Family Office Trends and Opportunities

Satyen Patel of Eton Solutions

Mar 29, 2023

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1. What are the trends you are seeing in the Family Office space?

2. How do Family Offfices in the US compare to those in Asia and the Middle East?

3. With so many choices available today regarding the location of their wealth - what should influence the families decision making process?

4. What must families consider when transferring wealth to the next generation?

5. How do the different generations view their wealth?

6. Are the next generation actually interested in ESG and Sustainabiltiy and Impact?

7. What's the value proposition that ETON Solutions brings to Family Offices?

Video transcript

1. What are the trends you are seeing in the Family Office space?

Money goes where the returns are, and I think increasingly as we move in the international arena, we're beginning to find that the learnings that we bring from North America are just as applicable internationally. And as geopolitical situations change and as the macro economy moves in different directions in a very fluid global environment, increasingly folks are getting a lot more mobile in the way they look at their wealth moving. Obviously, a lot of the wealth is moving for wealth protection, but there's a significant amount of wealth that's also moving for diversification into alternative assets, private equity, and different forms of alternative investments that you would not have considered in the past. All the way from something as trivial as it may sound like wine collections to art collections and so on and so forth. The involvement of the younger generation, second and third generations, which is a relatively new phenomena internationally, is also changing the outlook from the matriarchs and the patriarchs of where the emphasis of moving the wealth and focusing wealth creation is. ESG is playing a big part. And it's not just superficial, it's real. Giving is becoming a big part of it. Philanthropy is a big part of it. Doing good in society is a big part of it. But most importantly, the younger generation also is extremely mobile and in some cases to the point where they do not even want to necessarily live in their home countries. And that's becoming a challenge for the patriarchs and the matriarchs. It's happening for families in Taiwan. It's happening for families in Indonesia. It certainly happened with families in Iran in the past and other parts of the world. And as the world moves towards more complexity, that aspect we're beginning to see actually lends itself very well to our platform, our technology, and our strategy. The platform's capability and versatility is also something that comes to bear in mind in terms of addressing privacy, security, and control. As wealth moves from one generation to the other, letting go sometimes is difficult, but getting more control sometimes is an advantage. And allowing a technology platform to become the tool that in a very sophisticated way brings transparency, brings power in terms of knowledge and information at your fingertips. And to be able to deploy it in nanoseconds, not too different from how large sums of money today move from one part of the world to the other.

2. How do Family Offfices in the US compare to those in Asia and the Middle East?

I'm going to say two things that may seem like they're paradoxical, but they're not. The old adage that if you've seen one family office, you've seen them all is true. They are different in many ways. But having said that, in different parts of the world, as you work with different families, you also realise that by and large, the challenges and the issues that most family offices face are very similar. Leaving aside cultural nuances and some of the other aspects of social nuances, we feel that the growth of family offices around the world is more in relation to the period of time the wealth is created over. In North America and in Europe especially, you do see the benefits of multi-generational wealth sometimes going into the fifth and sixth generation. In other parts of the world, you're seeing wealth still moving from first to second generation and in some cases second to third generation. And that has its own nuances in terms of the evolution of wealth management. But other than that, I think it's very transportable. It's very similar. Cultural nuances are different no matter what. It's not just related to wealth management. In that part, you do see in the family office world too. So if your question was are you seeing similarities and are learnings from North America just as applicable internationally. And vice versa, the uniqueness of families, even within North America, are just as diverse as they are internationally. It's not like the Americans do something radically different than what people in Asia do, or Middle East or Latin America. Human beings are still human beings. The social challenges of multi-generational wealth passing from one to the other are still the same. The manner in which that wealth is controlled or stewarded; those challenges still remain to be the same in every part of the world.

3. With so many choices available today regarding the location of their wealth - what should influence the families decision making process?

The fundamental decision making process should still be around what do you want to do with your wealth. Some of it may be wealth protection, some of it may be wealth growth. But in today's world with increasing mobility, you do need the flexibility of moving with the times. And by that what I mean is the geopolitical world, the socioeconomic changes, and everything that goes with it. History has taught us, and for those people who've been around long enough, you know that having that flexibility in the past or inflexibility has made a huge difference in the dynastic trends of some of these families. Technology today provides that. Technology allows for that mobility. And having wealth being distributed and managed from different centers of location is an absolute luxury that you have today that you did not have maybe even 20 or 30 years ago. The very same changes that we are seeing the benefits of coming in the mobile world through the internationalisation and the liberation of the worldwide web or whatever is now translating to this industry too. And again, going back to my old adage, money goes where the returns are and the technology and the tools that you have today actually allow you to both increase transparency of that wealth, but also allows you to get that information powerfully available to you at your fingertips and to be able to manage that wealth now at a much faster pace. Because information is power, but timely information is even more powerful. And technology allows you to do that today in multiple jurisdictions.

4. What must families consider when transferring wealth to the next generation?

There are so many considerations, the list is pretty long, but it falls down into two or three big categories. The governance aspects of a family office become extremely important. The security aspects of how you manage that wealth becomes very important. And also the regulatory aspects of managing that wealth becomes very important. They’re boring subjects, sometimes mundane, sometimes tedious, but the families that have successfully transferred wealth over multiple generations have paid significant attention to those three aspects. It's not just about governance as it pertains to regulatory environments, as it pertains to governments and stuff. It also pertains to the governance internally in the family itself. What are the constitutional aspects of how you run a family? How do you intermediate? How do you provide for conflict resolution, arbitration? Some of these things each family has to deal with in different ways, depending on the source of their wealth. To some extent, the choices that the matriarchs and patriarchs make regardless of whether they may be in tune with the next generation or not. Every family that's created a wealth and fortune at some point or the other has to deal with the legacy that the matriarch and patriarch also wants to leave behind. And that sometimes drives that too.

5. How do the different generations view their wealth?

That's a very interesting evolving question you're asking because of the globalisation that's taking place, and also access to information in different parts of the world and the ease with which the younger generations travel, study, amalgamate and mingle with each other. I think their views are becoming increasingly global and therefore the divide between the objectives that the matriarch and the patriarch want or the second or the third generation want is increasingly divergent. Wealth creation versus wealth protection versus giving are sometimes in conflict and managing that through a proper governance process becomes even more challenging. But you're finding globally that the younger generation is much more evolved in their thinking, much more singular in their thinking in terms of commonality between the west, the east, and everywhere in between if you look at it from a north-south perspective and those challenges and those solutions are pretty common and transportable again between cultures, between geographies, and between countries.

6. Are the next generation actually interested in ESG and Sustainabiltiy and Impact?

I'm not so sure there is a universal answer to that. There is definitely a change happening. It's evolving. People are getting a lot more conscious about different aspects of what they need to impact in their country internationally and globally, whether it's impacting earth as a whole, whether it's impacting the environment around where they live. But generally, people are getting a lot more conscious about in the second and third generation about doing something good with their wealth versus just accumulating it. Having said that, the most successful businesses today, if you look around, are still ones that are being run and managed by family controlled businesses. To a large extent, that trend still continues. I wouldn't say that there's a wholesale movement away from family traditions, but there is certainly an increasing consciousness of the fact that one has to do more than just wealth accumulation.

7. What's the value proposition that ETON Solutions brings to Family Offices?

Technology provides avenues that never existed before, and necessity is the mother of invention, as they say. Our platform started as an ERP platform that evolved around a necessity. Our founder, Robert Mallernee, was establishing a multi-family office. He just moved out of an investment bank that had a couple of platforms and realised that there was no ERP platform available to do something like that. Over a period of 10 years, we've developed this ERP platform that brings technology in sync with knowledge of and domain knowledge of what a family office needs to run effectively. And we provide those tools in a synchronised way with a central source of truth where all your assets, liquid or illiquid, are managed from a central database. And they could be used in far off countries and through different vehicles, but both the investment ledger as well as the accounting ledger can all be brought together under one ERP platform. That's then connected all the way down to the tools that you're used to using on a day-to-day basis, which could be your mobile app, which could be your iPad, your laptop, and you could get that information anywhere, anytime in a coherent way, daily, and aggregated daily and updated daily so that you have all that information and power at your fingertips to allow you to make better decisions. And that's what we deliver through a product that is all encompassing, comprehensive, and timely to allow you to make those smart decisions. We're not in the advisory business, but we provide the tools for those very same advisors to be much more effective. And in our ecosystem are custodians, investment banks, lawyers, trustees. And that information actually empowers all of them to give better decisions and better advice to our clients and the system overall benefits from it. And we all are catalysts in helping this great transition of wealth that's happening from one generation to the other, which globally is to the tune of almost USD15 trillion. And that's going to happen in our lifetime. And our system is the only comprehensive ERP system that's designed for family offices that allows you the ability to do that. At every level of AUM, all the way from USD100 million of AUM to USD100 billion, which is what our largest client manages on our platform.

 

For institutional, professional investors and financial intermediaries only and not for retail or public use.

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