The rise of family offices has been attributed to shifting economic forces, market trends, and the increasing complexity involved in managing high-net-worth family wealth. In the face of a globalized society, commerce, and regulation, many families with significant wealth have struggled to adapt independently. They rely on family offices to advise and make the necessary moves to retain and grow their wealth.
Family office trends suggest they are the fastest-growing private wealth management firm type. Let’s learn more about their future trajectory.
1. Direct Investing Over Wealth Preservation
Family offices have long been assigned the role of wealth preservation over the long term. However, modern family offices are getting more closely involved in direct investing than ever.
2. Wealth Management And Investing Have Grown More Complex
The complexities of investing cannot be understated. A family they are facing administrative, legal, and tax matters in various territories, volatile market conditions, unstable geo-political conditions, and interest rates that have soared. A family office makes it a full-time job to gain expertise here that no individual or family has the time to do themselves.
3. Family Offices Are Taking Many Forms
New family offices are seemingly arriving with each year that passes. A family office can look like many things. A single individual, such as a bookkeeper, lawyer, or appointed family member working within a family business. It can be a separate, multi-person staff. A family office can be a mix of internal and third-party advisors. There is more diversity than ever in how family offices are structured.
4. Family Offices Are Taking More Control Over Investments
Many family offices look at stocks, bonds, real estate, private equity, venture capital, private debt, and direct investments in small businesses and corporations to get higher returns and increase diversification.
5. Fostering Positive Social Or Environmental Impacts
‘Impact investing’ is to deploy capital to generate a financial return while making a positive social or environmental impact. This has meant more family offices seeking investment opportunities in renewable energy, sustainable agriculture, healthcare, education, and similar sectors. This has helped these offices attract the next generation of family members passionate about social and environmental causes.
6. Embracing Innovative Start-Ups And Disruptive Tech
More family offices are investing in sectors more closely associated with innovation and disruptive developments, i.e. fintech, AI, blockchain, cybersecurity, and digital health. Investing capital in these locations allows a family office to stay ahead of the curve and generate very high returns while evolving an investment strategy.
7. Co-investing with Like-Minded Partners
It is common to see family offices take on partners, i.e. other family offices, institutional investors, or private equity firms. These partnerships allow them to participate in larger transactions and access better opportunities for growing a client’s wealth. It also leverages more expertise, expands its networks, and enhances its due diligence.
8. An Exploration Of Foreign Market Investments And Atypical Assets
Many family offices are examining real estate, private equity, and hedge funds in foreign markets and atypical asset classes outside the stock market to seek better returns. This has meant more sophisticated management of wealth is required on the part of a family office.
9. More Private Equity Investing Resulting In More Lucrative Returns
To buy and manage companies before selling them for profit is a family office investment strategy many use. Families are acquiring companies at a record rate, adding value to them and increasing their worth as an investment asset with great success. Private equity is the fastest-growing asset class for family offices to invest in, with sustainable investment assets coming in second as another area where investments are happening at a record pace.
10. Family Offices Are Growing Family Wealth All Over The World
Family offices have become so popular because they tend to deliver results. They used to be accessible only to families with investable assets of approximately $30 million or more and for families with net worths exceeding $1 billion. Today, more family offices are targeting families with tens of millions in net worth, leveraging their expertise to move families at this level into several hundred million or more in investable assets.
11. Assistance With Succession Planning, i.e. Death And Taxes
Family offices are becoming more equipped to handle succession planning, avoiding tax duplication or conflicting tax rates in multiple jurisdictions. Family offices are in close contact with their clients, planning for future events and ensuring wealth and the family estate will be properly administrated according to the client’s wishes.
12. Navigating Different Regions With Families Living Apart
It’s not uncommon to have a family living in many different countries. How to transfer and preserve wealth across borders can prove challenging. This is where more family offices are gaining experience, seamlessly administrating the best ways to transfer wealth across multiple jurisdictions while paying minimal taxes and regulatory fees.
