Family Offices: What to Know

Introduction

In 2004, there were approximately 157,000 ultra high net worth (UHNW)* individuals globally who controlled 9.6% of total wealth. By 2027, economists estimate the UHNW population will rise to over 528,000 and control 11.1% of global wealth (Morgan 2024). A result of the growth in the UHNW population is a concurrent rise in family offices (FOs), which are anticipated to increase at a CAGR of 4.8% annually (Botha, n.d.). FOs are professional businesses that require budgeting and resources and are expected to generate a profit. The most often cited prime objectives of FOs are intergenerational wealth preservation and real asset growth exceeding inflation. Secondary objectives are succession planning, risk management, and family governance (Morgan 2024). 

Absent a standardized definition paired with the sector’s bias toward opacity, there is no clear consensus on the number of FOs, resulting in estimates ranging from 3,500 to over 20,000 (Botha, n.d.). Broadly, the criteria for a family office aligns with the definition of an (UHNW) investor, meaning investable assets of at least USD 30M. However, in isolation, assets under management (AUM) of USD 30M or even USD 200M can be an insufficient FO qualifier. Therefore, many practitioners identify an FO by a combination of AUM and the organization's number of employees, services offered, operational construct, and mandate. 

The ambiguity in defining FOs creates a lack of unanimity surrounding the point at which a client should open an FO. At the client level, the choice of an FO is ideally based on a holistic study of objectives, financial position, simplicity of portfolio, and lifestyle. Yet, despite the rather loose definition of what makes an FO, surveys of self-identified FOs report agreement in their mission. An overwhelming 95% of US families and 100% of international families cite financial security and longevity as the paramount concern. Following financial security and longevity, 70% of families cite succession planning as their next most consequential priority (Morgan 2024). 

By 2035, over USD 31T of wealth will be subject to intergenerational transfer (Morgan 2024). Frequently, the receiver of such an inheritance may not be mentally or emotionally prepared to manage the wealth. Further, first generation wealth accumulation is frequently created via a business that the second generation may not be interested in nor suited to operate. As such, the company may require a third-party steward or divestiture. If the company is liquidated, the new influx of cash will demand reinvestment, tax planning, and structuring that is likely outside the client’s core competencies and would benefit from a diverse and dedicated team of professionals. 

SFO vs MFO

Once a client decides upon a family office, they may elect to operate as either a single-family office (SFO) or a multifamily office (MFO). Each has distinct advantages and disadvantages. In the SFO structure, the client maintains greater control, privacy, and customization. The disadvantages of SFOs are higher costs, increased succession planning complications, and less access to investment opportunities. The common profile for an SFO is a client with greater than USD 100M that values control, confidentiality, and utilizes complex investment structures.

A fully autonomous SFO may cost between 100 and 200 basis points (bps) of AUM, meaning that to make financial sense, it is generally recommended an SFO’s AUM be USD 150M or greater. At the highest level, SFOs require dedicated resources in the form of software, staff, investment professionals, legal services, tax management, and risk control. In terms of absolute dollars, Citibank reports the median cost of an average, small FO as USD 1.5M to USD 1.8M per year (Kuphal 2024). 

MFOs are an option for clients looking for cost efficiency, enhanced network effects, simplified operations, and potentially wider deal access. The AUM of MFOs is between USD 30M and USD 100M, and they are often the logical step after a financial advisor. Clients best suited for MFOs require fewer bespoke solutions, are not as concerned with privacy, have principles that are less interventionist, and do not need a dedicated team of experts and advisors. 

FO: Recruiting & Working

Recruiting in a FO can be difficult, as FOs find themselves competing in a limited talent pool against top-tier firms. Frequently, even large SFOs, either intentionally or unintentionally, may limit hiring to candidates with whom they have an existing relationship, such as their private banker and personal attorney. In such cases, competency may be secondary to trust and ease of process. Recruitment is a time-consuming and complex endeavor, and many SFOs believe it is a misallocation of limited resources. 

From an employee perspective, working at an FO comes with a unique set of challenges and opportunities, both positive and negative. First, every family office is different, with some working on complex financial products and deals, while others are far more conservative. Career progression and depth of resources are frequently cited concerns. However, the SFOs’ smaller relative size and lack of product specialization is offset by a diversity of exposures, responsibilities, and networking possibilities. Such prospects may be more limited in an institutionalized setting. 

The average SFO employs 11 staff members, but the median number is five. The staff may be comprised of both family and non-family members. J.P. Morgan reports 78% of remuneration is in bonuses, 47% is in co-investment opportunities, 13% is as shares of the FO, while 5% may be in the form of phantom options (Morgan 2024). In a survey from the Family Office Club, the average salary of an FO CEO is USD 600K and a CIO is USD 180K (T 2023). 

The basic portfolio structure of an SFO or MFO is similar. Both forms of FOs typically allocate over 45% of their portfolio to less liquid alternatives, a product of an FO’s ability to invest on a duration surpassing that of a single investor's lifetime. Public equities account for approximately 26% of value, while cash and cash equivalents comprise the residual (Morgan 2024). According to the 2024 Global Office Report, 76% of FOs benchmark performance, either against a relative index or a customized SAA. J.P. Morgan reports FOs’ 2024 average target return at 11%. 

Conclusion

FOs may be an ideal solution for investors with a high net investable asset position and a financial profile that necessitates greater degrees of management discretion. The legacy nature of FOs fosters a portfolio centered on long investment horizons, lower liquidity requirements, and increased risk tolerance, resulting in above average allocations to relatively illiquid alternative investments. When determining whether an FO is a fit, clients should consider more than just their net investable asset positions. FOs are businesses, and like any business, their success depends upon efficient management, controlling costs, and generating a profit. 

*Ultra high net worth (UHNW) persons are those with investable financial assets of USD 30M or greater.

Sources:

Botha, Francois. n.d. “The Family Office Market: Does Size Matter?” Forbes. Accessed April 23, 2025. https://www.forbes.com/sites/francoisbotha/2025/03/02/the-family-office-market-does-size-matter/.

Kuphal, Sheldon. 2024. “Single Family Office vs Multi Family Office: Key Differences.” CGAA. December 24, 2024. https://www.cgaa.org/article/single-family-office-vs-multi-family-office.

T, Author Marko. 2023. “A Comprehensive Guide to Family Office Jobs | Irving Scott.” October 24, 2023. https://irvingscott.com/insights/guide-to-family-office-jobs/.

Morgan, JP. 2024. “2024 Global Family Office Report.” https://privatebank.jpmorgan.com/nam/en/services/wealth-planning-and-advice/family-office-services/2024-global-family-office-report.

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