1. The Family Office In The US
To understand the reason behind the prevalence of family offices in the U.S, besides the fact that the U.S has the greatest share of HNWI population in the world, a brief history is provided.
As the economy grew over the years, the numbers of HNWs continued to grow, and so was the demand for such family services. Today, family offices have become an important part within the financial culture in the U.S. It is estimated that there are 500 to 1000 single-family offices, and around 2500 to 3000 multi-family offices in the U.S alone, managing approximately between $300 billion and $ 750 billion for their HNWIs and their families.
2. The Family Office In Europe
Contrary to family offices in the U.S, which have a more extroverted approach, family offices in Europe have always been more ‘traditional’, that is, they are said to lean more towards protection and preservation of wealth rather than further mass wealth creation. They are more concerned with their confidentiality and privacy.
Families such as the Medici family in the 12th century and the Rothschilds in the 1700s and other family dynasties all had their ‘family offices’. These ‘old’ families were said to be the ancestors of today’s multi-family offices, as they offered services to other families besides their own in return for a fee. They also played a key role in the financing of infrastructure and in the Industrial Revolution, which marked the expansion of the role of the bank trust officer . Until then, the duties of SFO had remained rather simple, and serving solely one generation of families, but as stated in Amil, R. et al. (2008), ‘the Industrial Revolution marked the beginning of the truly individualized and separate SFO as ever increasing wealth levels signalled a need for wealth preservation across multiple generations.’
It is difficult to estimate the exact figure of family offices in Europe due to their higher level of privacy – one 2010 estimate places it near 1,000 . With such a huge pool of wealth residing in Europe especially in places such as London, Monaco and Switzerland, it is logical to conclude demand for a family office model to increase over time as UHNWs become disenchanted with mainstream private banks and generalist wealth managers.
3. The Family Office In Asia Pacific
Over the past decade, economies from the Asia-Pacific regions have benefited from the tremendous capital inflow from the developed countries in the West. As a result, high GDP growth rates and increasing market capitalizations helped fuel the accumulation of wealth across these regions, attracting increasing opportunities for the private wealth industry.
In a Billionaire Census jointly conducted by Wealth-X and UBS , China is found to be the country having the second most billionaires in the world with 175, just after the United States at 515. In terms of population of billionaires in an individual city, Hong Kong came second with a total number of 75, while both Shanghai and Shenzhen made the top 20, with 19 and 16 billionaires respectively.
In terms of the HNWIs, Asia-Pacific has recorded a tremendous growth in terms of both population and investable wealth in 2012, ranked second in terms of the population of wealth in the globe, just behind North America. Hong Kong experienced a 35.7% increase in the HNWIs population; while India had 22.2% growth. Other countries within the regions that recorded double-digit growth in the population of HNWIs also include Australia, China, New Zealand, and Thailand (Capgemini and RBC Wealth Management 2013).
If you compare the family office market in the Asia-Pacific region to either the U.S or Europe, one can surmise that the family office industry in Asia-Pacific is still in its infancy stage, except for the two financial hubs, Singapore and Hong Kong, with a total number just over 100 in the whole region. The concept of a family office is still not widely known in the Asian market, nevertheless it provides a huge opportunity for growth of new family offices to keep pace with the increasing number of wealthy families in the region.
Australia for example, although having a small population, its private wealth market is said to be among the largest and fastest growing in the world. According to the family office group , Australia is the 13th largest economy in the world, has a healthy and well-established financial sector, and more importantly a stable government which helps set the stage for family office demand.
The family office industry in Australia is growing rapidly – one estimate puts the number of single family office to approximately 350 in 2011, with a total wealth of $226 billion. The table below gives an idea of the family office sector in Australia as of 2010, ranging from AUD $2 billion to $71 billion.