As the number of ultra-wealthy investors continues to increase, financial advisers are developing specialised practices to serve their needs, with family offices becoming increasingly sought after.
Structured as single-family offices that serve the needs of one ultra-high-net-worth family, or multi-family offices, which pool resources to serve the needs of a few to several dozen ultra-wealthy families, this segment is growing worldwide.
In Canada, family offices are booming. "Ten years ago, people didn't really know what a family office was," Chris Clarke, family office director and chief executive officer at First Affiliated, a multi-family office in Collingwood, Ont., that works with about 70 high-net-worth families told The Globe and Mail.
Ten years ago, people didn’t really know what a family office was"
"Now, because of this need for independence, objectivity and holistic [financial] planning at an experiential level, [combined with the fact wealthy Canadians are also] thinking about the succession to the next generation, the needs [of the ultra-high-net-worth] are changing and their focus is changing. That's why the family office is on the rise."
Canada has the fifth-largest ultra-high-net-worth population in the world, with 10,840 people enjoying a net worth of US$30-million or more, according to Wealth-X Pte. Ltd.'s World Ultra Wealth Report 2018 - and the trend is upward, with a year-over-year increase of 13.9% in population and 14.8% in wealth from 2016 to 2017.
In India the practice has taken off only recently.
"The rapid expansion of UHNW individuals in India has led to a growing appetite for more efficient, effective and prosperous ways to invest money and manage assets," says a report on Indian family offices by Edelweiss and Campden Family Connect.
"Fuelled by global trends and a desire to further professionalise a family's practice, families of great wealth are starting to set up family offices as vehicles through which they can invest their wealth into different asset classes such as equities, private equity, real estate, fixed income and hedge funds," it adds.
According to the report, which studied 78 families of wealth in India, nearly half (49%) utilise family office services.
Globally, assets managed by family offices are "growing at a faster pace" than that of advisers that cater to the more traditional high-net-worth market, or those with $5m or more in investable assets, according to Cerulli Associates.
Ernst & Young estimates there are "at least 10,000 single-family offices" around the globe, and at least half of them were set up in the past 15 years, according to its Family Office Guide."
About 45% of family offices said they plan to invest more in "direct investments" in the next 12 months, according to UBS' "Global Family Office Report 2018."