Boston Private Releases Survey on Threats to Family Offices
Survey highlights both an underestimation of risk and a culture of complacency
Boston Private, a leading provider of integrated wealth management, trust and banking services, today released a proprietary report titled “Surveying the Risk and Threat Landscape to Family Offices,” which explores the increasingly complex threats that family offices face and offers actionable data to improve risk management processes. The full report can be accessed here.
Wealthy families and family offices have long been targets for various threats, but the variety and complexity of those threats are growing dramatically. The complexity, paired with a lack of data and intelligence specific to the audience, often prevents family office executives from adequately identifying and managing risk.
With responses from 200 executives at single and multi-family offices, the report offers rare insight into the mindset of family offices as it relates to risk management, alongside a comprehensive overview of the risk landscape, including:
- A need for better insider threat procedures: Eight-in-ten (81%) family offices do not conduct periodic background checks on personnel.
- Prevalence of cyber-attacks: Over a quarter (26%) of family offices have suffered a cyberattack, with almost two-thirds of the reported cases occurring within the last year.
- Potential vulnerabilities from known external partners: Over a quarter (28%) of family offices have never carried out a review of the risks posed by third-party vendor relationships.
- Lack of readiness for major disruptions: Almost three-in-ten family offices (29%) did not have a business continuity plan in place before the COVID-19 pandemic.
- Need for increased stress testing: While over half (58%) of family offices have trained employees and family members on risks, only around a quarter (28%) have conducted testing.
“The evolving landscape of how family office risk management systems can be breached has made the task of preventing a breach so much harder. Moreover, the attitudes of many principals and family office executives around risk opens this group up to specialized problems,” said Edward V. Marshall, the author of the report who helps lead the family office practice at Boston Private. “Vendors, advisors and families alike have seen this manifest itself in an underestimation of threats, frustration concerning effective protective measures, and a reactionary mindset.”
Worryingly, the underestimation of threats (cited by 47% of respondents) and a culture of complacency (41%) were the two most cited obstacles to proper risk management at family offices, both of which serve to reinforce each other in a negative cycle. The report offers specific recommendations for overcoming this pattern.
“On one hand, so many family offices are open about their security shortcomings, acknowledging that they routinely underestimate the threats, but on the other hand, fifty-four percent of family offices believe they are prepared for the risks next year,” said Chad Sweet, Co-Founder of The Chertoff Group, a leading global security consultancy and survey partner. “This disconnect shows the value of reviewing the data and of working with experts to protect against these complex risks.”
Boston Private partnered with The Chertoff Group, Dentons, McNally Capital and Datatribe to develop the report.
“Family offices are vulnerable to a variety of threats but struggle to mitigate those threats in part due to a lack of relevant data and industry best practices to help guide their decision-making,” said Bill Woodson, Head of Wealth Advisory and Family Office Services for Boston Private. “This survey was created to help bring the challenges of risk management to light, and hopefully act as a roadmap for family offices.”
This research report follows the Boston Private white paper “Demystifying Risk Management for Family Offices,” released earlier this year to offer a framework for risk preparedness and management.
About Boston Private
Boston Private is a leading provider of integrated wealth management, trust and banking services to individuals, families, businesses and nonprofits.
For more than 30 years, Boston Private has delivered comprehensive advice coupled with deep technical expertise to help clients simplify their lives and achieve their goals. The firm offers the capabilities of a large institution with the superior service of a boutique to clients across the United States.
Boston Private is the corporate brand of Boston Private Financial Holdings, Inc. (NASDAQ: BPFH). For more information, visit https://www.bostonprivate.com/.
Private banking and trust services are provided through Boston Private Bank & Trust Company, a Massachusetts chartered trust company. Wealth management services are provided through Boston Private Wealth LLC, an SEC registered investment adviser and a wholly-owned subsidiary of Boston Private Bank & Trust Company. Some Boston Private offices do not offer all services.
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