Remote work and extended international operations are causing tax concerns for single-family offices, according to EY.
In addition, the risks presented by constantly evolving technology and the need to digitalize have single-family-office managers worried, according to Bobby Stover, EY Americas Family Enterprise and Family Office Leader.
“Family offices are now multi-jurisdictional and the trend to working remotely has exacerbated that,” Stover said in an interview. That is one of the concerns revealed in an EY survey of 250 single family offices, including 122 in the U.S.
To meet some of these concerns and to help achieve transparency and comply with all necessary regulations, family offices plan to spend significantly to upgrade technology over the next several years, Stover said, and many will outsource the function because of increased complexity.
According to the survey, 67% of respondents globally said they are significantly concerned about three or more regulatory issues and 72% cited the tax consequences of remote working as a concern.
“Single-family offices are concerned about how new virtual ways of working will raise new tax considerations for family members, family office employees and for their broader business ecosystem,” according to the survey. “Tellingly, 64% of single family offices are not very confident that their tax operations are high performing, which would indicate work needs to be done to remain compliant."
To keep up with changing times, 81% of respondents globally—and 76% of US offices—indicted they plan to make significant investments in three or more digital technologies within the next two years.
“Whether it is cybersecurity or intelligent automation to improve efficiency and manage risk, there is a clear drive towards a digital first mindset in many single family offices,” the survey said. “Both within the family and its operating business, digital transformation offers profound opportunities and important considerations for single family offices. Disruptive tech is here to stay.”
To accomplish what is necessary, family offices are going to have to have digital partners, Stover said. “Billions of dollars is going into family office technology. Gen Z wants a digital experience and it is going to take a lot of capital to do that,” Stover said. “Family offices will have to decide what to outsource and what to do in-house.”
Increased digitalization brings increased security risks and only 49% of single family offices said they were confident they have a structured process in place for identifying risks.