What family offices need to do to successfully compete with traditional wealth management firms.

A family office is a private wealth management advisory firm that is established by an Ultra-HNWI to manage their family’s private wealth. Any firm that provides investment advice only to family members, is wholly owned and controlled by family members, and does not hold itself out to the public as an investment advisor is considered a family office.

However, a family office goes beyond just managing wealth. It also helps secure a family’s financial future by building, preserving, and transferring family wealth and legacy. While early family offices can be traced to Europe, it was in the early 19th century that wealthy merchants along the east coast of the United States started hiring advisors to protect their family interests. The demand for family office services kept growing as the number of Ultra-HNWIs increased over the years.

Today, wealthy families rely on family offices for full time professional management of their personal fortune. The number of family offices in the U.S. has grown to about 3,000 single-family offices, with assets under management between $1 trillion and $1.2 trillion. There are also about 150 multi-family offices4 having assets under management between $400 billion to $450 billion.

Family offices currently stand amid a landscape filled with opportunities to further expand their business. However, they are also struggling with regulatory, operational, and technological challenges which may slow down their growth. It therefore becomes imperative to understand these challenges and make business decisions that will help family offices emerge successfully in an environment of intense competition with private banks and other wealth management firms.