Family Office
OPINION OF THE WEEK: Family Office Growth – A Mixed Global Tale

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.