As family offices continue to grow in influence and scale, their ability to adapt to unprecedented challenges, including faster intergenerational wealth transfers, shifting family dynamics, and mounting cybersecurity risks, has never been more critical.
A new Morgan Stanley Wealth Management report has become the latest to project a 75 per cent rise in the number of family offices by 2030, an increase fuelled by unprecedented intergenerational wealth transfers and increasingly complex market environments.
[See also: Advisers to the super-rich are embracing the AI revolution — but at what cost?]
A report by Deloitte Private in September predicted the number of family offices would rise to about 10,700 by 2030, up from 6,130 family offices in 2019.
Deloitte’s Defining the Family Office Landscape, 2024 report found that the largest growth in family offices globally will take place in North America and the Asia-Pacific – two regions vying for investment opportunities and competing to attract investment-management talent.
Morgan Stanley’s report highlighted six key areas family offices should prioritise to future-proof their operations and spotlighted the necessity for flexible structures to preserve values, safeguard legacies, educate heirs, and integrate cutting-edge technology.
[See also: Preparing the next generation is a ‘primary concern’ for UHNW families]
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‘Staff like institutions’
The report calls for family offices to evolve their governance structures. Historically, governance has focused on stability, but the report emphasises the need for flexibility to adapt to new family dynamics. This includes creating exit pathways for members who wish to pursue separate ventures and incorporating younger generations to keep objectives aligned with evolving priorities.
To support this evolution, family offices are encouraged to ‘staff like institutions’, building a talent pipeline that ensures continuity while bringing fresh perspectives. ‘It’s not just about hiring the right people—it’s about empowering them,’ says Liz Dennis, Head of Private Wealth Management at Morgan Stanley.
Strategic delegation and external partnerships are vital to bridging generational divides and managing risk, she said.
[See also: Five forces shaping private equity for UHNWs in 2024]
Harnessing AI’s power
Data management has become a cornerstone of effective family office operations. Reliable reporting platforms and rigorous due diligence processes enable offices to navigate market trends and make informed investment decisions. Technology, particularly AI, offers additional opportunities for efficiency in communication and reporting — though Morgan Stanley stresses the importance of balancing these advancements with robust cybersecurity measures.
Artificial intelligence remains one of the biggest themes for private investments, with the family offices of Jeff Bezos and Bernard Arnault among those that have bet on the sector.
More than half (53 per cent) of family offices have built portfolio exposure to generative AI technologies through public equities, private equity funds or direct private equity, according to the Citi Private Bank Global Family Office 2024 Survey released in September.
But only about one in 10 respondents have started employing generative AI to automate basic business processes, such as creating presentations. Another quarter are exploring related possibilities. However, few have ventured into the more high-stakes territory of employing the technology in areas such as portfolio construction or optimisation, or risk management.
Despite the low uptake overall, adoption is slightly higher among smaller FOs.
Preparing the next generation
Educating heirs is another critical challenge. Tailored financial education programmes help younger generations develop the technical and interpersonal skills needed to carry the family’s mission forward. ‘Meeting the next generation where they are is key,’ notes the report, underscoring the importance of bridging generational differences through relatable, hands-on learning.
A survey by Nedbank Private Wealth found there was a real risk of wealth erosion across generations as concerns remain about Gen Z’s readiness to lead family businesses, new research has revealed.
Spear’s Top Recommended HNW Wealth Manager, Rebecca Cretney, Senior Investment Specialist at Nedbank Private Wealth, said integrating philanthropy into succession planning can be a ‘powerful tool to bridge generational divides’.
Timeless goals
From governance to AI, the future-ready family office must balance innovation with the timeless goals of preserving wealth, fostering connection, and safeguarding legacies.
As families grow more diverse and markets more complex, the ability to adapt while staying true to core values will define the success of tomorrow’s family offices. With thoughtful planning and forward-looking strategies, the industry is well-positioned to navigate change and sustain its mission for decades to come.
Six pillars for the future-ready family office
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Evolving governance
Flexible governance structures are vital for sustainability. Offices should balance clear priorities with adaptability, allowing for changes within the family, such as providing exit options for members pursuing separate interests. -
Institutional-level staffing
To ensure continuity and mitigate key-person risk, family offices must establish pipelines to attract, train, and promote talent. Strategic succession planning and delegating responsibilities to younger staff can bridge generational divides and ensure alignment with evolving goals. -
Data-driven decision-making
Robust data systems are critical for staying ahead of market trends. -
Closing the financial education gap
Offices must prioritise financial literacy for younger generations to prepare heirs with tailored programmes combining technical knowledge and interpersonal skills. -
Proactive cybersecurity
With rising cyber threats, family offices need to adopt strong security protocols, such as multi-factor authentication, unique passwords, and careful handling of digital communications to mitigate risks like identity theft and fraud. -
Navigating AI integration
Artificial intelligence offers significant opportunities for efficiency in operations and reporting but fffices must balance innovation with vigilance.
