Rise of the ‘virtual family office’

The coronavirus crisis has forced many family offices to rethink their approach

Markets and businesses across the world continue to cone to terms with the consequences of the coronavirus crisis, and the family office space is no different

Family offices around the globe are being forced to make a ‘shift in priorities’, says Andra Ilie, a senior manager of family office and governance at KPMG. Ilie suggests a switch of focus from growth to wealth preservation and asset protection is likely. This will require ‘careful consideration and potential restructuring with an emphasis on flexibility’, she notes. Being ‘nimble’ will be important as family offices seek to weather market volatility.

But one of the defining characteristics of family offices is that they tend to take an unusually long-term outlook, as John Prince, co-founder of billionaire’s club Respada, told the Knight Frank Wealth report earlier this year. ‘Family offices can afford to think in terms of 40 years or more,’ said Prince.

They may have a knack for augury, too. In fact, many family offices were already anticipating a market downturn in 2020, even before fears of the coronavirus emerged. A survey conducted by UBS and Campden Wealth in 2019 found that 55 per cent of the 360 family offices interviewed expected the global economy to sink into a recession by the end of 2020. (Although this was mainly on the basis of poor performance for the financial year concluding in 2019.)

Of course, the coronavirus crisis has forced family offices to reflect on their operations, perhaps more than ever. Charlotte Filsell, who heads up Sandaire’s Family Office Services team, reveals that some families are ‘turning inward’ to their operating business in order to survive through the short-term instability. ‘One family has discussed with us how important it is to be prepared for shocks – having a well-functioning family office mitigates several risks they were previously unaware of.’

There have also been more enquiries about setting up a ‘virtual family office’, says Annamaria Koerling, who heads up Delfin Private Office, the international arm of the recently ‘demerged’ Owl Private Office. This ‘hybrid business model’ means a single family office, usually a small or mid-sized operation, is downsized, and its advisory services outsourced to advisers such as Delfin to reduce overhead costs. ‘The services that we provide give them a really resilient and flexible business model,’ Koerling says, adding that she had taken two new clients on the back of the enquiries in the past week.

Single family offices are also grouping with like-minded businesses and consolidating into multi-family offices in reaction to the pandemic, Koerling observes. ‘They are joining forces. Rather than have a single family office, you combine with other families that you know well or work with closely, combine the resources and share out the infrastructure costs.’