Technology, government policy, global economics, and the continuous search for new opportunities will largely shape family office trends for 2025, influencing how these entities think, invest, and operate.
The overall outlook for family offices is positive, as the number of establishments continues to grow, reflecting rising wealth globally.
Certainly, setting up a family office is an excellent way to grow, preserve, and distribute family wealth to beneficiaries for years and generations to come.
Despite the optimism, running a family office is not without risks, the new year will presents its share of headwinds.
But risks can be mitigated and challenges overcome.
With proper awareness, foresight, and protectiveness, single- and multi-family offices can thrive in 2025.
As global wealth increases, so does the number of family offices, driven in large part from Asia.
Deloitte estimates there are as many as 8,030 single family offices globally, a 31% increase from 6,130 in 2019.
And by 2030, there will be approximately 10,720 family offices, and their collective assets will reach US $5.4 trillion, surpassing the hedge fund industry’s total AUM.
And these entities are pushing their collective weight around in the investments space.
And the nature of family offices makes for ideal investors, given their long-term outlook and ‘patient capital,’ which differs from a hedge fund or asset manager, aiming or the highest returns in the shortest time windows to satisfy investors.
And when it comes to family office staffing, they’re now competing directly with large financial institutions for talent.
With rising levels of global wealth, wealthy families are looking for places where their assets and interests are best protected.
North America and Europe have long been home to most of the world’s family offices, with New York and London being popular locations, but other locations are on the rise.
Hong Kong, Singapore, and Dubai have risen to greater prominence in recent years, not only reflecting rising levels of wealth in the respective regions, but also incentives and friendly policies that attract the world’s wealthiest.
Family offices must assess and navigate the impact of Donald Trump’s re-election, weighing its effects on investment portfolios, as well as taxation and regulation, among other notable areas.
For the wealthy and business owners, there is no clear consensus where they stand. A pre-election UBS survey found that 57% of wealthy investors preferred a Harris presidency, while 53% of business owner preferred Trump.
No matter where one stands, here are a few considerations with a Trump victory:
Amy Lynch, a former regulator at the Securities and Exchange Commission and Financial Industry Regulatory Authority (FINRA), is less certain about the prospects of industry deregulation:
“If regulation is taken away, it could be chaos in the markets, a free-for-all that could lead to a financial crisis. There could be no rules for any of these firms — and that affects the way transactions are executed, how broker-dealers operate, how family offices operate.”
With Trump re-assuming role as President in January, the full impact - positive or negative - remains to be seen.
Private equity accounts for 30% of the average family office portfolio, up from 22% in 2021.
Conversely, public equities accounted for 25%, down from 34% in 2021.
“Equities has always been the number one asset class family offices invest in, but over time, inch by inch, private equity has been encroaching upon that and, for the first time last year, private equity allocations surpassed equity allocations in family office portfolios.”
- Rebecca Gooch, Global Head of Insights, Deloitte
Just as family offices have increased allocations to private equity, others are bypassing private equity funds, and they are now buying stakes in private companies directly.
According to a survey from Bastiat Partners and Kharis Capital, half of family offices plan to do "direct deals" — or invest in a private company without a private equity fund — over the next two years.
This trend reflects family offices’ confidence in finding and negotiating their own PE deals as the FOs grow in size and sophistication.
Because family offices are usually set up founded by entrepreneurs who created their own companies, they often like to invest in similar private companies and leverage their expertise.
Still, successful investing requires great due diligence and also being in the right networks and spaces to learn about attractive deals or be invited to deal offerings. Family offices often the lack resources and infrastructure needed to make the most of these opportunities, but over time, they’re growing in resources and acumen.
Family offices are emerging as viable alternatives for capital as other investment sources (institutional) have been constrained, resulting from persistently high interest rates and market uncertainty.
And real estate has been a favored asset class, representing an average 14.4% of assets under management for family offices.
And with constrained capital across other sources, family offices are in prime position for attractive real estate investing opportunities, including favorable terms for lending.
It wasn’t too long ago that cryptocurrency crashed and burned… but has since “risen from the ashes.”
And investors (including family offices) have regained interest in digital assets. One survey found that 33% of family office professionals are actively investing in cryptocurrencies and are considering increasing holdings.
Among those FOs, this included 41% with less than $1 billion assets and 19% with more than $1 billion in assets.
This is a notable increase compared with just 16% of family offices that invested in cryptocurrencies in 2021.
Still, like any investment - especially with one that has a history like crypto - do the necessary due diligence and mitigate the risks or the extent of harm from those risks.
"ESG will remain a key long-term wealth manager priority despite Trump re-election.” - Private Banker International
According the UBS Global Family Office Report report from earlier in 2024, 50% of respondents polled said they were “very or somewhat likely to invest in green technologies over the next two to three years”, and another 27% were unsure.
But with Donald Trump returning to the White House (and assumed less political backing for ESG), sustainable investing could face a few challenges or setbacks.
Still, interest in these investments is expected to remain during and after a Trump presidency.
Fortunately, family offices have the “luxury” to focus on long-term sustainable investment gains over short-term profits, not constrained by shorter time horizons or pressured to make riskier investments to meet client goals.
The so-called “Great Wealth Transfer” is underway, with an estimated $84 trillion to be transferred from older to younger generations by 2045.
And family offices will play a major part in facilitating those transfers.
According to a UBS report, the primary goals of most family offices is to support the transfer of wealth from one generation to another (63%) and provide income for family members (55%).
But an RBC and Campden report found that only 53% of North American family offices had a succession plan, and a just 30% of those had a formal written plan.
And around 4 in 10 wealthy families will face a generational transition in the next decade, highlighting the importance of sound succession planning and the need for forward-thinking.
A Citi Private Bank report found that 53% of family offices have built portfolio exposure to Generative AI through public equities, private equity funds or direct private equity.
And another 26% are considering adding AI to their investment portfolios.
While family offices have done a good job investing in the cutting-edge technology, fewer are actually using AI.
A report from RBC shows that only 11% of family offices are using artificial intelligence, though 30% of respondents have expressed a desire to adopt the technology.
The previous Citi report also found similarly low levels of AI adoption, but smaller organizations are more likely to pick up the tech faster “due to the intense cost pressures they generally face… however, entities with more than $500 million will likely catch up soon based on the higher proportion of such larger entities indicating work in progression on generative AI.”
Learn more about how family offices can make use of AI.
Like other investing entities, family offices are often inundated by mounds of data (and paperwork), and for humans to sift through it all, that is not practical.
Quality data is more valuable than ever, allowing for optimized asset allocation, managing risk effectively, and achieving long-term financial goals with greater precision.
Such quality data is also important for AI, as its output is based on the data fed to it.
And family offices are leveraging automation and machine learning tools to go through that data, extrapolate information, input it into platforms, then create summaries, analyses, and even predictions.
“The cost of fixing a problem can easily be a factor of 100x compared to an investment into measures that would have prevented the issue in the first place.” - Tobias Jaeger, CEO of Falcone International
Digitizing workflows is one of the most important things a family office can do for its long-term strategy, but be aware of risks.
According to Deloitte, 43% of family offices worldwide have experienced a cyberattack in the last 12-24 months, and 25% have experienced three or more attacks.
Family offices are less regulated than traditional wealth and asset managers, and in these situations it’s not uncommon for FOs to have fewer formalized procedures around data security and controls.
These findings further support the very reasons cybercriminals pursue family offices.
They go after entities with large sums of money that are perceived to have weak cybersecurity.
Prove the criminals wrong. Francois Botha from Forbes wrote about how family offices can protect themselves from cyber threats.
“Family offices sometimes fall through the cracks of being big enough to be specifically targeted, but not having in place the strong risk management measures typical of bigger organisations, hence leaving them very vulnerable.” - Kevin Hulbert, Senior Adviser at Dentons
Just as some don’t have succession plans, 3 in 10 family didn’t have a business continuity plan in place before COVID-19, and over a quarter said “implementing secure remote working protocols is one of their top risk management challenges.”
The report mentions that family office leaders must change their mindsets, citing underestimation or complacency towards risks.
Additionally, they should develop continuity plans and partner with a risk consultant to carry out these computer-simulated, ‘what-if’ scenarios that identify vulnerabilities before real threats emerge.
From there, they have a mindset and framework of which to address these risks.
The private, somewhat secretive nature of family offices makes it harder for them to find talent.
How will promising talent show up if they don’t know the organizations exist or how to find them?
And inner network referrals to fill jobs can only go so far, as there is certainly a talent shortage, especially considering the growing number of entities that compete for the same expertise.
Family offices must position themselves in a way to show they are present, relevant, and indeed a worthwhile opportunity and career move.
Whether it’s establishing a presence at top universities or financial industry networking events, there are for these entities to be front and center for top talent.
Similarly, sites liked LinkedIn and ZipRecruiter are places to post jobs and meet with potential team members.
Costs are going up… what else is new?
As rising expenses and smaller returns hurt profit margins, outsourcing for family offices is one way to reduce costs and attain greater operational efficiency.
Leveraging the technology and expertise of third-parties can mitigate the risk associated with in-house functions.
According to Rick Flynn, a managing partner of Flynn Family Office:
"More successful family businesses are today relying on outsourced family office services providers to achieve greater control and cost savings while managing toward defined family wealth objectives."
Empaxis helps family offices reduce costs by taking care of their operational processes.
The private wealth industry has historically has been slow to adopt technological change, and that needs to change.
As Craig Iskowitz founder and CEO of advisory consulting firm Ezra Group, puts it, “If (family offices) choose not to innovate, they risk going the way of Sears or Blockbuster."
And according to McKinsey when firms become digital leaders in their industry, they have faster revenue growth and higher productivity than less-digitized peers.
In many cases, family offices have a patchwork set of systems that don’t interact well with each other. Exchanging data across platforms becomes a major challenge, leading to inaccuracies as well as manual copying and pasting of information into different systems.
A lack of quality, centralized hubs makes it harder for family offices to get the most accurate view of everything relevant to them: investment portfolios, bookkeeping/accounting, legal, taxation, family details, etc.
Quality data is foundational to analysis and decision-making, and single- multi-family offices need better setups.
They should certainly leverage the digitized and automated tools that make it easier to manage investment portfolio data, reports, and documents.
Even if they lack in-house expertise and don’t know where to start, that’s ok. Many wealthy families are in the same situation.
Family office digital transformation and technology experts like Empaxis can help. Our systems-agnostic, start-to-finish approach means we help family offices at every step of the way with any systems they use. The support , includes data migration, software and application development, as well as testing/QA, implementation, and ongoing maintenance.
Automating routine, manual tasks is another technology-related opportunity for family offices.
Predictable and repeatable tasks once done by humans can now be done by bots. This allows employees to focus on higher-value activities.
To learn more about Robotic Process Automation, check out one of our posts on how RPA helps money managers.
Danielle Valkner of PwC shared a few more examples of how RPA helps:
"The most widely used examples of RPA include data entry/form population and account reconciliations. When you combine RPA with artificial intelligence (AI) and machine learning you can gain even greater efficiencies. One real example of this which all family offices will recognise is gathering of tax information and populating tax forms."
As family offices increase their allocations to private equities, they have more statements to process every month.
It’s a very manual process with repetitive steps for these alternative investment statements: downloading, renaming, formatting, storing, extracting data, and sending report notifications.
Sometimes these statements come in all at once, and it’s overwhelming to deal with, especially when there are tight deadlines.
We at Empaxis have automated development automation tools to streamline these processes for family offices.
Our clients benefit tremendously from the time and resources we save them.
Interested in learning about automating your private equity statement processing?
Family offices are certainly hitting their stride, the most bullish they've been in years, as they increase in number and prominence globally.
There are several great investment opportunities, but still plenty of risk to watch out for.
And SFOs and MFOs should take advantage of technology, but insufficient and improper use can present threats and hinder productivity.
Furthermore, lack of prep for succession plans, looming regulations, rising costs, and talent shortages make it harder for family offices to get the support they need.
But they can overcome some of those challenges by partnering with third-party investment operations and systems integration services providers like Empaxis that know how to deliver the solutions and results that single- and multi-family offices need.
Overall, the family office structure will continue to remain a viable and desirable way for wealthy families to grow and preserve wealth and assets for generations to come.
There are some current challenges, but the future is bright.
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