Family offices boom, private banks shrink

The number of single-family offices has more than doubled in the past 10 years, whereas the number of private banks is shrinking as the ultra-wealthy prefer to take more control of their assets.

Wealth X, a Singapore-based consultancy, reckons there are between 7,000 and 11,000 single- and multi-family offices globally. But the true number may be higher, particularly when it comes to single-family offices.

It is difficult to know because many family offices are highly secretive and don’t necessarily tell the outside world they are a family office. Family offices are also very much a western concept and are less popular in countries in Asia and the Middle East, where families prefer to keep their money in operating businesses.

But some number-crunching can give an idea of the figures. The number of ultra-high net worth individuals worth $200m-plus is, according to Wealth X, around 31,000. Assuming that $200m is the start point whereby individuals and families might consider an investment office of some sort, it follows that the number of single-family offices, if a loose definition is used, is more likely to be between 10,000 and 15,000. In 2005, it was thought by wealth management consultancies that there were between 2,000 and 3,000 family offices – still a lot, but nothing near the numbers today.

In contrast to the family office boom, the number of private banks is shrinking. Again, it’s difficult to place an exact number on this, but the number of Swiss private banks has fallen to 139 in 2013 from 182 in 2005, according to KPMG. Most of their numbers have been absorbed through mergers, which have accelerated with the crackdown on offshore money. Unlike private banks, single-family offices aren’t regulated.

Although private bank numbers might have fallen, the amount of money they manage hasn’t. Scorpio Partnership, a London-based wealth consultancy reckons wealth managers globally managed around $20.3 trillion in 2013, up from $18.5 trillion in 2012.

That is an increase of about 10%. Given that family offices are more popular these days, it stands to reason that the amount under family office control has increased by more than that. Again, no reliable data exists. But Forbes’ billionaire list might offer a proxy in terms of the increase in the assets under management held by family offices. According to the latest list, billionaires’ wealth rose by 20% to $7.05 trillion in 2014.