Key Trends Redefining Family Office Dynamics

What are the key family office trends? Namely, greater attention is paid to risk management, private equity is emerging as the top investment option, there is an increased focus on battling cyber threats, and outsourcing is becoming a more popular option. If you want to learn more about them, keep reading this article—we will discuss all the above (and more) family office trends here!

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6 Key Family Office Trends

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So, what trends will redefine single-family and multi-family offices? Some are in line with general wealth management trends, while others are family-office-specific. Let’s learn more about what the future will bring.

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Focus on Risk Management

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The unstable global geopolitical situation, along with skyrocketing inflation, make up the risks that family offices need to manage this year. All of these fuel the concerns in such businesses, leading to the prioritization of risk management.

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Apart from traditional methods, family offices also utilize ESG in wealth management investments since such opportunities are usually safer. This way, they line up with the expectations of modern investors while also decreasing the impact of environmental uncertainties on the managed assets.

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Private Equity on the Rise

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Another crucial trend that we can observe, affecting both single-family and multi-family offices, is the shift from public to private equity. This is mainly due to their higher long-term potential—all it takes is a patient client.

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This is proven by the current ratio between private and public market investments made by family offices. According to a survey by Campden Wealth and RBC, North American family offices currently allocate about 29.2% of their investments in private markets vs. 28.5% in publicly traded stocks.

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Cybersecurity and Battling Cyber Threats

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This is one of the general wealth management trends that impacts the way family offices operate. As more cyber threats emerge and data protection legislation becomes stricter, cybersecurity in wealth management becomes yet another priority. 

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Firms reshape their procedures and put more resources into ensuring that their client data is protected for a reason. According to a survey by Boston Private, about 26% of private offices had suffered a cyber attack, while two-thirds of them (17.3%) occurred in the 12-month period before the survey. The need for better cybersecurity is obvious—family offices realize that and put more effort into protecting their data and systems.

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Outsourcing

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Outsourcing is also becoming popular, though not in the form of fully outsourced family offices. Instead, many such businesses choose it as a way to scale up their operations and provide additional, more out-of-the-box services.

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While this is a natural way of how family offices work, we can see an increase in the reliance on outsourced experts vs. in-house teams. According to a report by Deloitte, 34% of family offices plan to increase the extent to which they work with outsourced experts, 59% do not plan to make a change either way, and only 7% plan a decrease. We can see that the largest family offices work on a partner model, where outsourced experts help not only with additional services but also with excessive workloads when they have to be completed in short time spans.

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Wealth Transfers

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This is yet another general trend observed across the whole wealth management segment. We are currently entering an era called The Great Wealth Transfer, a period when Baby Boomers pass on their assets to Gen X and Millennials. This occurs to such an extent that many family offices make it their top 1 priority.

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With the wealth transfers and associated succession plans come one other major change, this time in the communication with the clients. As the new generation comes into play, more focus is put onto digital channels and remote communication—this is a developing family office trend that we should observe not only in 2024 and 2025, but also in the following years.

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Artificial Intelligence

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We live in a time when no list of trends can be completed without the mention of AI, and so it is in the case of family offices. The generation shift prompting the digitization of family offices makes it much easier to implement artificial intelligence and machine learning. This, combined with the power of such tech, makes such companies more and more likely to implement AI.

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Just take a look at our family office platform. It offers you, among others:

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• automated portfolio reconciliation with excellent data accuracy,
• smart portfolio management tools, which enable you to:some text
  • quickly calculate risk,
  • find investment opportunities,
  • remodel and rebalance portfolios easily,
• elaborate client management module to store all your client data, analyze it and extract insights out of it.

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The power of AI and related technologies is yet to be fully realized and unleashed across family offices. Yet, it has already embarked on a journey towards becoming an industry-wide standard.

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Conclusions

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Most of the current family office trends rightly revolve around the digital realm. With the generation shift and the increased capabilities of new tech, we are bound to see quite a lot of changes pushing family offices forward towards a better, faster service. At the same time, we must not forget market-related trends, as the recession, geopolitical conflicts, and general uncertainty also shape the way such businesses operate in 2024.

Do you want to learn more? Read our article: Is it possible to benefit from AI in wealth management industry?