What 2021 taught us about navigating the new normal
The second year of a pandemic has meant shifting from survival mode to re-establishing a new business strategy. By putting stronger systems in place, identifying and rectifying weak points, and confidently moving the business into the digital age, one expert shares how family offices can make the most of the turbulence of the past two years.

What you need to know

  • Whether we want to admit it or not, the Covid-19 pandemic is likely to be part of our lives for a little while longer. And where the last two years have been about surviving and improvising, successfully moving into the third year means adopting a new family office strategy.
  • Working remotely has prevailed and instead of simply coping with it, there are now ways to make it even more functional, communicative and collaborative for all stakeholders.
  • Tech has played a pivotal role in business operations but it’s shown that there are other areas in need a bit of attention and streamlining.
  • Intuitive software has led to the digitising of assets and asset management, which comes with its own set of considerations to guarantee success, security and more control for the family office.
Operations Published on Simple December 22, 2021

Adapting to the new normal mostly meant becoming a remotely organised and virtual family office. As advisors, we would like to share some insights we find helpful as we move into 2022 and come to terms with the fact that Covid might be around for quite a while, sadly. Since we all are well-versed in Covid-induced change and transformation, the good news is that talent and insight remain at the core of operating successful family offices in the long run. Yet over the past two years, we have understood that the means to leverage both have transformed fundamentally. 

Transforming the operating model of family offices 

Trust is considered to be the air that family offices breathe. Hence, winning, onboarding and retaining talent was and always will be a top priority, one that used to be a highly personal leadership matter. Since the pandemic, access to new talent has gone completely digital, giving professional networks like LinkedIn more importance in managing the talent pipeline in the long run. As a result, there are more senior leaders becoming more active and present at social media events. This suggests that digital readiness to recruit top talent in a purely digital process incorporating virtual touchpoints will only become more important to competitive advantage. Yet, retaining top talent and enabling them to perform at their best becomes even more critical. As a result, coaching and developing a team of individual talents has become an even more valuable contribution of strong leadership. However, many seasoned executives have struggled to provide coaching to individuals or teams at the level they previously performed at and that people were accustomed to. 

By now, everybody we have worked with has understood that virtual wine-and-cheese tasting events are not going to do the trick. Caring for and helping with state-of-the-art home-office infrastructure is much more important, but also more costly. Less pricey, but more challenging is the subsequent need to establish a routine dialogue to keep remote working conditions and collaboration routines in sync with the sometimes rapidly changing family needs. Where or how this happens doesn’t matter, as long as it happens. Whether it’s a conversation while you have a “virtual espresso” with each of your members informally and confidentially, or during a walk in the park together. The price for not getting people and team development right will rise steeply since word of mouth now travels globally through the relevant communities almost at the speed of light.   

Family office strategy is a muscle, so you need a digital gym to exercise in

The pandemic challenged our routines, both in business and private family matters. For two years now, daily operations were focused on improvising to stay operational. This was a powerful distraction for leadership to be lured away from addressing bigger pictures. Most family offices and family businesses consider flexibility and fast decision-making to be their core competencies, and it’s become clear that the former challenge is taken care of rather well. Yet, this flexibility has meant that returning the strategic practice of evaluating long-term options and controlling the progress towards achieving big picture milestones to previous levels has a long way to go in most cases. 

The prevailing constraint currently is the overwhelming variety of apps that are now available. While most leaders are familiar with and see the benefit of singular collaboration tools such as Teams, Giro or Asana, very few have rigorously integrated these tools to allow the apps to interact seamlessly. Encouraging digital collaboration between family members and family office staff is a key driver for competitive advantage in the long run. 

In the context of publicly traded firms, the U.S-based Diligent Inc. has pioneered the way in developing an integrated board-executive-level collaboration ecosystem. It features governance, risk management, compliance and audits, stored in a secure cloud to share sensitive data and private documents. For successful implementation and professional application in day-to-day leadership, family offices and family businesses need proper training while, more importantly, understanding that flexibility and speedy decision-making are still core competencies. This is where we see many decision-makers hesitate and struggle the most. This also holds true, albeit at a much lower level, when looking at more family-oriented applications such as Trusted Family or Pax Familia.              

Data is the new gold, so software is the next step in wealth management

Social distancing rules demonstrated how limited access to relevant data can unexpectedly be the reason someone is unable to sign critical documents immediately. Hence, using secure data vaults such as i-Deals have become a rather widely adopted practice as having digital signatures via services like DocuSign becomes the norm. While having all asset-related documentation digitised in a secure cloud is common sense in progress, only some family offices have made efforts to go beyond that. What we observe here is similar to changes taking place in business such as establishing IoT-based virtual assembly lines. Yet, “digital twin” in manufacturing or real estate are, take i.e. BIM (Building Information Management) for example, still further down the road. This is true, both for practical experience from choosing, adopting and implementing the necessary systems and for gaining new insights from working with the “digital twin” translating into new value-added services for the enterprising family. Creating learning opportunities by bringing digital experts from the industry together with leaders from the family office was found to be very helpful.  Establishing a digital version of all the family’s assets has recently made some serious progress, and there are many forms of software available to do this.

For advisors, having the complete and current balance sheet of family wealth be so accessible puts the family-principals back into the driver’s seat. Especially among active and competent investors, increased data autonomy could result in more independence from third-party service providers and reduce significant recurring fees for tasks such as simple data queries.

As most advisors work with families with a strong growing concern for their firm, software can ease the process of managing multiple legal entities, such as the one developed by ORCA. It’s become increasingly common to see substantial portfolios of legal entities comprising of corporate direct investments in start-ups or other firms unrelated to the core family business. By using key indicators, these systems can help family members avoid legal or tax misconduct or being exposed to compliance violations. 

About the Authors

Christian Schiede

Christian Schiede

Entrepreneurship & ownership strategy

Christian Schiede draws on 15+ years of experience working with 'hidden-champions', the larger German family businesses, and advises entrepreneurial families.

Connect with Christian Schiede

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