Why are the world’s wealthiest families flocking to family offices?

The wealthiest families in the world are increasingly investing their portfolios into risk assets rather than cash, a recent survey of more than 338 family offices revealed.

“Family offices have put cash to work in 2024. Forty-three percent upped exposure to public and private equity,” Citi Private Bank’s (C) 2024 Global Family Office Report read. “Half of respondents increased their allocation to fixed income. Allocations to real estate — which is interest-rate sensitive — saw the most stability for the second year running, despite respondents’ concerns over high interest rates.”

This shift in investments in 2024 is significant because it reflects the attitudes of the wealthiest individuals in the world. Generally speaking, family offices are established by billionaires — though it’s feasible that anyone with more than $500 million in assets could employ the staff necessary to maintain an office, explained Richard Weintraub, head of Citi Private Bank’s Family Office Group in the Americas.

“Last year, over 95% of clients expected a decent return this year, and that happened over the past 12 months,” Weintraub said. “That really gives me confidence. When I look at these sophisticated family offices and what they’re looking forward to, they expect it to be another bullish year in the markets.”

As the number of ultra-wealthy people in the world increases, so do family offices. Today, the amount of wealth held by family offices is an estimated $5.5 trillion, which is already a stark increase from $3.3 trillion in 2019. According to Deloitte projections, the wealth held by family offices will increase by 189% by 2030.

While family offices are increasingly common, experts note it can be challenging to define exactly what they are or how they function.

“The terminology of a family office describes the same terminology as a red car. It doesn’t tell you how big the engine is and how many wheels it has,” Weintraub said. “When you think about someone with a family office, it’s probably someone with extraordinary wealth. And the reason to build it is mostly control.”

Even the size of family offices can vary widely — some families employ a few individuals, while others work with more than 100 advisors.

Weintraub added that while billionaires could work with multiple financial advisors, they then risk the possibility of over or under allocating their wealth, while handling assets through family offices can mitigate that risk. This, in turn, allows families to preserve their assets across multiple generations.

“Your own investment team will follow the guidance that you’ve given them,” Weintraub said. He noted that family offices deal with a number of concerns —including financial investments, philanthropy, and art collecting. He added that a family office “enables you to get everything you need to get done within, within one entity.”