The number of family offices keeps growing
Published in Family Office Elite Magazine, winter edition 2016/2017:
Several months ago Wealth-X published their World Ultra Wealth Report 2015-2016. Wealth-X is an organisation which gathers global wealth intelligence about the affluent, and their report normally makes an exciting read.
The report highlights several developments that catch the eye. First and foremost the fact that the number of affluent individuals (i.e. those who own USD 30 million or more) hardly grew between 2014 and 2015 – it actually only increased by 0.6% to a total of 212,615 individuals whose total wealth amounted to USD 30 trillion. The personal wealth of about a quarter of those people was more than USD 100 million.
Where the 2014 issue of the report made reference to the global number of family offices (the number of single- and multi-family offices was estimated to be between 7,000 and 11,000), no specific section is dedicated to these institutions in Wealth-X’s last report.
This in itself is not surprising as it is indeed quite a challenge to estimate the total number of family offices. However, it is worth making a (non-scientific) attempt, because the number of single- and multi-family offices keeps increasing as demand for family office services keeps growing and the assets under administration with family offices are at an all-time high.
Defining family offices
The main challenge in trying to establish the number of family offices in the world is defining what a family office actually is. There is no universally recognised definition of a family office. In fact, most jurisdictions do not regulate family offices, whether single- or multi-family, so there are no registers that can be used in order to establish an accurate number.
A family office can be defined as a "privately controlled (group of) staff, employed within (or without) a dedicated structure that supports an affluent family with the organisation, management and maintenance of (all or some of) their assets, needs and wishes".
The distinguishing factor here between single- and multi-family offices is that multi-family offices are commercially operated and offer their services to more than one family.
Number of family offices
Although no global definition exists, an indicative minimum number of family offices can be deduced from Wealth-X’s report.
Wealth-X lists 2,473 billionaires in total in the world. It is safe to say that all those individuals have 'some type of' family office arrangement. In most cases a single-family office, and sometimes an embedded family office.
The 5,042 individuals whose wealth is USD 500–999 million will also almost all be using some type of family office services, be it a single- or a multi-family office. The estimate of the number of multi-family offices should take into account the risk of double-counting, as they cover not one but a number of families, so 4,000 (80%) for this group should be considered relatively accurate.
Single- or multi-family offices?
9,450 individuals fall within the category of USD 250–499 million in wealth. This is a more difficult segment to assess, as there are many families with wealth well above USD 250 million that neither have a single-family office nor use a multi-family office. At the higher end of this range it can be assumed that at least half of the families will work with some type of single-family office set-up. Towards the lower end, a quarter of the families will have a single-family office and half will have a relationship with a multi-family office. Avoiding potential double-counting of multi-family offices, approximately 3,500 family offices should be taken into account for this bracket.
The group of persons that hold wealth of between USD 100 million and USD 249 million dollars consists of 40,600 individuals. Assuming that half of those work with a multi-family office and the average multi-family office has 25 clients (often fewer) another 800 (multi-)family offices need to be added to the calculation.
This brings the total of family offices to 10,773, and that does not even include the biggest category likely to use a multi-family office – the 63,050 individuals with USD 50–99 million.
And they will continue to multiply
Wealth-X foresees 50% growth in the global UHNW population between now and 2020, by which time 318,400 people are forecast to hold USD 46.2 trillion between them. As that number of affluent people grows, so will the number of family offices.
But unless jurisdictions around the world introduce specific regulations for family offices to register, it will not get any easier to provide an accurate estimation of how many are out there.
Jan van Bueren is Global Head Family Office Advisory at the Swiss private bank Union Bancaire Privée (UBP) and Co-Founder of UBP’s award-winning family office advisory service - FOSS Family Office Advisory.
Thomas Ming is a Senior Family Office Advisory at the Swiss private bank Union Bancaire Privée (UBP) and co-founder of UBP’s family office advisory service - FOSS Family Office Advisory, located in Zurich.