August 20, 2024
Over the past several years, the landscape of family office investing has undergone a significant transformation, reshaping the way wealth is managed and preserved across generations. What was once a relatively niche segment within the financial industry has rapidly expanded, with family offices growing not only in number but also in their influence on global markets. These private wealth management firms, often established by ultra-wealthy families, have become key players in the investment space, driving trends and influencing financial strategies on a broad scale.
In this article, we are highlighting how the family office market has seen transformative growth over the past 10+ years, and the implications of this growth. By the end of this, you’ll have a better understanding of family offices and why many firms are swaying towards them.
Family offices are private wealth management firms established by wealthy families to manage their financial affairs. They handle a wide range of services, including investment management, estate planning, tax services, and philanthropy. Family offices can be single-family offices (SFOs), serving one family, or multi-family offices (MFOs), serving multiple families. There are other entities like Private Banks and Wealth Management firms that provide financial services to wealthy individuals, and tend to be a part of larger financial institutions. While the offerings and capabilities of these types of firms differ, they all exist to preserve and grow the wealth of their clients.
Analyzing the growth of family offices starts with understanding the size of the pool of high net worth individuals (HNWI). These people have a net worth of over $1 million, and if you have over $30 million to your name, you are considered an ultra-high net worth individual (UHNWI). In 2004, there were roughly 157,000 HNWI that held 9.6% of global wealth. As of 2022, that number has almost doubled to 295,000 that hold 10.6% of global wealth (JPM FO Report 2024). JPMorgan estimates that by 2027, the amount of HNWI’s will surpass 500,000 and control over 11% of global wealth. As the amount of wealthy individuals increases, the need and demand for bespoke financial services via family offices will grow.
Another driver of family office growth is The Great Wealth Transfer. As Baby Boomers pass on their accumulated wealth to their inheritors, a massive shift of wealth involving trillions of dollars will take place, the need for family office services will be in high demand. According to the Family Office World Newsletter, this will be the most significant wealth transfer in history, with an estimated $84.4 trillion being transferred over the next two decade (link). When significant amounts of wealth change hands, individuals will seek advice on how to preserve and grow these assets, as well as estate planning, tax advice, and much more.
As managing money becomes increasingly complex, and the needs of HNWI’s are becoming more and more diverse, wealthy families are seeking more sophisticated advice beyond traditional wealth management services and asset classes. The personalized wealth management solutions that family offices offer allow wealthy families to get individualized attention that will be in higher demand as this group of people accumulate more assets over time.
Dakota Marketplace empowers investment firms to forge direct connections with family offices, strengthening their sales and relationship-building efforts. By offering a focused outreach approach, the platform helps firms efficiently pinpoint and engage with key decision-makers. Additionally, it streamlines the fundraising process by acting as a bridge that links family offices with investment opportunities.
In future blog posts, we will discuss the implications of the growth in family offices, and highlight some success stories from notable family offices and their investment strategies.
To explore family offices in Dakota Marketplace, book a demo now!
