Family offices need to evolve to meet the changing needs of wealthy clients

Family offices need to evolve to meet the changing needs of wealthy clients
Several key pillars are identified by a report from Morgan Stanley.
NOV 29, 2024

The number of family offices is set to grow exponentially in the next five years, but they will need to evolve to meet the changing needs of wealthy clients according to Morgan Stanley Wealth Management.

With Deloitte saying that the wealth controlled by family offices is expected to grow 73% to $9.5 trillion by 2030, the importance of this sector of investment and wealth management adapting is clear.

Two key factors are driving what Morgan Stanley sees as necessary changes.

Firstly, the purpose of family offices, beyond the financial aspects of wealthy family needs to include human, intellectual, and social capital and alignment with families’ long-term mission and values.   

Secondly, the families themselves, where dynamics and trends are evolving.

“Family Offices are pivotal in managing wealth and preserving legacies, and as families and environments evolve, so must the industry,” said Liz Dennis, head of Private Wealth Management.

The report identifies six essential pillars that it says family offices will need to embrace to keep up with trends and client demands:

  1. Governance:
  • Implement structured yet flexible governance to address priorities while accommodating change.
  • Establish mechanisms for family members to exit gracefully and review policies regularly, involving younger generations.
  • Core documents (e.g., family mission statement, constitution, bylaws, and succession plans) are essential for clear governance.
  1. Staffing:
  • Build an institutional-quality team with clear delineation of in-house versus outsourced roles.
  • Plan for staff succession to address key-person risks and ensure stability across generations.
  1. Investment Solutions:
  • Stay abreast of market trends, including alternative investments and technologies like AI.
  • Regularly update the Investment Policy Statement (IPS) to align with emerging opportunities and risks.
  • Leverage technology for data aggregation, deal sourcing, and investment analytics.
  1. Artificial Intelligence:
  • Integrate AI to enhance efficiency in investment research, reporting, and operations.
  • Use scalable, secure platforms while remaining vigilant about cybersecurity and data privacy.
  1. Financial Education:
  • Equip younger generations with financial literacy to ensure effective stewardship of wealth.
  • Tailor education programs to generational priorities and emerging financial trends.
  1. Cybersecurity:
  • Address increasing cyber threats through practical measures, such as using strong passwords, multi-factor authentication, and enabling automatic updates.
  • Incorporate cybersecurity into operational practices without needing extensive in-house resources.

“This guidance is designed to support family offices of all shapes and sizes as they work to ensure continuity across generations,” added Dennis. “Even with technology's potential, human expertise remains irreplaceable—and forward-thinking family offices must define clear strategies and infrastructure to continue adding value as indispensable partners for generations to come.”

Latest News

Inheritance conflict is the rule, not the exception, Wells Fargo finds
Inheritance conflict is the rule, not the exception, Wells Fargo finds

New research exposes a wide gap in how affluent parents and their adult children understand and prepare for the transfer of family wealth.

Private equity leads public pension returns for 14th straight year
Private equity leads public pension returns for 14th straight year

A new AIC report finds a 13.2% median annualized return over 10 years, outpacing public equities, real estate, and fixed income.

Medicare gaps leave retirees dangerously exposed to health care costs
Medicare gaps leave retirees dangerously exposed to health care costs

Most Americans entering retirement lack a realistic picture of what health care will actually cost them and advisors may be their last line of defense.

Taxable accounts surpass retirement savings as US households diversify portfolios
Taxable accounts surpass retirement savings as US households diversify portfolios

New H&W data reveals $102.4 trillion in household investable assets, with taxable accounts outpacing retirement savings growth.

What a former RIA founder wants advisors to know about AI
What a former RIA founder wants advisors to know about AI

Betterment’s Devon Klumb built and sold an RIA - now he’s telling advisors what he wished he’d known sooner.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor