Family offices have become “significantly” more professional in their governance, management and infrastructure over the past five years, research from Ocorian has found.

However, the service provider noted that family offices need to be prepared for further, more complex challenges ahead.

Ocorian’s study of global family office professionals found that 85 per cent said their family offices had become more professional in their operations and structure over the past five years.

Of these, 19 per cent felt they had become ‘much more’ professional, while 15 per cent said they were already professional and did not need much improvement.

It revealed that family offices had increased their professionalism in several ways, with 53 per cent having developed a stronger succession plan and 48 per cent strengthening the family constitution or charter, or introducing one for the first time.

Meanwhile, 46 per cent had secured the support of more professional third parties and 45 per cent had improved the management team running the family office.

Nearly half (41 per cent) had developed a more diverse and professionally managed investment portfolio, while 40 per cent had strengthened compliance, tax and legal infrastructure.

More than a third (34 per cent) had developed a more cohesive and robust philanthropy programme and 11 per cent felt they had better oversight of all the assets owned by the family office.

However, despite this increased professionalisation, family office professionals still faced significant challenges, the research showed.

The biggest challenge, which was identified by 86 per cent of respondents, was ensuring family offices had the right governance in place to meet the needs and expectations of family members.

Ensuring the investment portfolio was properly managed and aligned with the risk/return profile of the family was the second biggest challenge, cited by 56 per cent of respondents, followed by having a robust family succession plan in place, identified by 44 per cent of those surveyed.

Other challenges identified included upgrading technology (40 per cent), maintaining confidentiality (39 per cent), and preparing the next generation for wealth transfer (36 per cent).

Navigating regulatory compliance issues was highlighted as a challenge by 34 per cent of respondents, with Ocorian noting that there was a mixed response as to how well-advised family office professionals felt in meeting these regulatory demands.

Less than a fifth (18 per cent) felt they were in a strong position to meet requirements, 65 per cent believed they were in a quite strong position, and 14 per cent said their ability to meed regulatory demands was average.

“It is extremely positive that so many family offices have taken significant steps in becoming more professional over the last five years, and it is certainly the biggest trend I’m seeing with my UK clients,” commented Ocorian commercial director – private client, Michael Harman.

“I’d suggest this rapid and widespread professionalisation is a result of the explosion of growth in number of family offices; they simply have to professionalise as a way to stand out in an increasingly crowded market.

“Despite this rapid increase in sophistication, they face a number of significant challenges in the near future – particularly around regulation and compliance.

“We’re seeing an increasing number of family offices across the globe come to us for expert advice on these areas, benefitting from the guidance and professional support we offer, especially with access to our regulatory and compliance specialists – Bovill Newgate.”

---