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Best Practices To Help Family Offices Weather COVID-19 – Boston Private

Ed Marshall

30 March 2020

The world’s wealth management industry, along with so many other sectors, is scrambling to catch up with the coronavirus pandemic. The economic dislocation is immense and the implications will be pondered for years to come. In the more immediate sense though, as an important wealth management actor, what sort of steps should family offices take? Where will the most serious challenges lie? When should certain measures be taken? 

To broach these and other questions is Edward Marshall, managing director at . This white paper from the firm sets out some ideas. The editors are pleased to share these views; they also add to our recent series of features about family office themes more generally. The usual editorial disclaimers apply to views of outside contributors. Email and

From how we work and where our children go to school, to the way we get our groceries and meet with loved ones, COVID-19 has changed our daily lives. The very technological innovations which are intended to support home, school and business operations during times like this, are stretched to their limits. How many of us have had difficulties with something as simple as successfully dialing into conference call lines?

Family offices are not immune
While some family offices were better prepared for external risks and financial market recessions than others, COVID-19 has caused severe economic and operational disruptions across the board. Family offices contain a treasure trove of sensitive and potentially lucrative information. Cybercriminals are all too eager to use disruptions that the pandemic is causing to make it easier to access valuable family office data.
As physical spaces have closed to help fight the spread of COVID-19, family offices are increasingly working remotely. This has created novel and significant opportunities for security and privacy breaches caused by criminals looking to exploit a crisis. For example, family members and staff can fall into the “them-not-me” mentality when working remotely, falsely believing that security and privacy breaches occur more frequently at larger companies. 

Consider the following to protect yourself right now:

-- Be on the lookout for increased crisis-related scams. Fraudsters are using fake emails claiming to be working with the Centers for Disease Control and Prevention (CDC) or World Health Organization (WHO). Scam emails and telephone calls selling COVID-19 cures, treatments and preventatives are on the rise. Be wary of emails asking for donations for COVID-19 responses, especially if the cause or individual raising the money is unknown to you. Scammers are using fear and sympathy to get people to click on links that they would normally avoid. When in doubt, don’t click. If you want to donate to causes, go directly to their websites;
-- Cut through the noise: Develop a daily update for family office employees. There is a cacophony of information out there related to COVID-19; some of it is reliable, a good deal of it is alarming and much of it is speculative. The urge to surf the internet for news, can foster anxiety with the sheer amount of unreliable and alarming information. Instead, host a daily update call or send an e-blast containing news clippings from reliable sources to provide principals and executives with the latest on family office operations, investments and markets. Ongoing communication during this crisis is likely to foster better relationships between principals and the family office after it is over; and 
-- Contact service providers and learn about their business continuity and risk management plans. Family offices are responsible for a variety of functions and often leverage third-party service providers to support operations. That is why it’s necessary to conduct an audit of all systems and technologies used to support operations and make sure that contingency plans are in place in case problems arise with vendors. 

Vendors are shutting down, working remotely and most likely have a limited staff, often leading to performance issues. Having a good understanding of how vendors are operating can provide comfort to principals who expect a functional family office operation. It is also a good idea to review your current insurance coverages (life, cyber, kidnapping and ransom, directors and officers, and various other liability policies).
•  Refresh your staff on safe cyber and risk practices. While it can be challenging to engage principals and a family office staff that are working remotely, reminders on best cybersecurity practices will pay dividends. 

Here are a few suggestions to consider:

-- Remind families and staff about common cyberattack methods (ransomware, business email compromise and social media hacks) and how to defend against them;  
-- Re-evaluate money transfer protocols with your financial service providers. Ensure that multi-factor authentication is in place for any monetary withdrawal requests. Be mindful that more sophisticated scammers have the ability to “spoof” inbound caller IDs and format emails to look like legitimate financial institutions and even governmental entities;  
-- Update software on all devices, especially laptops, tablets and mobile phones;
-- Use encrypted emails to send personal information;
-- Leverage a Virtual Private Network (VPN) service on all devices;
-- Securely back up your family office data now and in more than one location.
-- Never use personal email, computers or conference calls to conduct family office or sensitive business;
-- Review health plans for family members who may need specialized medical services in remote locations. Understand where family members are residing and have a plan to relocate them as the pandemic evolves. Ensure that family medical records are updated, complete, and easily accessible; and 
-- If the family is managing estate staff, make sure wellness and employment law implications are considered when making human capital decisions.

•  Contact professionals when risk management problems arise. If risks occur throughout the course of normal business operations, then a crisis like COVID-19 only exacerbates any risk weaknesses that a family office already has. 

When risks occur, make sure the family office has the proper professionals on speed dial. More than that, family office executives should build plans around potential threats even during a crisis by making a list of what do and who to call when a cybersecurity breach occurs, when family members have medical emergencies or confidential information is stolen. This plan should include rapid access to healthcare professionals and the preferred hospital, should a family member contract COVID-19. Some health systems are overloaded and expectations of normal response times and service levels should be seriously revised. Planning for this potential emergency is recommended. The crisis can also cause stresses on mental health. While telemedicine is still in its early days, there are more and more options for families who need mental health counseling delivered remotely. Nevertheless, even during a crisis, families should avoid self-diagnosis and treatment and always seek professional advice.
•   In a crisis, it pays to be both tactical and strategic. Family office culture focuses on efficiency, responsiveness and the speed of task completion, often to the detriment of risk management. This set of expectations can cause unnecessary, preventable and unexpected exposures to risks that could be mitigated with proper policies and procedures. While a responsive mindset can make family offices nimble to respond to COVID-19 disruptions, it can also have unintended consequences. Take time to think about the overall mission of your family office, implement the strategic risk plans that are in place or contact a specialist to help prepare you for the next crisis.
•  When COVID-19 is under control, conduct an overall risk assessment. Family offices are particularly vulnerable to risks because of a variety of factors including: publicly available information about their level of wealth and activities; complex operations run by small staff sizes; informal governance mechanisms; a lack of resources dedicated to information security and IT systems; and operational issues that cause them to often prioritize efficiency over security. During or after the crisis, conduct a risk audit with a team that has specialized experience of working with family offices. Take the lessons learned from the COVID-19 pandemic and incorporate new protocols and best practices into your strategic plan and daily operations, and stress test the revised risk management system in better times.