Family offices are as unique as the families that set them up, and their form and function change in line with the growth of a family and its wealth.
The historical roots of family offices run deep, with the concept dating back thousands of years. In ancient Rome, noble families appointed a head of household to oversee finances and staff, while Asian and European rulers employed an inner circle of stewards to manage their wealth.
Fast-forward to the 19th century: the Rockefeller family pioneered the modern single family office in the United States, with the model soon taking hold in Europe. As more families became interested in the structure, some joined together, forming multi-family offices. More recently, families in Asia and the Middle East have set up family offices as wealth there grows and matures, and families focus on good stewardship and safeguarding their family legacy.
"Understanding the regional differences in the form and function of family offices around the world is critical to meeting the needs of the international families we work with," says Aik-Ping Ng, Co-Head, Family Office Advisory Asia Pacific and Senior Family Governance Advisor, Wealth Planning and Advisory at HSBC Private Banking.
Each business family will have its own priorities and requires varying levels of complexity when it comes to planning for the effective transition of their business, family and wealth.
An experienced, neutral family office adviser can help a family make thoughtful, informed decisions while maintaining a sense of connection between a family's wealth and all generations.
Existing family offices can be reshaped over time, Doshi says, or new entities formed with the specific needs of a younger generation in mind.
Differences among generations can also come to fore when the younger generation is more closely tied to the origins of a family's wealth. First-generation entrepreneurs may have built their wealth through a family-centric approach, with family and business closely intertwined, and therefore lean towards less formal structures or keeping family members in key roles.
If the younger generation is educated or gains professional experience abroad, they may develop different cultural norms and expectations around inheritance, or bring a global perspective to investing, running the family businesses and making a social impact.
Looking to the future
One thing is certain: The world is constantly changing, and family offices will no doubt continue to evolve, no matter where they are located.
The number of ultra-high net worth families is expected to continue to increase in the coming years, and this growth will coincide with a massive intergenerational wealth transfer. In the next decade alone, more than USD15 trillion of global wealth will be passed on to the next generation, according to research firm Wealth-X. North America will account for more than half – USD8.8 trillion. Europe and Asia follow, with USD3.2 trillion and USD1.9 trillion, respectively, projected to pass hands1.
This intergenerational shift in wealth will have wide-ranging implications, and the need to prepare younger generations for wealth management, protection and preservation will only become more crucial.
Family offices will play a critical role in achieving continuity from generation to generation, and in responding to changing regulatory or tax regimes.
While new family offices need to develop from the ground up, those that are established will need to regularly review and professionalise operations to advance the family's goals. Even mature family offices that have had the same structure and procedures in place for many years may find they need to change and adapt.
Family offices require deep expertise to establish and operate – and to ultimately serve the unique needs of each family. HSBC Private Banking's team of experts provides advice to family offices at all stages, and supports these wealthy families across generations. Our global network means we can connect you to advisers with local, specialised knowledge around the world. To learn more about how HSBC Private Banking can help you create or develop your family office, please contact us or your Relationship Manager.
1 A Generational Shift: Family Wealth Transfer Report, Wealth-X, June 2019 ↩