Family offices have become much more popular in recent years, according to a new report by Deloitte. The report shows an increase in total family office investment from 2019’s $3.3 trillion to the current figure of $5.5 trillion. It projects a further increase of 189% by the year 2030. This reflects an increase in the number of ultra-wealthy families and individuals.
Family Offices Serve as an Alternative to Funds
“Globally, family offices are expanding rapidly by focusing on their growing presence throughout different areas of the world, asset base, industry impact, and what makes a family office successful,” said Deloitte Private Global leader Wolfe Tone in a statement.
A “Family Office” is a privately held company that specializes in the asset management and growth of a single family. One of its primary uses is to secure the continued growth of assets as they pass from one generation to the next. This once-niche practice has been increasing in popularity, to the point that this alternative has begun to rival hedge funds as a tool for protecting assets and growing wealth.
“As they continue to navigate ongoing economic challenges and geopolitical uncertainty,” said Tone. “Family offices are expanding their services, maturing their structures, focusing on their talent strategies, and carefully managing their investments to ensure sophisticated and efficient operations for the future.”
Rapid Expansion of Wealth for Affluent Families
Deloitte’s report estimated the existence of over 8,000 active family offices worldwide, with almost 4,400 across the Americas, almost 3,000 in the Asia-Pacific region, around 2,000 in Europe, and around 350 between Africa and the Middle East. The report projects that the number of offices in North America could double by 2030.
“Off the back of gains in their operating businesses and wider investments, the world’s most affluent families have been accumulating wealth at a meteoric pace, and we expect this trend to continue,” said Deloitte Private Global Head of Insights Rebecca Gooch. “With an expectation that family wealth will nearly triple between 2019 and 2030, this is spurring demand for private wealth management structures, leading to a rapid rise in the size and sophistication of the family office arena.”
Family Offices Are Becoming More Sophisticated
The report also details some popular organizational details of family offices, including that more than 25% of family offices have opened a second branch and that almost 75% of offices have established boards of governance. According to the report, the boards have an average of four members, half of which are usually family members, while the other half are industry professionals.
The primary tasks of these boards are to manage portfolios and direct investments, with these two pursuits taking up around half the office’s time and effort. Some of the rest of the effort goes to things like administration, compliance, and the operation of family-owned businesses. A notable amount of the family office’s time is spent “training” the family’s next generation in financial matters, business pursuits, investment activities, and other skills. This pairs well with the family office’s mission to smoothly transfer wealth between generations.
The report includes predictions made by the professionals operating inside these offices. Popular predictions include the general idea that family offices will continue to become more popular throughout the world. They also include more specific predictions, such as an increasingly institutionalized and professionally managed organization, an increasing transition to more independent office set-ups, and a broad expansion of the services these offices offer.
“In looking ahead, many family offices are staying true to the traditions of past and current generations, while also evolving to meet the needs of future generations,” says Deloitte Private Global Fantasy Enterprise leader Adrian Batty. “As the wealth management sector matures, the enablement for firms to scale up in sophistication and reach creates further opportunities for growth.”
