Number of family offices could grow by 75 per cent globally. Experts see similar trend developing in Canada
Helen Burnett-Nichols • Canadian Family Offices
Family offices set to boom this decade: Deloitte survey
Number of family offices could grow by 75 per cent globally. Experts see a similar trend developing in Canada
As family offices grow, expect demand for professional services to grow along with them.
The number of family offices around the world has grown significantly since 2019 and is expected to further skyrocket over the next six years — bringing demand for increased sophistication and professional management, according to a global survey released last week.
While there were an estimated 6,130 single-family offices worldwide in 2019, the latest report in Deloitte Private’s Family Office Insights Series – Global Edition is predicting that number will grow to 9,030 globally by 2025 and to 10,720 by 2030, representing 75 per cent growth in just over a decade.
Much of that growth will occur in North America, where the number of single-family offices is expected to see significant expansion, from 2,210 in 2019 to 4,190 in 2030 — a 90 per cent increase.
The report surveyed 354 single-family offices, with average assets under management of US$2 billion, from around the world. It forecasts a dramatic rise in family wealth in the next few years.
In North America in particular, the total estimated wealth of families with family offices has more than doubled since 2019, to US$2.4 trillion. By 2030, it is expected to rise by 71 per cent, to US$4 trillion. (Individual figures for Canada were not provided in the report.)
Carolyn Cole, founder and CEO of Cole & Associates, a firm that advises on family office strategy and design in Vancouver and Toronto, says it’s important to note that family offices may be measured differently in the U.S. and Canada. Many family-controlled wealth structures in Canada, for example, would not define themselves as family offices.
Broadly, however, she sees a similar growth trend developing in Canada.
“Holding wealth together is the foundation of family offices,” Cole says. “As North America gets into multigenerational wealth, focuses less on selling businesses or IPOs, and maintains more assets within a family, you’ll see net worth continue to rise.”
The desire to professionalize
Family offices’ surge in popularity has been boosted by factors like increased wealth concentration, generational wealth transfer, and robust private equity and M&A markets.
The prevalence of new wealth around the world is also driving the need to create family office structures. Just under 70 per cent of all family offices were established after the millennium, according to the Deloitte report, with four out of 10 offices serving first-generation families. Just one in 10 family offices represents a legacy family of four or more generations.
As the industry grows, families are voicing a desire to further professionalize. Although roughly half of North American family offices are currently led by family members, says the report, the balance is expected to shift. Post-succession, the proportion of non-family professionals leading family offices is expected to be as high as 73 per cent.
In addition to running three family-office-related businesses, Carolyn Cole advises families and professionals across Canada.
As Cole explains, there is a growing understanding in Canada that rising generations do not need to be owner-operators or hands-on in any of the businesses to be good shareholders and stewards of family wealth.
“With the awareness that you can hire people and hold them accountable, you will see far more families professionalizing their family offices and enabling their inheritors to work in the fields of their choice, while maintaining governance over family wealth,” she says.
A greater leadership role
The report also highlights an increasing demographic shift as women take on greater leadership roles within family enterprises — and may be more likely than men to use a family office for wealth management, on a like-for-like basis.
While women comprise 10 per cent of all wealth-holders over US$100 million, they serve as the principals of 15 per cent of family offices worldwide, according to the Deloitte survey. In North America, women are the principals of 12 per cent of family offices, slightly lower than Asia-Pacific at 18 per cent and Europe at 20 per cent.
In Canada, Cole says there has been a significant and rapid increase in the number of women establishing, leading and running family offices in recent years—a trend that she anticipates will continue.
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“I would expect that within a decade, we would be more on par with Asia-Pacific and closer to Europe,” she adds.
Looking ahead, family offices, says the report, will be demanding greater sophistication and looking to broaden their reach. As many as three-quarters of survey respondents expect the future to involve an expansion in the number of family offices worldwide.
More than two-thirds of family offices also expect more institutionalization and professional management to take hold, while half of respondents are looking to greater adoption of asset class and geographic investment portfolio diversification.
Other trends those surveyed expect to see:
• Family offices becoming increasingly independent structures separate from families’ operating businesses.
• Expanded service offerings.
• More widespread adoption of operations-based digital technology.
• A transition to sustainable investments and operations.
Source: Original Article
