7 key drivers shaping family office decision making

Since it was initially established back in the 19th century, the concept of the family office has undergone significant evolution. As modern families grow increasingly global in terms of their geographical spread and generational diversity, and more sophisticated in their behaviours, investment ambitions and lifestyles, the family office continues to adapt at an unprecedented pace.

International mobility in particular has become a major factor within the family office space. Political decisions in the UK around ‘non-dom’ rules as well as tax changes in the US, for instance, have thrust global mobility into the spotlight and led families to review and question their international footprint.

At the same time, international family networks continue to grow. Research by Deloitte Private, suggests that there were roughly 6,130 single family offices in the world in 2019 and that this number is projected to grow to more than 10,720 by 2030, a 75% increase. This growth reflects a trend of international families seeking jurisdictional diversification, both as a risk mitigation strategy to hedge against instability and to open up new opportunities.

Against this backdrop of complexity, specialist wealth jurisdictions such as Jersey, are having to remain agile and respond in increasingly innovative ways to support a sector that is evolving at pace.

Influencing Decisions 

Fundamentally, in Jersey we see seven key areas that are shaping the sector and influencing family decision making as they strive to achieve their future wealth ambitions.

Wealth Preservation: with recent years having been defined by global instability – economically, socially and politically – families crave jurisdictional stability above all else. That sort of stable environment is critical to achieving wealth preservation goals, and that means a jurisdiction having a strong ecosystem of leading financial institutions and access to a deep talent pool of expert advisors that can provide high-quality, tailored, cross-border structuring solutions.

Legal Certainty and Stability: a legal framework that can provide reassurance, certainty and guarantees is absolutely vital in terms of wealth preservation and asset protection – particularly where holding real assets such as property is concerned. A well-established legal framework, backed by robust case law, consistently provides families with the confidence they need to make informed decisions.

Regulation: the international regulatory environment is continually evolving to protect stakeholders, driven by market dynamics and technological advancements. Jurisdictions must adapt with those regulatory shifts if they are to maintain their reputation. Clear, pragmatic regulation that meets international standards can provide much-needed reassurance and is viewed as crucial by globally mobile families.

Asset Protection: with families increasingly working across multiple time-zones, geographies and regulatory environments, and with diversity continuing to shape family dynamics in complex ways, ensuring assets are protected in international disputes is critical. Paired with a stable legal framework, a jurisdiction’s robust asset protection measures can help mitigate risks posed by instability across a family’s home jurisdiction and provide peace of mind when it comes to safeguarding wealth across generations.

Lifestyle and Connectivity: From a jurisdictional perspective, good connectivity, accessibility in terms of transport and communications links, and cultural affinity are frequently cited as key criteria for families. For families looking to set up an operational presence in a jurisdiction, factors such as a top-class education system, a comprehensive health service and good a work-life balance play a significant role

Expertise: Experience in delivering private wealth management solutions is something that takes time to build and is difficult to replicate. Whether a family partners with  an established professional services provider or creates a bespoke operation, seamless access to deep expertise and high-quality client service, is invaluable. From investment management and concierge support, to assisting with corporate governance, financial reporting and trustee and corporate services, access to a full range of options and a deep knowledge base is critical to families, who often need to deliver solutions quickly.

This is reflected in the growing trend for family offices to participate in the alternative investment space – as our recent paper illustrates – while specialist opportunities in areas of sustainable finance as well as tokenised products will increasingly become part of the picture too, all requiring specialist advice and guidance.

Philanthropy: As wealth transfers between generations, families are increasingly focussed on aligning investments with their philanthropic and charitable goals. Being able to draw on flexible structures, like trusts and foundations, that can support both private wealth and charitable objectives, has moved higher up the wish list for families over recent years. As a recent paper we supported found, an ability to help clients achieve their responsible investing aspirations while maintaining control over their wealth is only set to become more important over the coming years.

Cohesion 

Despite the global landscape becoming increasingly complex and families being more and more concerned about instability, both in their home countries and in the regions where they invest and operate, families are not slowing down.

They demand progress, solutions and results – and in this dynamic landscape, jurisdictions need to step up in all the areas outlined above if they are to serve the interests of families successfully.

But these drivers do not exist in isolation – one of the biggest challenges to emerge from family global mobility is a lack of cohesion that can arise when it comes to cross-border planning. Bringing together these drivers coherently is essential in enabling a family to realise its long-term legacy and vision.

Backed up by its highly positive MONEYVAL assessment last year, Jersey continues to focus on being able to tick all these boxes, combining stability and certainty with a forward-thinking and innovative approach that can deliver both financial optimisation and peace of mind.

This article was first published by eprivateclient.