Colleagues working together in the office.
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A version of this article first appeared in CNBC’s Inside Wealth newsletter, a weekly guide for high-net-worth investors and consumers by Robert Frank. sign up Get future editions delivered straight to your inbox.
Increasing wealth concentration and a revolution in asset management are driving a rapid rise in new family offices, with family office assets expected to increase by more than $2 trillion by 2030.
The number of single family offices – in-house investment and services firms typically owned by a family with assets of more than $100 million – is expected to grow from 8,000 to 10,720 by 2030, said a report published by a US research firm. Deloitte PrivateTheir wealth is expected to grow even more rapidly, from $3.1 trillion today to more than $5.4 trillion by 2030, more than doubling since 2019.
According to the report, the total assets of families with family offices are expected to exceed $9.5 trillion in 2030, more than doubling in 10 years.
“It’s explosive growth,” said Rebecca Gooch, global insights head at Deloitte Private. “The growth of family offices has really accelerated over the last decade.”
The rise of family offices is reshaping the wealth management industry and creating a powerful new force in finance. Projected to hold more assets than hedge funds in the next few years, family offices have become the new stars of fundraising, with venture capital firms, private equity firms and private companies vying for a slice of their growing wealth.
This growth is being driven by two broader economic forces: Wealth is growing ever faster at the top of the pyramid as technology and globalization create winner-take-all markets and provide huge rewards to tech entrepreneurs. According to Capgemini, the number of Americans with assets of more than $30 million will grow 7.5% to 90,700 in 2023, and their wealth will soar to $7.4 trillion.
The number of centimillionaires, people with assets of more than $100 million, has more than doubled in the past 20 years to more than 28,000, according to Henley & Partners and New World Wealth. Forbes magazine estimates that there are now 2,700 billionaires in the world, more than 2.5 times the number in 2010.
At the same time, the ultra-wealthy are changing the way they invest and manage their financial lives. Rather than entrusting their fortunes to a single private bank or asset management firm, today’s ultra-wealthy are choosing to set up standalone family offices to better represent their interests and long-term goals. Family offices are thought to offer more privacy, more customization, and more tailored programs for the next generation of their family members.
“They want a team that is dedicated to them 24/7,” Gooch says, “not just with their investments, but with them in every aspect of their lives.”
In the wake of the financial crisis, wealthy families are also looking for advisors who represent their family’s best interests, rather than private banks or wealth management advisors who are driven by the need to sell a product.
“Some organizations don’t have a product to sell, but many do,” says Eric Johnson, private wealth and family office tax leader at Deloitte, “and the surprise is, when you sign with them, you end up having to buy the same product they’re selling, which may not be in the best interest of your family.”
According to Deloitte, more than two-thirds of family offices were founded after 2000. Most (41%) were established by the original wealth creators, 30% serve the second generation (heirs), and 19% serve the third generation.
North America is leading the family office revolution. Family office assets in North America are expected to grow 258% between 2019 and 2030, compared to 208% in Asia Pacific. North America’s 3,180 single family offices are expected to swell to 4,190 by 2030, accounting for about 40% of the global total. Asia Pacific is currently home to about 2,290 family offices, which is expected to grow to 3,200 by 2030.
Total wealth held by families with family offices in North America has more than doubled since 2019, to $2.4 trillion, and is expected to reach $4 trillion by 2030, according to Deloitte.
The $5 trillion pool of capital globally has sparked a Wall Street scavenging for family offices to help manage their funds, with traditional wealth managers, from Goldman Sachs and Morgan Stanley to UBS, JPMorgan Private Bank and Citi Private Bank, as well as countless trust companies and multi-family offices, poaching family office professionals and setting up new family office teams to better target growth.
Accounting firms, tax accountants, consulting firms and technology companies are also waking up to the power of family offices, making it easier for them to outsource parts of their operations to keep costs down.
“A whole new category of companies is emerging that will benefit from this ecosystem,” Gooch said.
As family offices grow in both size and number, they are also becoming more institutionalized. Rather than a two- or three-person office focused on arranging a basic portfolio and family travel, today’s family offices are more like boutique investment firms. According to Deloitte, the average family office has 15 staff members and manages $2 billion.
Family offices are also changing the way they invest: Instead of traditional portfolios that hold a 60/40 mix of stocks and bonds, family offices are shifting money into alternative assets such as private equity, venture capital, real estate and private credit.
According to the JP Morgan Private Bank Global Family Office Report, family offices now have 46% of their total portfolios invested in alternative investments, with private equity accounting for the largest share at 19%. Besides investing in private equity funds, more family offices are also investing in direct deals, that is, directly in unlisted companies.
According to a BNY Wealth survey, 62% of family offices made at least six direct investments last year, and 71% plan to do the same number of direct deals this year.
Private equity giants such as Blackstone, KKR and Carlyle are building private wealth teams to target family offices more effectively. Private company dealmakers are also turning to family offices, who can buy shares or entire companies. Family offices are considered “patient capital” compared to private equity firms and venture capitalists because they take a long-term view and prefer to invest over decades or even generations.
“Family offices can be very solid and powerful partners in making investments,” Gooch said. “I think a lot of private companies are very grateful for their long-term, patient capital and dedication to the space.”
To keep up with growing assets and responsibilities, family offices are on a hiring spree. A whopping 40% of family offices plan to add staff this year, according to Deloitte. More than a third (36%) say they plan to increase the number of services they provide to families or increase the number of family members they receive services from. And more than a third (34%) are increasing their reliance on outsourcing, Deloitte noted.
Deloitte said the biggest trend for family offices over the next few years will be a continued move towards “institutionalisation” with more specialised management, governance and technology. More than a quarter of family offices now have multiple “branches”, often overseas, to serve different parts of the family.
And with massive wealth transfers expected to send trillions of dollars to spouses and future generations, more women and heirs will start running family offices in the coming years. According to a Deloitte survey, the average age of a family office head is 68, and four in 10 family offices will go through a succession process in the next decade.
The study found that women make up 10% of people with assets of over $100 million, while they also manage 15% of family offices worldwide.
“On an equal footing with men, women are slightly more likely to be heads of family offices,” Gooch said. “Family offices can really focus on important stages in life like retirement and estate planning, and making sure the next generation is prepared.”
