Just 5% of U.S. family offices say next generation is prepared: UBS

Many family offices, like their broader wealth management counterparts, aren’t prioritizing the preparation of the next generation of decision-makers for leadership roles.

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That’s one conclusion of the latest edition of UBS’ annual “Global Family Office Report,” which surveyed more than 300 family offices in 30 markets throughout the world. 

The lack of succession planning was particularly pronounced in the U.S., where only 5% of the respondents said the next generation of their client families “is fully involved,” and 33% said the next generation is partially involved. Globally, the comparable numbers were 13% and 32%.

The numbers reflect a broader trend in wealth management. Both clients and the owners of advisory firms generally lack plans to hand down their businesses to the next group of owners when they are ready to retire.

With their deep involvement in managing the fortunes of one wealthy family or multiple wealthy families, family offices by their very nature touch on many aspects of inheritance and succession planning. 

Family offices are generally defined as business entities set up traditionally to handle the wide-ranging needs of the ultrarich — the family offices in UBS’ survey had an average net worth of $2.7 billion. 

The Ultra High Net Worth Institute, an industry group, has said family offices in the U.S. typically work with families with a net worth of $250 million or more. 

Over time, though, family offices have changed, not only by adding to the long list of services they provide but by working with clients who may not previously have seemed a natural fit. Today, many wealth managers run multifamily offices that work with groups of families whose individual net worths can have a minimum of $25 million.

In-house strategic asset allocation was provided by 86% of surveyed family offices (with 12% providing outsourced asset management), the most common offering. Other services, according to UBS’ survey, include bookkeeping and accounting (67% in house, 31% outsourced) cybersecurity (26% in house, 52% outsourced), tax planning (33% in house, 59% outsourced), art and collection management (26% in house, 12% outsourced) and a catchall category called “lifestyle services” (36% in house, 16% outsourced.)

How family offices plan to invest client portfolios this year

Although family offices provide a wide variety of services, much of their time and energy is devoted to helping their clients preserve their fortunes through investing. 

UBS’ “Global Family Office Report,” which also looked at how family offices plan to adjust their investment allocations, suggested many firms planned to keep their investment allocations largely unchanged last year.

With 64% of the respondents saying geopolitical conflict is the biggest risk in the next year, and nearly half also expressing worries about a global trade war, family offices continue to favor investments in developed markets. Respondents to UBS’ survey in the U.S. say they put 29% of their clients’ portfolios in equities in developed markets and 7% into fixed income in developed markets. 

Alternative assets are also popular. U.S. respondents said they’d put 20% into real estate, 10% into private equity direct investments and 10% private equity funds of funds.