What Set Family Office Apart From Private Wealth Management?


Customers With Private Wealth Are Constantly Changing Their Priorities

The Global Business Complexity Index 2022 (GBCI) study by TMF Group provides a reliable assessment of the global challenges in starting and running a business. The GBCI 2022 analyzes 292 business complexity indicators to give a thorough look at the global and regional factors impacting business operations worldwide.

The way we view certain places is evolving due to a global push for transparency. The GBCI found better corporate governance, and our private wealth and family office clients have seen similar improvements. As stated by Rani Jarkas,Did you know that in most private wealth and family office jurisdictions, individuals with private wealth have to disclose their identities to the authorities? While transparency is gaining popularity among investors worldwide, it’s important to remember that privacy is equally valued by many individuals.

When deciding where to set up a family office and build a successful asset management structure, practical factors like time zone, language skills, and access to expertise and talent play a crucial role. However, our clients still value stability in politics, society, and the economy when making decisions. The Russian invasion of Ukraine and tensions between China and the US have heightened the situation. Local experts are predicting more volatility in the next five years.

Clear and specific laws make things easier for businesses and investors. Governments often work hard to help people follow the rules they’ve set. Singapore is a shining example of a country that has worked hard to become a top destination for wealth management. They have implemented strong laws and built a robust legal system.

Chasing Ethical Wealth Management

Quoted from Rani Jarkas, the financial expert in Hong Kong, The newest generation of private wealth customers are placing increasing importance on managing their wealth responsibly. You can engage in socially conscious investments, pay fair taxes, promote good corporate governance, or increase charitable contributions. Nowadays, sustainability is becoming a top priority for businesses of all sizes.

This trend has made clients consider the bigger picture when deciding how and where to manage their investments. Great news! According to the latest research from the 2022 GBCI, private wealth and family office clients have significantly increased their investment in greener practices in 70% of countries. The difference between offshore and onshore jurisdictions in terms of openness and good governance is often seen as larger than it actually is. Our observation shows that when clients compare jurisdictions, they discover that it’s more complex than they initially thought.

ESG’s rising popularity is expected to bring about a global cultural shift and increase complexity in regions with less strict regulations. If global standards for ESG reporting, like those in the EU, are adopted worldwide, it could become a standard practice for everyone. This would not significantly increase complexity.

ESG practices and feelings are primarily driven by corporations, customers, and private investors who prioritize ethical and sustainable business. It’s not just about government mandates, but about making responsible choices. The Private Wealth and Family Office sector has always been a trendsetter, so this is nothing new for them.

The Impact Of Covid-19

The Covid-19 outbreak has sped up existing trends and caused customers to rethink their investment strategies. This has inspired more people to invest in humanitarian causes. According to Rani Jarkas, Due to cash flow problems, we had to consolidate multiple clients’ businesses and structures. In the post-pandemic era, some jurisdictions are giving more consideration to higher inflation rates and the importance of social and political stability. 

Governments providing more assistance during the pandemic has led to increased inflation due to the influx of money into the economy. Due to the impact of Covid-19, many clients needed to find ways to cut costs and manage their assets more efficiently. Outsourcing options like payroll, accounting, and administration will become more appealing to many people. TMF Group can help with outsourcing requirements. We’ll make it easy for you by reducing administrative costs and providing a single contact point.


Welcome To A World That Is Rapidly Transforming Into A Digital

More and more, family offices and private companies rely on technology platforms. The decrease in face-to-face interaction due to the Covid-19 pandemic has accelerated a change that was already happening. This change is unlikely to be reversed. Technology is revolutionizing the business world by making flexible working hours possible. But, there are challenges with this transformation.

Businesses embracing modernization or implementing new procedures may encounter challenges with the adoption of new digital reporting standards. The global trend of electronically uploading tax bills is growing rapidly. In 2020, only 24% of governments mandated this for all businesses. However, by 2022, that number is expected to rise to 35%.

Family businesses are jumping on board and getting tech-savvy. This could involve enhancing reporting or using digital platforms to evaluate asset performance. In an era of advancing technology, private wealth and family office clients still require human interaction to ensure their individual goals are met, despite the decreasing cost of technology-driven services. Technology offers greater flexibility and efficiency, but to maximize production, it must be used effectively.

What Lies Ahead For Offshore Business?

Offshore centers have their critics, but they are also seen as crucial for creating and protecting wealth, and ensuring efficient capital allocation in global markets. Offshore jurisdictions are intentionally simpler than onshore ones, offering more secrecy and tax neutrality. These places make up half of the top ten easiest places to do business this year. Out of 77 jurisdictions, the top six include Jersey, BVI, Hong Kong, Curacao, and the Cayman Islands.

The supposed benefits of keeping assets in traditional offshore locations might not be valid anymore because of the demand for transparency. We’re confident that the offshore market will remain strong and attractive to clients with private wealth and family offices. As the world becomes more transparent, these jurisdictions will keep providing specialized services and regulatory settings for our clients’ wealth management needs. The decision-making criteria for private wealth clients in Hong Kong are changing. Clients may have specific circumstances that influence their choice of location, which can be unconventional.

Discover The Different Forms Of Family Offices

Family offices come in various types based on their structure, size, and clients. It’s important to remember that each type has its own pros and cons that can help or hinder a specific situation. Here are five popular family office solutions to consider: Ever heard of Internal Family Offices (EFOs)? They’re pretty interesting!In family businesses, you’ll often find family offices. 

In Hong Kong, the family’s wealth management is usually handled by senior managers in the finance division. Looking for personalized wealth management services without setting up a dedicated family office? We’ve got a cost-effective alternative for you! The line between business and EFO ownership of assets often gets blurry since EFOs operate within the business. Additionally, if the family is very wealthy, an EFO may not be sufficient for managing their wealth. Consider outsourcing to a multi-family office in such situations.

Looking For Family-Friendly Workplaces? Check Out MFOs

Multi-family offices cater to the wealth management needs of many UHNW families. MFOs offer families a cost-effective alternative to SFOs. By taking care of operational and talent management, as well as other expenses, MFOs can provide a similar range of services as SFOs. MFOs can come in various forms too! Commercial MFOs are the most common type of MFOs. They aim to make a profit by serving a range of UHNW clients. 

Private MFOs, or closed MFOs, cater to a select few families who share the expenses. One downside of a multi-family office compared to a single family office is the lack of a dedicated wealth management team tailored specifically to a family’s unique needs. Nowadays, many MFOs offer customized services and products to cater to the unique needs of customers in Hong Kong.


Welcome To The World Of Individually Owned Offices (SFOs)

If privacy and personalized asset management are important to a UHNW family, they should consider setting up a single-family office. Single-family offices are like dream teams chosen by wealthy families to handle all their financial needs. In addition to investment planning and execution, they offer real estate investing, accounting and reporting, tax compliance, and other concierge services.

SFOs have higher costs and require more startup investment than MFOs. Beneficial owners of a single family office often team up with other wealthy families and switch to a closed multi-family office to cut costs. Introducing VFOs – the future of family offices! In a VFO, families can bring in outside consultants to take care of any service modules they require beyond the family office. Outsourcing employment gives families access to top advisors and reduces costs for family offices.

If a family has assets under management (AUM) between US$ 20 and US$ 200 million and wants more control over their wealth management without the high costs of an SFO, a VFO is a great solution. In a VFO, the family becomes the link between outside advisors. Since VFOs are decentralized, privacy is a big concern. To ensure secure operations, having a strong technology foundation is crucial.

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