Family offices are sprouting up everywhere – although definitions can be elastic as to what constitutes that term. Centres such as Singapore, Hong Kong, Dubai and Geneva compete to attract them. Other financial hubs, such as the UK, give the impression that they aren't as constructive. The editor takes a look at the picture.

The US has thousands of single-family offices. Singapore has about 700 - rising from almost none a few years ago. Hong Kong is pushing hard to entice these entities to set up shop. Dubai’s DIFC and its rival in Abu Dhabi want a slice of the action. Switzerland, Monaco, Jersey and Malta seek to attract and retain family offices. It’s hard to ignore that competition is warming up. 

The market has become so busy that there's almost a dozen reports from banks, consultancies and various other bodies about what family offices invest in, what they pay their staff, where they are, and their fears and grumbles. In fact, it's reached the point where the field of family office "watchers" has got a bit crowded. These organisations are trendy. It's as though it is now the fashionable thing to have one, like a Ferrari, Swiss chalet, private jet or villa in Provence.

Part of this is to do with a growing awareness in Asia, the Gulf and other regions that family offices (there are anywhere between 6,000 and 10,000 of them, depending on who is counting), collectively hold trillions of dollars in wealth and are valuable organisations to have on one’s turf. They’re often holders of “patient capital” and that’s useful when banks are pulling in their horns to guard balance sheets, as has been the case since the demise of Silicon Valley Bank and the shenanigans in Switzerland with Credit Suisse. 

In the past, family offices tended to be secretive and little-known entities. They were set up, often wisely, to avoid prying eyes. That’s changing – if a family office is so discreet that it misses out on the invitation list of hot venture capital funds, for example, that’s not smart. Financial centres increasingly want to be their friends (well, most of them seem to be). Banks, which know they can lose some ultra-wealthy clients to family offices and independent shops, can still keep hold of some of the money by offering custody, support and other services. 

This isn’t, or should not be, a zero-sum game, but inevitably there is competition between jurisdictions, with various tax incentives and other structures being rolled out or considered, as in Hong Kong with a recent package of measures, Singapore with its reforms, and the new facilities in Dubai as linked to above. And that also means more traditional financial hubs cannot afford to be complacent. 

Cold Britannia?
And so it is rather concerning that in the UK, for example, one doesn’t hear much about family offices in any sort of broadly supportive way from the current government, or the Financial Conduct Authority. The UK’s resident non-domiciled regime (“non-doms”), which goes back to the late 18th century, could be axed if the Labour Party wins the next general election, which must be held by January 2025. Current opinion polls suggest that’s likely. Labour isn’t exactly keen on multi-millionaires. And the Conservatives aren’t much friendlier either. In a race to capture a “centre ground” of politics that is moving in a more collectivist direction, UK Chancellor of the Exchequer, aka finance minister, Jeremy Hunt, hasn’t shown any real intent yet that he’s going to cut top income tax rates, or kill inheritance tax (which due to non-indexing of the nil rate threshold, catches a wider and wider swathe of the population). The political narrative in the UK doesn’t appear that friendly to people who want to build family offices. If the government started to talk about attracting family offices, both domestic and foreign, I suspect it would get flak for attracting the "one per cent."

Swiss distractions
In Switzerland, the political and economic climate is a bit easier, as far as I can judge it. But the Swiss have got a lot to distract them at the moment – a new regulatory regime for external asset managers, and the Credit Suisse trauma that has, for a while, dented the country’s reputation. Whether that causes problems for family offices there is too early to tell. Switzerland is still home to trillions of dollars of cross-border wealth, so it has a lot of incumbent strength.

In neighbouring Germany, there's a large and very domestically-focused family offices sector, linked historically to the mittelstand medium-sized, often family-run businesses that have been the backbone of the country's economy. They tend to be very discreet.

US warnings and opportunities
In the US, family offices are plentiful, and this is a sector that dates back to the days of the Rockefellers in the late 19th century. The market is largely domestic, although some firms, such as the Tiedemann multi-family office, in January 2023 merged with London-based Alvarium to expand into Europe and Asia (in another deal), and there may be others considering a similar move. One trend this publication is struck by is how families in Singapore, or the Gulf, for example, want to learn ideas from the US market. But there are also warning signs. When the Archegos hedge fund in New York blew up in 2021 (the group was classed as a family office), and hit Credit Suisse (one of many of that bank’s misadventures), it prompted some politicians on the Left side of the aisle to call for family offices to be more heavily regulated. This has prompted calls, such as from the law firm Dentons, for the sector to wake up to legislative threats. (See another story here on why the criticisms of family offices missed the mark.)

There has been pushback, and one suspects some of those calls might be drowned out in the political noise ahead of the November 2024 US presidential elections. But the sector should not be complacent. Today’s Republican Party is different from that the Reagan era, and the modern GOP with its greater support from blue-collar voters might be open to going after the “coastal elites” with their family offices. The Democrats continue at times to flirt with a wealth tax, so it appears. So this industry needs to be on top of its game in making the case for why it matters. 

And, as I have noted when talking to some figures in the sector, the case for family offices is that they provide an often useful structure within which families can build, transfer and inherit wealth wisely and responsibly. This is, if you support the ideas of an open market economy as opposed a zero-sum view of the world, an important part of the ecosystem of free enterprise. It is a sort of barometer.

Whatever the arguments, tracking the family offices market is and remains a key part of what we do at this news service and, as I don’t hesitate to point out, we work as an exclusive media partner with Highworth Research to track its activities. (Click here for a free sign-up.)

Whether in the sultry heat of Singapore or the more bracing climes of New York and Geneva, family offices are now a big story.