Morgan Stanley Identifies 6 Key Focus Areas for the Future-Ready Family Office

• Morgan Stanley reports on the rising need for flexible structures in family offices
• Offices adapting to address need to uphold values, safeguard legacies, educate heirs, and maximize tech amid complex markets

New York -

Morgan Stanley Wealth Management today released a comprehensive report identifying essential focus areas and recommended steps for family offices to target growth more effectively.

"Family Offices are pivotal in managing wealth and preserving legacies, and as families and environments evolve, so must the industry"

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With the number of family offices projected to expand 75% by 2030,1 trends indicate growing urgency and demand for adaptable structures that help families express values, protect legacies, educate the next generation and leverage technology to navigate cybersecurity challenges and change amid complex markets. Additionally, offices are now facing a faster pace of intergenerational wealth transfers, underscoring the need to remain relevant for future generations.

To that end, the report identifies six essential pillars family offices will need to embrace to keep pace. Key takeaways include:2

• Allow governance to evolve: The governance structure of a family office is crucial for its long-term sustainability. It should balance flexibility with clear priorities, allowing for changes both within and outside the family-for example, including mechanisms for a graceful exit to allow family members to pursue separate interests. Regular reviews of governance rules should be conducted, involving younger generations to consider shifting objectives and priorities.
• Staff like an institution: Family offices should establish a healthy pipeline to invite, train, and promote fresh talent that can support current and evolving needs. It's essential to plan for succession and delegate responsibilities to younger staff members to ensure continuity, mitigate key-person risk, and help smooth generational divides. One of the most important decisions will be to identify which roles to keep in-house and then build supplemental external partnerships.
• Data matters: To stay at the forefront of market trends and maximize investment capabilities, Family offices require robust, reliable data sources and the capability to build or access a consolidated reporting platform. A rigorous approach to deal sourcing and due diligence is also necessary, defining investment parameters and adhering to a strict process for sourcing and vetting new deals.
• Fill the financial education gap: Family offices are prioritizing effective financial education programs for younger generations, which means meeting students where they are and recognizing generational differences. It's essential for trainers to find the right balance of technical knowledge, interpersonal skills and experience. Additionally, as academic organizations de-emphasize financial literacy, family offices have an opportunity to fill this gap and help prepare younger generations to carry the torch. This may be an important area where external resources can help supplement or build new financial education programs for families.
• Anticipate the cyber threat: Family offices are increasingly targeted by cyberattacks that threaten long-term stability. However, there are simple yet effective steps that can help mitigate common threats such as identity theft, online scams, malware and fraud. These recommended measures include automatic updates, unique strong passwords, multi-factor authentication and careful handling of links and attachments.
• AI is a balancing act: Family offices are also under pressure to stay current with advancements in technology, particularly artificial intelligence (AI). AI can help family offices operate more efficiently, particularly in client communications and reporting. However, it's key to fully understand potential security implications and ensure a secure perimeter for family information.

"Family Offices are pivotal in managing wealth and preserving legacies, and as families and environments evolve, so must the industry," said Liz Dennis, Head of Private Wealth Management. "This guidance is designed to support family offices of all shapes and sizes as they work to ensure continuity across generations. Even with technology's potential, human expertise remains irreplaceable-and forward-thinking family offices must define clear strategies and infrastructure to continue adding value as indispensable partners for generations to come."

Morgan Stanley Wealth Management is committed to helping family offices understand the shifting dynamics they face and the practices that will allow them to navigate changes and fulfill the family's mission across generations. For more information, please visit Morgan Stanley Family Office.

Full report available here.

1. Deloitte Private's latest report in its Family Office Insights Series - Global Edition explores the rapid expansion of family offices and offers a vision of the future landscape | Deloitte Global
2. Morgan Stanley Family Office: The Future-Ready Family Office: Evolving with Purpose

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