruption. Second, this is a generation that expects immediate results. They live faster-paced lives and demand immediate changes when problems arise.
A virtual family office is the ideal structure to do more with less by leveraging outside specialized expertise, embracing emerging technologies and deploying resources more quickly. This structure allows the family to have a leaner staff that is focused on the biggest goals for the family. In addition, there is no need to have a physical office because everything can be done remotely.
As the next generation is about to take the reins of the office, a single platform holistically focused on the family that provides real-time data and transparency will be adopted more quickly than the older office structures.