According to a third unidentified respondent quoted in the study, employees working remotely from home during the pandemic posed yet another risk to family offices.
“We have had several unsuccessful attempts by outside parties to pose as employees and have us wire money to them,” the respondent said in the online study.
While over half of the family offices in the study (58%) said they have trained employees and family members on potential risks, less than a third (28%) said they have conducted stress tests or scenario analysis to back up training and planning.
A majority (80%) said they did not conduct periodic background checks on all personnel, unless their staff had just been hired (68%).
Social media presents a threat as well, since a misplaced social media post or comment or a stolen email address or personal connection can tarnish a client’s once-sterling reputation and irrevocably damage it, and by extension, the family office charged with protecting it.
Despite the potential for such elevated risk threats, only 28% of family offices said they offered privacy and reputation management services—hardly surprising, Boston Private said, since only 26% of respondents considered reputational risks to be a significant threat to their practice. Only a third believed they presented major or catastrophic impacts, and a majority (72%) thought they had a low chance of occurring.
Family offices that decide to outsource risk and threat management to an external vendor face additional hurdles, the study found. A third of those surveyed (35%) said they found it to be a major challenge, and that outside vendors did not understand their unique concerns (35%). Over a quarter (28%) of family offices said they have never carried out a review of the risks and threats from using a third-party vendor.
Boston Private also found that few family offices offered the equally important yet often overlooked services of physical security and international travel, even though their clients faced the risk of direct physical threats, such as kidnapping and break-ins, both in the U.S. and abroad.
Only 16% of respondents said they used medical advisory services, despite the potential for disruption from significant health issues during the pandemic and the increasing sophistication of medical advisory and risk management tools.
Over a quarter of family offices have developed a network of family offices to share best practices and vendor recommendations, while almost 60% want to see more conferences to help do this, Boston Private reported.