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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up To receive future editions delivered directly to your inbox.
Family office assets are expected to grow by more than $2 trillion by 2030, as rising wealth concentration and a revolution in wealth management drive rapid growth among new family offices.
The number of single-family offices (intra-family investment and services firms typically valued at $100 million or more) is expected to increase from 8,000 to 10,720 by 2030. Deloitte Private Limited. Their assets are expected to grow even faster, reaching $5.4 trillion by 2030, up from $3.1 trillion today and more than doubling since 2019.
According to the report, the total wealth of families with family offices is expected to reach US$9.5 trillion by 2030, more than doubling in ten years.
“Growth has been explosive,” said Rebecca Gooch, global insights leader at Deloitte Private LLP. “The growth of family offices has really accelerated over the past decade.”
The rise of family offices is reshaping the wealth management industry and creating a powerful new force in the financial landscape. With assets expected to surpass those of hedge funds in the coming years, family offices have become the new star of financing, with venture capital firms, private equity firms and private companies all vying for a piece of their growing wealth.
This growth is driven by two broader economic forces. As technology and globalization create winner-take-all markets and deliver huge returns to tech entrepreneurs, wealth at the top of the pyramid is growing faster and faster. The number of Americans worth $30 million or more increased by 7.5% in 2023, to 90,700, while their wealth soared to $7.4 trillion, according to CapGemini.
The number of millionaires (those worth $100 million or more) has more than doubled over the past 20 years to more than 28,000, according to Henley & Partners and New World Wealth. According to Forbes, there are currently about 2,700 billionaires in the world, more than 2.5 times the number in 2010.
At the same time, the super-rich are changing the way they manage their investments and financial lives. Rather than handing over their wealth to a single private bank or wealth management firm, today’s ultra-rich are choosing to create single-family offices to better represent their interests and long-term goals. Family offices are seen as offering more privacy, more customization and more tailored plans for the next generation of families.
“They want a team that’s dedicated to them 24 hours a day,” Gooch said. “Not just in investing, but in all different areas of their lives.”
In the wake of the financial crisis, wealthy families are also looking to advisors to represent the family’s best interests, rather than turning to private banks or wealth management advisors out of a need to sell products.
“Some organizations don’t have a product to market, but a lot of organizations do,” said Eric Johnson, Deloitte private wealth leader and family office tax leader. “And, lo and behold, if you engage them, you Will have to buy what they are selling, which may not be best for the family.”
According to Deloitte, more than two-thirds of family offices have been established since 2000. The largest number (41%) were founded by the original wealth creator, 30% served the second generation (heirs), and 19% served the third generation.
North America is leading the family office revolution. Between 2019 and 2030, family office wealth is expected to grow by 258% in North America and 208% in the Asia-Pacific region. The number of single-family offices in North America is 3,180 and is expected to increase to 4,190 by 2030, accounting for approximately 40% of the global total. There are currently approximately 2,290 family offices in the Asia-Pacific region, and this number is expected to increase to 3,200 by 2030.
The total wealth held by families with family offices in North America has more than doubled since 2019, reaching $2.4 trillion. According to Deloitte, this number is expected to reach $4 trillion by 2030.
The global capital pool of $5 trillion has sparked a frenzy on Wall Street to help family offices manage money. From Goldman Sachs and Morgan Stanley to UBS, J.P. Morgan Private Bank, Citi Private Bank and countless trust companies and multi-family offices, traditional wealth managers are poaching family office experts and forming new family office teams to better target growth goals.
Accounting firms, tax lawyers, consultants and technology companies are also beginning to realize the power of family offices, which can now more easily outsource parts of their operations to reduce costs.
“There’s a whole new area of companies that can benefit from this ecosystem,” Gooch said.
As family offices have grown in size and number, they have also become more institutionalized. Today’s family offices are no longer two- or three-person shops focused on basic investment portfolios and arranging family trips, but more like boutique investment firms. According to Deloitte, the average family office has 15 employees and manages $2 billion in assets.
Family offices are also changing the way they invest. Family offices are shifting funds into alternative assets, including private equity, venture capital, real estate and private credit, rather than old-fashioned 60-40 stock and bond portfolios.
According to the J.P. Morgan Private Bank Global Family Office Report, family offices’ alternative investments currently account for 46% of their total investment portfolios. The largest amount is private equity, accounting for 19%. In addition to investing in private equity funds, a growing number of family offices are also conducting direct transactions, investing directly in private companies.
A BNY Wealth survey found that 62% of family offices made at least six direct investments last year, and 71% plan to make the same number this year.
Private equity giants such as Blackstone, KKR and Carlyle are building out their private wealth teams to better target family offices. Private company dealmakers are also looking for family offices that can buy stakes or entire companies. Because family offices have longer investment horizons and prefer to invest for decades or even generations, they are seen as more “patient capital” than private equity firms or venture capital.
“Family offices can be very reliable, strong investment partners,” Gooch said. “I think a lot of private companies are very grateful for their long-term patient capital and their dedication to this space.”
To support growing assets and responsibilities, family offices are recruiting aggressively. Deloitte says 40% of family offices plan to hire more staff this year. More than one-third (36%) say they plan to increase the number of services provided to families or increase the number of family members served. Deloitte noted that more than a third (34%) of businesses have also increased their reliance on outsourcing.
Deloitte said that the biggest trend for family offices in the next few years will be to continue to move towards “institutionalization” – more professional management, governance and technology. More than a quarter of family offices now have multiple “branch offices” serving different parts of the family, often in other countries.
With huge wealth transfers expected to transfer trillions of dollars to spouses and the next generation, more women and heirs will start running family offices in the coming years. The average age of family office heads in the Deloitte survey is 68, and four out of 10 family offices will go through a succession process within the next decade.
The survey shows that while women account for 10% of wealth holders with assets of $100 million or more, they control 15% of family offices worldwide.
“Women are more likely to be the head of a family office than men,” Gooch said. “Family offices can really focus on key stages of life, like retirement or estate planning. And making sure the next generation is prepared.”
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