This publication breaks out the major themes shaping the North American and wider world's family offices industry.
Those sometimes mysterious-sounding creatures, family offices, have inched away from the shadows of financial life in recent years to attract more media and business attention. And part of that heightened awareness is driven by the sheer scale of the sector.
Even on the more conservative estimates, there are 7,300 single family offices (SFOs), according to data from Campden, the research firm, although that figure contrasts with data from EY (aka Ernst & Young) in 2016 pegging the figure at 10,000. This news service’s data and analytics firm partner, Highworth, has recently argued that all such figures need to be treated with a pinch of salt. Hard data on which such assessments should be built does not exist. And Highworth, as explained here, reckons that if there are about 6,000 SFOs globally at present which are known, then on a simple extrapolation basis, the total indicative assets under management comes out in the region of more than $11.9 trillion.
However one slices and dices the sector, the SFO sector is big, and of course there is now a sizeable chunk of multi-family offices. Recently, this publication carried a guest article speculating why single family offices make the “multi” jump and pal up with other SFOs. The kind of trends that are shaping much of the financial industry, such as the need for scale to cope with regulation, client expectations and obtaining buying power, affect the family office space. In the past few days – and continuing further – we have looked at some of the factors driving the sector.
For example, one development is a willingness by family offices, even the larger ones, to outsource more of their activities, whether they be to handle bill payment, taxation, concierge services, the chief investment officer role, custody and security. There comes a point of course (as discussed here) where nothing more can be outsourced without there being little more than a legal shell. So the decision over what to outsource and what to keep in-house is a constant debate. Banks such as UBS and Citigroup have been setting up family office arms in recent years to provide advice, support and services to family offices, much as such firms have also done the same for external asset managers. The theme appears to be “if you cannot beat them, join ‘em”. As recently as this week, Geneva-based private banking group Reyl announced that it was reshaping its family offices and entrepreneurs business segment. In our North American news channel, we covered a major appointment by the professional services firm PKF O’Connor Davies to appoint industry veteran Steve Prostano, and launch a family advisory services arm.
Family offices have been around for more than a century, getting their start in the US during the era of John D Rockefeller and fellow “Gilded Age” business tycoons determined to pass on wealth without blighting their children’s lives and sense of reality. And fairly early on in the process, family offices realized the need for a level of professionalism, certainly among the larger ones. This publication, for example, has spoken to headhunters about the need for more professionalism in hiring external, non-family members to work in SFOs and MFOs, to ensure that interests are intelligently aligned, and keep potentially fractious family members happy. Rising complexity drives much of this.