Family office approach
Family office approach
Podcast
26.9.2023
Once a year, Ernst & Young publishes the Global Wealth Management Research Report - a study that uses surveys to shed light on key topics and developments at wealth management . In 2023, over 2,600 people from 27 nations took part. These spanned various wealth and age groups (millennials, Gen X and baby boomers).
In their published online article, which we will refer to below, they summarize the report with a focus on German respondents and look at them in relation to the European average. You can find the article here.
The study contains valuable data that is used by many financial service providers to develop their services. However, as it covers a wide range and does not relate to specific companies or a specific target group, it raises the question of how the new findings can be interpreted in individual cases. Or for us:
What is particularly important to wealthy individuals at the moment and what can we as a family office do to provide them with the best possible support?
According to EY, 48% of participants stated that they are looking to change their financial service provider. More precisely, they would like to reallocate an average of 33% of their portfolios within the next three years. It is striking that this desire for a reallocation is particularly high among millennials, i.e. people born between 1980 and the late 1990s, at 76%.
The main reasons for this can be found in the turbulent events of recent years. The coronavirus pandemic, the energy crisis and the war in Ukraine have shaken the economy several times in a short space of time and left investors increasingly unsettled. Their desire to minimize risks, diversify their investments and hedge against market volatility is correspondingly high.
This is a concern that is particularly evident in younger generations who have had little investment experience to date. Instead of slowly familiarizing themselves with the field of investment, they were confronted with crises and conflicts right from the start of their portfolio development. It seems hardly surprising that they now want to reorient themselves and find reliable service providers. But what can we as a family office do to meet their requirements and those of their more experienced colleagues?
A further look at the data shows that professional advice is a key factor in customer awareness. In addition to the events of recent years, the increased investment spectrum also contributes to investor uncertainty. On the one hand, they generally viewed the increased opportunities as positive and were confident of achieving their goals. On the other hand, high net worth individuals in particular rated the volatility and complexity of new options as a disadvantage (46%). This is an obvious result, given that this group has the greatest access to offers of all kinds and therefore the most points of contact.
On average, half of all investors across all generations agree that they would like more professional advice.
What we as a family office frequently observe are two decisive factors in particular.
The first is dissatisfaction with the offerings of previous service providers. Many of our customers come to us with the desire to finally take advantage of the opportunities offered by the expanded investment spectrum. Although the options have grown, this does not necessarily apply to their access. In particular, those who want to integrate alternative investments such as private equity into their portfolio quickly come up against the limits of their existing advisors. All too often, they only have a limited product range and are unable to meet the demand for more diversity. This is accompanied by a lack of a central, holistic overview of the entire portfolio.
A finding that is also confirmed by the "Private Wealth Management Study Germany 2020" conducted by Stephan Unternehmens- und Personalberatung GmbH. In a representative survey of 1032 financial advisors, 43% admitted that they were unable to offer more complex strategies outside of traditional mixed portfolios. Just 4% considered themselves able to fully implement portfolios including various alternative investments.
The second factor is trust. We live in an age in which sources of information are more open than ever before. Wealthy people have long since stopped blindly following the instructions of their advisors. Instead, they are interested themselves, get actively involved and question recommendations. This is a development that we as a family office very much welcome. On the one hand, it ensures an active exchange between service providers and clients and thus leads to better decisions in the long term. On the other hand, investors are increasingly standing up for their needs, examining their options thoroughly and opting for partners who solely represent their interests instead of focusing on selling their own products.
In summary, the desire for more advice is a result of growing complexity and increasing uncertainty. In order to navigate clients safely through this complex situation, sound expertise is required both in the individual asset classes and when considering the overall strategy. In our experience, those who can provide this are already laying a solid foundation for a trusting partnership.
The desire for more advice also means more input on individual needs, goals and financial circumstances. This is where the previously mentioned increased commitment of investors is particularly evident. Service providers must do more than simply identify lucrative investments and open up access. Rather, investors want communication at eye level and a deep understanding of their values and goals.
This active co-determination is also reflected in the increased importance of digital tools and platforms such as management tools, apps and online solutions. The digital age requires more efficient processes, intuitive navigation and comprehensible steps - including in portfolio management. However, the most important thing is the optimal combination of these self-determined options and personal contact. 86% of respondents would like a joint evaluation of their own portfolio at least once a year.
When FINVIA was founded in 2019, this was one of our main focuses. We wanted to finally combine individual personal advice with digital excellence and give our customers the best of both worlds. This concept is bearing fruit today, based on our experience and this year's report. The role of the family office has long since evolved into that of a trusted companion. We don't set the direction, our clients do. It is also entirely up to them to decide how much of their wealth they wish to place in our hands or how often they wish to make use of our expertise.
Our job is to provide the right offer for your needs. This means modular services instead of all-inclusive services, up-to-date controlling options, access to all investment opportunities and contact with experienced experts.
Alongside investment performance (37%), access options (29%) and brand reputation (24%), a competitive cost structure was the fourth most important criterion for choosing a financial services provider (23%).
Fixed fees, performance-based models or combinations of both were rated as particularly good. Our experience has taught us that it is less about the form itself and more about its transparency . It is important that customers understand what costs are incurred for what and can fully understand them. Providers should also ensure that they avoid hidden costs. Although these may increase profits in the short term, over a longer period of time they can cause investors to lose confidence.
FINVIA therefore uses a fixed fee model that is based exclusively on the current value of the wealth managed: Only money that works is remunerated. This means that our customers know at all times what costs they will incur and how exactly they will be charged. Just as they know that we are only paid by them and not by any product providers.
EY's Global Wealth Management Research Report shows what could already be expected as a result of digitalization, the growing investment spectrum and fluctuations in recent years:
Today's investors are no longer passive market participants. Rather, they are self-determined and aware of their values and needs. Accordingly, it is up to financial service providers of all kinds to respond to this and provide them with the right tools. Modular offers, communication at eye level, individual service and complete transparency are the cornerstones for this.
Although the current figures make it seem so, this development is neither new nor surprising. It is no coincidence that we have a corporate concept that is geared precisely to these changes. Nevertheless, we are constantly keeping an eye on current events and look forward to continuing to adapt our services to the needs of our customers in the future.
Family office approach
26.9.2023
Christian Neuhaus
EY's Global Wealth Management Research Report 2023 reveals: Investors want more advice, multichannel presence and transparency from financial service providers. But what does this mean for family offices and how is FINVIA responding to the growing demands of its clients?
Once a year, Ernst & Young publishes the Global Wealth Management Research Report - a study that uses surveys to shed light on key topics and developments at wealth management . In 2023, over 2,600 people from 27 nations took part. These spanned various wealth and age groups (millennials, Gen X and baby boomers).
In their published online article, which we will refer to below, they summarize the report with a focus on German respondents and look at them in relation to the European average. You can find the article here.
The study contains valuable data that is used by many financial service providers to develop their services. However, as it covers a wide range and does not relate to specific companies or a specific target group, it raises the question of how the new findings can be interpreted in individual cases. Or for us:
What is particularly important to wealthy individuals at the moment and what can we as a family office do to provide them with the best possible support?
According to EY, 48% of participants stated that they are looking to change their financial service provider. More precisely, they would like to reallocate an average of 33% of their portfolios within the next three years. It is striking that this desire for a reallocation is particularly high among millennials, i.e. people born between 1980 and the late 1990s, at 76%.
The main reasons for this can be found in the turbulent events of recent years. The coronavirus pandemic, the energy crisis and the war in Ukraine have shaken the economy several times in a short space of time and left investors increasingly unsettled. Their desire to minimize risks, diversify their investments and hedge against market volatility is correspondingly high.
This is a concern that is particularly evident in younger generations who have had little investment experience to date. Instead of slowly familiarizing themselves with the field of investment, they were confronted with crises and conflicts right from the start of their portfolio development. It seems hardly surprising that they now want to reorient themselves and find reliable service providers. But what can we as a family office do to meet their requirements and those of their more experienced colleagues?
A further look at the data shows that professional advice is a key factor in customer awareness. In addition to the events of recent years, the increased investment spectrum also contributes to investor uncertainty. On the one hand, they generally viewed the increased opportunities as positive and were confident of achieving their goals. On the other hand, high net worth individuals in particular rated the volatility and complexity of new options as a disadvantage (46%). This is an obvious result, given that this group has the greatest access to offers of all kinds and therefore the most points of contact.
On average, half of all investors across all generations agree that they would like more professional advice.
What we as a family office frequently observe are two decisive factors in particular.
The first is dissatisfaction with the offerings of previous service providers. Many of our customers come to us with the desire to finally take advantage of the opportunities offered by the expanded investment spectrum. Although the options have grown, this does not necessarily apply to their access. In particular, those who want to integrate alternative investments such as private equity into their portfolio quickly come up against the limits of their existing advisors. All too often, they only have a limited product range and are unable to meet the demand for more diversity. This is accompanied by a lack of a central, holistic overview of the entire portfolio.
A finding that is also confirmed by the "Private Wealth Management Study Germany 2020" conducted by Stephan Unternehmens- und Personalberatung GmbH. In a representative survey of 1032 financial advisors, 43% admitted that they were unable to offer more complex strategies outside of traditional mixed portfolios. Just 4% considered themselves able to fully implement portfolios including various alternative investments.
The second factor is trust. We live in an age in which sources of information are more open than ever before. Wealthy people have long since stopped blindly following the instructions of their advisors. Instead, they are interested themselves, get actively involved and question recommendations. This is a development that we as a family office very much welcome. On the one hand, it ensures an active exchange between service providers and clients and thus leads to better decisions in the long term. On the other hand, investors are increasingly standing up for their needs, examining their options thoroughly and opting for partners who solely represent their interests instead of focusing on selling their own products.
In summary, the desire for more advice is a result of growing complexity and increasing uncertainty. In order to navigate clients safely through this complex situation, sound expertise is required both in the individual asset classes and when considering the overall strategy. In our experience, those who can provide this are already laying a solid foundation for a trusting partnership.
The desire for more advice also means more input on individual needs, goals and financial circumstances. This is where the previously mentioned increased commitment of investors is particularly evident. Service providers must do more than simply identify lucrative investments and open up access. Rather, investors want communication at eye level and a deep understanding of their values and goals.
This active co-determination is also reflected in the increased importance of digital tools and platforms such as management tools, apps and online solutions. The digital age requires more efficient processes, intuitive navigation and comprehensible steps - including in portfolio management. However, the most important thing is the optimal combination of these self-determined options and personal contact. 86% of respondents would like a joint evaluation of their own portfolio at least once a year.
When FINVIA was founded in 2019, this was one of our main focuses. We wanted to finally combine individual personal advice with digital excellence and give our customers the best of both worlds. This concept is bearing fruit today, based on our experience and this year's report. The role of the family office has long since evolved into that of a trusted companion. We don't set the direction, our clients do. It is also entirely up to them to decide how much of their wealth they wish to place in our hands or how often they wish to make use of our expertise.
Our job is to provide the right offer for your needs. This means modular services instead of all-inclusive services, up-to-date controlling options, access to all investment opportunities and contact with experienced experts.
Alongside investment performance (37%), access options (29%) and brand reputation (24%), a competitive cost structure was the fourth most important criterion for choosing a financial services provider (23%).
Fixed fees, performance-based models or combinations of both were rated as particularly good. Our experience has taught us that it is less about the form itself and more about its transparency . It is important that customers understand what costs are incurred for what and can fully understand them. Providers should also ensure that they avoid hidden costs. Although these may increase profits in the short term, over a longer period of time they can cause investors to lose confidence.
FINVIA therefore uses a fixed fee model that is based exclusively on the current value of the wealth managed: Only money that works is remunerated. This means that our customers know at all times what costs they will incur and how exactly they will be charged. Just as they know that we are only paid by them and not by any product providers.
EY's Global Wealth Management Research Report shows what could already be expected as a result of digitalization, the growing investment spectrum and fluctuations in recent years:
Today's investors are no longer passive market participants. Rather, they are self-determined and aware of their values and needs. Accordingly, it is up to financial service providers of all kinds to respond to this and provide them with the right tools. Modular offers, communication at eye level, individual service and complete transparency are the cornerstones for this.
Although the current figures make it seem so, this development is neither new nor surprising. It is no coincidence that we have a corporate concept that is geared precisely to these changes. Nevertheless, we are constantly keeping an eye on current events and look forward to continuing to adapt our services to the needs of our customers in the future.
About the author
Christian Neuhaus
Christian Neuhaus is one of the founders of FINVIA.
After gaining his first professional experience at UBS Sauerborn, where he was a member of the investment committee, the business graduate joined HQ Trust GmbH, the multi-family office of the Harald Quandt family, in 2011 together with some of the current FINVIA founders. Here, he advised complex large assets on asset structuring until 2016. He was then involved in setting up the digital asset manager LIQID - an associated company of HQ Trust GmbH, to which he eventually returned to help develop the digital strategy.
