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How to build your virtual family office

The future of family wealth

Family offices are the zeitgeist in wealth management. Everyone has or wants one. You can choose from single-family offices that can depend on family and be integrated into the family business or independent from the family business or multi-family offices that can be privately owned by various families or by independent third parties. Either way, there has been an exponential growth over the last decade. Which one is better suited for a family depends on many circumstances. Both options come with considerable costs, limited flexibility, and a steady increase of headcounts due to regulatory complexity. This is when a virtual family office changes the game by leveraging technology in an agile and multi-disciplinary set-up.

The structure

Let's have a closer look at the structure of a virtual family office: It's tailored to the specific needs of the family with a central cockpit to oversee the various building blocks that are variable depending on the challenges. It all starts with an analysis and definition of the core goals to achieve. Let's say a family has defined independent investment management as their prime goal. They then need to clarify which other areas are vital for them, such as wealth preservation, asset protection, succession planning, and estate planning.

Family governance

Based on these elements, they can then define the family governance framework. Again, there is no standard template for that. However, it's essential to consider the position of all generations involved to achieve the best results to cover the needs of all family members. The definition of values, roles, and decision making is crucial in this context. Family constitutions or mission statements provide guidance and unity. In particular, cross-jurisdictional families and millennial family members will appreciate virtual family assembly gatherings to exchange information and to reach decisions.

We advocate for the early involvement of future family leaders, and broad governance consensus and participation. Next-generation leaders should have clarity about succession plans and the requirements to step into leadership roles. We further recommend transparent and frequent communication; again, technology can facilitate the process. All of these governance elements will shape the "family culture" and foster alignment and commitment to preserving the family wealth over generations. Succession planning, like in business, is a process, and it's as essential for wealthy families as for businesses.

Virtual family office governance

With the defined family governance framework, the core building block of a virtual family office – in our example, the investment management part – can be designed around technology and an investment team. It doesn't need to be full-time and in-house since external providers may offer a robust investment process and institutional level research. With a flexible platform, it can also be a mix of in-house and external specialists. The market offers various technology solutions tailored to individual requirements. A virtual investment committee with family members and independent specialist members alongside a strict investment and due diligence process can save costs and deliver the desired results. And with a reliable reporting and control framework, adherence to the family's investment strategy can be guaranteed.

The coordinator

Let's now focus on the other building blocks of the virtual family office. Interestingly enough, wealth planning, succession planning, and estate planning trigger higher costs than investment management. And cost is not the only reason why coordination and collaboration are crucial.

A trusted advisor with international and multi-disciplinary collaboration experience and the respective network is best suited to cover this role. The virtual family office may also provide for this role within its internal structure to coordinate the various tasks to be outsourced to external specialists. Such an internal appointment ensures an additional level of control and efficient exchange of information if projects are highly complex. The decision, whether internal or external, depends on the individual needs of the virtual family office and budget allocations for these building blocks.

With the assistance of technology, ad-hoc specialist teams work on the various solutions to satisfy individual needs. Such collaborations require a structured process and project management skills to maintain control over tasks, communication, costs, and timing. With that in mind, a virtual family office can, in almost real-time, adapt operations to the family's changing needs.

The most critical ability for this position is understanding the needs of the family. Only a deep understanding of their issues, pressures, and challenges allows for an effective orchestration of several specialists in various jurisdictions. She/he needs to anticipate outcomes, communicate transparently, and create an environment of ease, control and trust.

In most cases, the above-outlined investment management part is straight-forward. However, wealth planning, succession planning, and estate planning require in-depth analysis and a clearly defined strategy that should consider all involved generations' position. The human element needs to be supported by comprehensive technical capabilities and an international top-professionals network. With an external specialist, the virtual family office can outsource this part but maintain control and oversight. If she/he is already advising on family governance, all services can be provided with a holistic view of the family's needs.


A final note on cybersecurity: Specialist advice is required here to meet the highest security standards. With a secure environment in place and awareness, education, and guidance for all involved parties, the risks of emerging cyber attacks can be mitigated.

To recap: A virtual family office offers many advantages in terms of efficiency, communication, agility, and costs, and there's no entry barrier or minimum wealth requirement. It can dynamically adapt to the evolving needs of the family and enable results that provide the family with peace of mind. The fundament for every family office is values, governance, and transparency that define the family's wealth purpose and lead to the desired culture. Early involvement of the next generations ensures commitment and alignment to preserving the family's wealth over generations.

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