The Rise of Family Offices: A Financial Force

Family offices, the in-house investment firms of families typically worth $100 million or more, are experiencing rapid growth, expected to manage over $5.4 trillion in assets by 2030.

• Their number is predicted to rise from 8,000 to 10,720 by 2030, according to a report from Deloitte Private.
• This surge is driven by wealth concentration at the top, as technology and globalization create winner-take-all markets, propelling the number of Americans worth $30 million or more to 90,700 in 2023.
• The population of centimillionaires (worth $100 million or more) has more than doubled over the past 20 years, exceeding 28,000, while the number of billionaires has surpassed 2,700, reflecting a significant increase in wealth.

Tailored Financial Management and Investment

The ultra-wealthy are opting for family offices to customize their financial management and achieve long-term goals.

• These offices provide privacy, tailored programs for the next generation, and a dedicated team to manage all aspects of their financial lives.
• They prioritize advisors who represent the family's best interests, as opposed to those with incentives to sell specific products.

The Impact on the Financial Landscape

The growth of family offices is significantly impacting the wealth management industry.

• They are becoming a dominant force in fundraising, attracting venture capital firms, private equity interests, and private companies.
• They are driving a surge in demand for financial professionals, including specialists in family office management, tax attorneys, consultants, and technology companies.

Evolution of Family Office Strategies

Family offices are evolving from small, traditional setups to more institutionalized structures.

• They are becoming more professional, adopting sophisticated governance practices and leveraging technology.
• They are moving away from traditional 60-40 stock and bond portfolios and shifting towards alternative investments, including private equity, venture capital, real estate, and private credit.
• Direct investments in private companies are becoming increasingly common, with 62% of family offices making at least six direct investments in the past year.

Family Offices as Patient Capital

Family offices are seen as "patient capital" due to their long-term investment horizons.

• They are becoming attractive partners for private equity giants like Blackstone, KKR, and Carlyle, who are expanding their private wealth teams to cater to this growing market.
• They are also investing in private companies, either by taking equity stakes or acquiring entire companies.

A Growing Workforce and the Future of Family Offices

Family offices are experiencing rapid growth in their workforce and services.

• 40% of family offices plan to hire more staff this year.
• More than a third are expanding the number of services they offer and the number of family members they serve.
• They are also increasingly relying on outsourcing to manage their growing responsibilities.

The Great Wealth Transfer: A New Era for Family Offices

The great wealth transfer, projected to shift trillions of dollars to spouses and the next generation, will create new opportunities for family offices.

• More women and inheritors will take leadership roles in family offices.
• Family offices will play a crucial role in helping the next generation manage their wealth and prepare for key life stages, such as retirement and legacy planning.