2024 Global Family Office Report: Insights from single-family offices around the world

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A shimmering strip of gold plated handwriting swirls elegantly across a dark surface. It spells JP Morgan. Text, ideas and insights.

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Thank you so much for joining us today. I'm William Sinclair, and I run our US family office practice. And

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Text, William Sinclair, Head of FIG and US Private Bank family office. William is wearing a suit and a red tie. He has short light colored hair combed to one side. In the background there are vertical strips of grey soundproof material. William sits at the table to the right of two women. Intricate logo of JP Morgan is up on the wall in the background.

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I am really excited to share our 2024 Global Family Office Report with you today and some of our key findings.

I'm joined by two of my partners, Elisa Shevlin Rizzo, who runs our US family office advisory practice. She works with families on family office, governance, design, construction. She also helps work with families on the rising generation and the education around that generation.

And

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Elisa is wearing a blue suit. She has shoulder length blonde hair.

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along with Elisa is my partner Jamie Lavin Buzzard, who runs our family office investments and advice group. She works with families as they think through their investment policy statements, their investment allocations, benchmarking, and helping bring unique opportunities to many of the largest and complex families we work with.

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Jamie is wearing a pink blazer over a white top. She has long reddish brown dark hair. Slide, 2024 global family office report, insights from single-family offices around the world. Logo, JP Morgan, private bank.

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And I wanted to personally thank all of you that are joining us today because you helped participate in this survey, and we are giving you an early preview. And thanks to you for being a part of this. And this survey and report reflect contributions from 190 families from around the globe, representing 48 different geographies, and the average net worth of the families that responded was $1.4 billion.

So Elisa, maybe we can go through some of the key findings and highlights from the report.

Absolutely.

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Slide, highlights from the report. A list of data points with icons beside them.

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So the report is very rich in detail, but we gathered information and insights in five key areas. The first is size of family offices. The second is the types of services that they are providing to their family member clients.

Third is how they're governed. How are they making decisions? How are they organizing themselves? We talked a lot about investments with our clients and in the report itself, and then costs and staffing.

And so there's some key highlights here. Maybe you can go a little bit deeper now into the actual key highlights.

Sure. So not surprisingly, family offices really reflect the families that they serve. And so as such, we saw wide variations in the size of the family offices, the number of households that they're serving, the types of things and activities that they're doing in-house versus outsourcing, whether it's investment management, wealth management, overseeing trusts, concierge services, family education, and more.

And there are a couple key themes that jumped out at us. One is that family offices are really organized around investments. We'll talk more about that later with Jamie. But there's a real interest in alternatives, in particular, for our family office clients, and they report, on average, about a 45% allocation of the portfolio to alts.

Second theme that jumped out at us was that family members are engaged in the family office and in decision making and actually running the family office in every way, shape, or form. Particularly around investments, family members are in control of investment decision making, and we'll talk more about that later on, as well.

We asked a lot of questions about the services that are being provided in family office, and there are great detail in the report itself about the different types of services family offices are undertaking and whether they're doing that work in-house or whether they're outsourcing that work to third-party providers.

And we also saw a lot of gaps, too, with some of the family offices as well.

Yeah. We asked where they felt that they needed assistance or where they felt that there was a gap in their existing service model, and there were three key areas that really resonated with clients across the globe.

One was cybersecurity. Around the world, family offices are very concerned about the risk of cyber attack, and so that came through loud and clear, with 40% of our family office clients indicating that cybersecurity was a gap in their service model.

The second area of concern was around family governance. How are the families making decisions? How are we engaging with one another to ensure the perpetuation of the wealth from generation to generation?

That may be with starting a family mission statement or drafting a family constitution. It may be around creating investment committees, distribution committees, what have you. But governance was a key theme where they felt that there was a need and a gap in their existing model.

And then last, family wealth education was another area that families around the globe really indicated a need for further support.

And the one thing here that stood out to me was this next stat, which is kind of unbelievable, how many families-- I think as you highlighted, one of the gaps is cybersecurity, but how many families are actually affected by this issue.

Yes. 24% of the families that we surveyed have been subject to some form of a cyber attack or other fraud breach, and so that really indicates the scope of the issue. And the dollars that could be involved are substantial.

And then also cost was something that you mentioned that we looked at, and so I think, as you can see here, the average cost to operate a family office has continued to go up, as has that war of talent.

Absolutely. And there's a lot of real detail in the report itself, going through costs based on the size of the family office and the assets under supervision. I would say, though, that for a family office with about $1 billion of assets under supervision that has a relatively well built out team, the average operating cost is about $6 million.

But when I say that's the average, they have to understand that there's huge variations in the relative cost profile of family offices. And so that's an average, but it's not necessarily the case for every family.

And so we'll go a little deeper on all of these points, but maybe to start, why don't we start with the allocations that we're seeing within our family office clients? And I think as Elisa said, that rise in private market and alternative investments. So Jamie, maybe you can talk through that.

Absolutely.

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Slide, Global family offices are heavily allocated to alternatives with an average return target in the double digits. A list of three data points. A graph. Three Circular bands with different proportions of the band in different colors. There is a legend that indicates what each color means. The graph is labeled by assets under supervision.

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And before I get into the allocation, what we wanted to know from these family offices were how are you driving that allocation? Do you set long-term targets, and how do you get there? And what we heard was 55% of the family offices do set long-term asset allocation targets to derive returns.

The

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Text, Jamie Lavin Buzzard, Head of Family Office Investments and Advice.

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average return target that we heard was 11%. And of course, there's a range there, the low end being 4%, but some family offices setting targets over 20%. And also interesting that there's some dispersion in setting those targets, so more family offices internationally set targets, about 3/4, versus half of the US family offices.

But even more interesting is when a US family office set a long term return target, they actually had a higher target. So 44% of the US family offices set a target above 10% versus 21% of the international family offices setting a target above 10%.

And again, not surprising because what we've seen, just in the walls of JP Morgan and across the industry, is this capital chase into alternative investments. And so the asset allocation decision didn't surprise. 45%, we mentioned, average allocation to alternative investments.

And that includes the whole gamut. That is private equity, private credit, venture, hedge funds, direct deals. There is a large asset allocation to alternatives, and that is really driving those higher return targets.

Now, we also have not abandoned our core balance of the portfolio. We still see allocations to public equities and to fixed income and cash, of course. The average allocation to public equities was 26%, with 21% to fixed income and cash.

So those are very much alive and well. And this also won't surprise you, but as the assets under supervision did increase as that family office did get larger, the allocation to alternatives also grew with it.

And we also saw an interesting trend, obviously, with continuation of families thinking about where they want to insource versus outsource, and that also is a little bit dependent on the size of the family office from an AUM perspective. So what stood out to you there?

Absolutely. And

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Slide, nearly 40% family offices with less than $1 billion A.U.S. outsource investment management. Three data points with percentages. Text, top five motivations for working with external investment advisors. One, access to due diligence and manager. Two, access to research. Three, cost savings. Four, ability to benchmark family office decisions. Five, technology access.

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this also plays into where family offices are finding their ideas and also finding investment opportunities. But for family offices with assets under supervision below $1 billion, we saw greater outsourcing.

We saw 40% outsourcing some form of investment management. And the low and high ends of that spectrum, 38% of those family offices between $50 million and $500 million do outsource versus the other end of the spectrum, the family offices over $1 billion, 20% tend to outsource.

And the interesting thing in all of this, though, is there's obviously a range of spectrum of what and how these family offices are outsourcing. Some family offices, of course, are creating very sophisticated investment teams in-house. Some are supplementing in-house and external.

But 80% of those family offices do outsource something within the investment realm. And the top areas that we found the family offices outsource, the first being access to due diligence and managers. Again, that is likely playing very much into that heavy alternatives allocation.

The next being access to research, followed by cost savings, economies of scale. If you don't want to construct that sophisticated investment arm in-house, you can supplement it with external advisors. Also, the ability to benchmark. What are the other family offices doing? And finally, access to technology is a really important one.

The other thing that we saw was 37% of family offices do utilize external advisors to do a health check on the portfolio, to get advice on is my asset allocation standing the test of time, is my manager selection and due diligence, and that's very much a form of governance.

And from a governance perspective, I think we also saw some distinctions, both domestically and abroad, in terms of the governance structure and who's actually making some of these decisions.

Absolutely.

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Slide, investment governance structures differ greatly between US and international family offices. Four data points with percentages.

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The family is very involved. Elisa mentioned it at the outset. 90% of these family offices reported back that the family is involved in the investment making decision in some way, shape, or form. 50% of these family offices said a family principle is the primary decision maker. They may be the CIO, or they may not be.

And again, there was some dispersion in US versus international. 56% of the US family offices said that family member is the primary decision maker. Much more investment committee focused internationally, so 46% of those family offices said that an investment committee is making the decision.

But again, remember, 90% of the time, a family member is involved, so there is a family member or two or three on those investment committees.

And one of the other things that I think stood out, though, as people to think about the insourcing and outsourcing, is really just the cost of operations for these family offices. It's continuing to rise. There's a war for talent, and I think that distinction happens more so at the sub-billion dollar family office.

But Elisa, maybe you could just talk through what we are seeing from a cost perspective.

Sure.

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Slide, large established family offices spending average of $6 million on annual operating costs. A bar graph labeled operating costs increase as assets under supervision rise. Global overview by assets under supervision. In the vertical access there are categories of amounts of money. In the horizontal axis there are percentages from 0 to 100.

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Absolutely. So not surprisingly, this is a question that we get all the time, particularly with families that are just getting started with building their family offices. Typical operating costs can vary. Might need facilities. Certainly, you're going to need staff. Technology is going to be another cost. Risk management. Insurance.

And then you're going to need services like accounting, reporting, legal, maybe HR. So there are a lot of different costs that come into a family office, and the relative costs vary depending on the size of the family office, the number of households that are being served, the value of the assets under supervision, and then the complexity of those assets, and then particularly if the family is doing in-house investments where they're building out large investment teams.

So the range really varies. I mentioned before that the cost of running a true single family office managing substantial wealth of $1 billion or more is about $6 million annually. And then it varies with smaller family offices, of course, seeing much lower relative costs.

We also saw a pretty large percentage of reporting costs in excess of $10 million.

Yes, we did. So in the report, there are a lot of different charts people can refer back to, and you can see the variation between family offices that are small, with less than $500 million and a staff of less than five people, versus the large, very built-out family offices, where the costs can vary and go up to $10 million or more.

And what did we see in terms of the number of staff by family office size? What stood out to you there?

So

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Slide, as assets under supervision rise family offices tend to staff up. A bar graph labeled as assets increase so does the number of employees. There are categories of number of employees in the vertical axis and percentages from 0 to 100 in the horizontal axis.

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it was surprising how many family offices at every level of wealth are relatively small. A significant proportion of family offices have less than five people. In fact, 50% of the global family offices that we're working with employ five people or less to manage their balance sheet and their family assets, regardless of the size of the wealth.

So that was one thing that really stood out to me. And then also thinking about who's in these key roles. Oftentimes, we're asked who my first hire should be. Should it be a CEO? Should it be a CIO? Do I need a general counsel? And so those are the types of questions that we're asked often about staffing.

A

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Slide, increasing professionalization does not necessarily mean that family members are not involved in running the family office. Two pie charts labeled US overview and international overview. Text, who typically fills the CEO position?

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significant cost driver in terms of talent is really the investment staff. As Jamie mentioned, there's a real war for talent out there, and so family offices are competing with private equity firms, venture capital firms, to really get the best type of talent to run their family portfolios.

So the majority of the cost is driven if they're insourcing or bringing in the investment team in-house.

Yes. By our estimates, about 60% of the operating costs of a family office is directly tied to staff and compensation and benefits.

Got it. And so as we're seeing this continued insourcing-outsourcing question, what are some of the other ways that our families, both domestically and internationally, are thinking about pulling in the family, though, into the actual family office?

Well, as Jamie said, the families are really engaged in many of the family offices that we're working with. And particularly with the emerging or newer family offices, we do see family members playing key roles.

It's very common for the family principal to be serving as a CEO. They may also be wearing the hat of the chief investment officer as well and really functioning in both capacities. In the US, about 55% of CEOs are actually family members.

Oftentimes, the principal. Sometimes it may be another member of the family. Maybe it's a sibling. Maybe it's a child who's leading that family office development and overseeing the management of the activities therein.

And we also saw, as we think about the rising generation, distinctions of what families are doing both internationally and here in the United States with how they're engaging the next generation. So

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Slide, approaches to preparing the rising generation differ by region. A numbered list that compares percentages of approaches between US and international

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maybe you can talk through what really stood out to you from that part of the report.

Sure. 70% of the family offices that we're working with said that preparing the next generation and succession planning was a key concern and a key objective of their family office. And about 2/3 of the families have adopted some sort of a governance approach and an education approach to get their family members ready to take on leadership roles at some point in time.

In the US, of course, we've been talking about the great wealth transfer for many years, and we estimate that between now and 2045, about $84 trillion of wealth will change hands from the Baby Boomers to the next generation, primarily Millennials, but also Gen X and Gen Z.

Say that number again.

$84 trillion, by some estimates. So it's a lot, and it's starting to happen. And so we know that pace is going to accelerate as the years go by. So clients indicate that they recognize the need to prepare their children and grandchildren to take on the responsibility that comes with wealth, and that's a theme we've heard from clients around the globe.

But the approaches that they're taking really vary from region to region. In the United States, we find that many of the families that we're working with use philanthropy as a gateway to have these conversations about wealth and to prepare their children and grandchildren to engage with family wealth and think about what's the purpose? What are the values that the family wants to impart?

And Elisa, these are things like family foundations, donor-advised funds, as a way to bring the next generation into the family office.

Absolutely. That's exactly the different types of programs that family offices and families of great wealth are running to help engage their family members in philanthropy. They might be involved in reviewing grant requests, for example, from a private foundation.

They may be talking about shared family values so that they can identify themes that they want to explore in areas of impact. It may be going to tour a facility or an organization where the family has made or is considering making a substantial contribution.

So there are a lot of different ways that we're seeing families get their next generation family members engaged in conversations about family wealth and stewardship through philanthropy. Interestingly, we see that much less in the international side.

Many of our international clients are using a different measure to get their next generation family members involved, and for the international clients we're working for, it's often the family business. And that's the gateway for many of the next generation conversations about education and engagement with our global clients.

I think we saw, interestingly, with our international families or those with operating businesses, some of them are actually setting criteria around what it takes to come into that family business, right?

Absolutely. They're setting policies in place that underline what kinds of educational experiences family members should have, whether they should have experiences in employment outside of the family business.

Oftentimes, that's very much the case. They're looking for their family members to go out into the world, get educated, learn something from others, perhaps in a related field, but be able to bring back those experiences to the family office and to the family business itself.

So some of these families are requiring, you might need to go get an MBA or have 10 years of work experience outside of the business before coming into the business.

That's right. And they also may be providing mentorship opportunities within the family business-- opportunities for shadowing older family members or existing executives within the family business so that people can see what's happening, and they can tour facilities. They can understand the job.

But having that baseline, what are the minimum requirements before I can come into the family enterprise, that's an approach that a number of families that we're working with are taking.

Interesting. And

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one of the things that, I think, you said at the beginning, and maybe, Jamie, you could go a little deeper on this, was that 1 in 5 families have actually been a victim to either identity theft or a cyber fraud. And what are we doing to try to help combat some of that here to help many of these families?

Yeah. It's shocking, and it's scary. And there's so many interesting things going on in the fast-moving technology advancement, whether it be AI, large language models such as ChatGPT. That is all very exciting. But just as fast, cyber crimes are increasing.

And not only did we see a quarter of our family offices be affected by some sort of fraud or breach, 40% also reported that they don't have this cyber protection capability in-house. And so one of the benefits to working here at JP Morgan is we have to, by the very nature of who we are, one of the largest banks in the world, invest a large amount of money to protect ourselves each year.

Last year at JPMorgan, we invested $700 million in protections for the firm in cybersecurity. We learn a lot by doing that. So what we seek to do is take our own learnings from protecting JP Morgan to help our families protect themselves.

We will come in and do education sessions. Sometimes, that is very technical in helping set up the family office and even the family home to be safer and protect from cyber criminals. Sometimes it's speaking to the next generation. Children as young as seven, eight, nine, 10 years old who are starting to get smartphones, and how they can protect themselves.

It's a very important thing for our families and family offices, and that's one of those areas and economies of scale that we see a lot of family offices needing to supplement because it's just a difficult area to hire in-house.

Elisa, anything else or any other takeaways from this report that you wanted to share today? And I know our advisors will be able to go deeper with many of the families they work with. But any other key highlights?

So one key highlight that I found was the percentage of families who are trying to shield their next generation family members from knowledge about the family wealth, and that may be a good strategy when children are relatively young.

But in today's digitally connected age where anything can be looked up on the internet, it's very, very difficult to put that into practice and sustain that from the long term. So although about 20%, 22%, of our family members globally indicated that they're trying to protect the family from knowledge about the wealth as a means of engaging the next generation, I don't know that that's sustainable in the long term.

Jamie, anything else that you wanted to share?

Yeah, just these as these families grow, move to the next generation, family offices look and feel different all around the world. It's one of the best things we do, coming in to help supplement, help partner, help be a sounding board, and we have a lot of fun doing it.

Thank you, Jamie. And I want to thank you all for joining us today. We love working with families like yours around the globe and sharing the key insights from a report like this one. And I know our local teams are excited to spend time with you in the coming weeks to go through how some of these issues might most affect you and your family.

I want to thank you again for joining us, and we appreciate your continued trust in JPMorgan.

Thank you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional on your JP Morgan team. This concludes today's webcast. You may now disconnect.

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In Spain, this material is distributed by J.P. Morgan SE, Sucursal en España, with registered office at Paseo de la Castellana, 31, 28046 Madrid, Spain, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE, Sucursal en España is also supervised by the Spanish Securities Market Commission (CNMV); registered with Bank of Spain as a branch of J.P. Morgan SE under code 1567. In Italy, this material is distributed by J.P. Morgan SE - Milan Branch, with its registered office at Via Cordusio, n.3, Milan 20123, Italy, authorized by the Bundesanstalt für Finanzienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Milan Branch is also supervised by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB); registered with Bank of Italy as a branch of J.P. Morgan SE under code 8076; Milan Chamber of Commerce Registered Number: REA MI 2536325.

In France, this material is distributed by J.P. Morgan SE - Paris Branch, with its registered office at 14, Place Vendome 75001 Paris, France, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB) under code 842 422 972; J.P. Morgan SE - Paris Branch is also supervised by the French banking authorities the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and the Autorité des Marchés Financiers (AMF). In Switzerland, this material is distributed by J.P. Morgan (Suisse) SA, with registered address at rue du Rhône, 35, 1204, Geneva, Switzerland, which is authorised and supervised by the Swiss Financial Market Supervisory Authority (FINMA) as a bank and a securities dealer in Switzerland.

In the Netherlands, this material is distributed by J.P. Morgan SE - Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1135, 1077 XX, Amsterdam, The Netherlands, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiele Markten (AFM) in the Netherlands. Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 72610220. In Denmark, this material is distributed by J.P. Morgan SE - Copenhagen Branch, filial af J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39-41, 1560 Kebenhavn V, Denmark, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Copenhagen Branch, filial af J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 29010. In Sweden, this material is distributed by J.P. Morgan SE - Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 11147, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SE. In Belgium, this material is distributed by J.P. Morgan SE - Brussels Branch with registered office at 35 Boulevard du Régent, 1000, Brussels, Belgium, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Brussels Branch is also supervised by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) in Belgium; registered with the NBB under registration number 0715.622.844. In Greece, this material is distributed by J.P. Morgan SE - Athens Branch, with its registered office at 3 Haritos Street, Athens, 10675, Greece, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE - Athens Branch is also supervised by Bank of Greece; registered with Bank of Greece as a branch of J.P. Morgan SE under code 124; Athens Chamber of Commerce Registered Number 158683760001; VAT Number 99676577.

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