2015 Private Wealth Industry Outlook
The ongoing institutionalization of the single family office
The private wealth landscape continues to change at a rapid pace. Organizations that grew out of the family business are evolving into very sophisticated wealth and investment managers. Family offices are now adopting more formal governance structures, realigning their organizational structures, implementing risk management programs, embedding more rigorous controls, and reevaluating their technology platforms.
The private wealth industry remains keenly competitive as single family offices continue to evolve into more sophisticated institutional wealth management firms. Family offices are defining their long-term vision to create clarity in strategy and to move the business forward in an ever-evolving marketplace.
In this Outlook, we discuss many of the internal and external factors that are driving this change. Download the 2015 Private Wealth Outlook and read the companion documents about the outlooks for mutual funds and alternative investments.
This Outlook is part of Deloitte’s Financial Services Industry Outlooks series which provides insights and trends for banking, insurance, investment management, and commercial real estate.
As private wealth managers adopt a more institutional structure, there is a renewed focus on processes, policies, and procedures that make up the organization’s governance structure. This foundation builds on the family mission statement to:
- Provide clarity of strategy and goals
- Manage complex family relationships
- Clearly define roles, responsibilities, and accountability
As family offices operate more like professional services firms, they are competing for top talent in the industry. Industry subject matter experts help private wealth managers create the most successful and efficient operating model by evaluating:
- Outsourcing and succession planning
- Leadership, guidance, and insight into potential weaknesses in the structure that make the organization susceptible to fraudulent activity
- New opportunities for growth
Organizational risk must be constantly monitored, managed, and reevaluated. Establishing a master risk framework provides structure around risk management for the organization, however the family, the Board, and the employees must all be responsible and accountable.
There are many internal and external factors that create opportunity for risks to emerge such as:
- Reputational risk
- Fraud risk
Controls and technology work in partnership to provide vigilance around fraud prevention and detection, while creating new opportunity for the organization to thrive in a competitive industry. The organization must create a culture of transparency to avoid potentially costly mistakes in risk management by:
- Educating the family on best practices for staffing and fraud detection
- Performing periodic assessments of vulnerability
The key to effective use of technology at the family office is the ability to access, analyze, manipulate, and report the data. In order to evaluate the family office needs and assess the anticipated returnon investment, the organization should:
- Review legacy technology platforms
- Understand technology's weaknesses and opportunities