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Rising costs and family disagreements are prompting a growing number of wealthy investors to close their family offices, say advisers.
These offices — which serve as private wealth-management companies for rich individuals — have grown strongly in number in the US over the past decade as a convenient way of managing family money and as status symbols.
In 2024, there were nearly 3,200 single-family offices in the US, managing $1.3tn of assets, according to estimates by consultancy Deloitte. But the rising costs of maintaining a dedicated office have started to outweigh the benefits for some.
“There are increasing numbers closing,” said Doris Meister, chair and chief executive emeritus of Wilmington Trust, a wealth management business. “A lot of families form family offices without fully understanding what it is going to take to run it from a cost perspective.”
“I’ve seen [closures] increase in the past few years for sure,” said Aaron Bates, head of ultra-high net worth and growth strategies at Bernstein Private Wealth Management.
“Usually it’s in that $250mn-$750mn range [of assets] where the overhead becomes stressful and high,” he said.
Family offices tended to close at one of two stages, said advisers, either early in their life or after several generations.
Setting up a dedicated family office generally requires expensive wealth managers, and the growing number had increased competition and driven up salaries, they added. High inflation has also recently increased general overheads.
“The average [annual] cost of a billion-dollar-plus family office from our data is approximately $6.1mn and that number is only going up, not down,” said William Sinclair, global co-head of the family office practice at JPMorgan Private Bank.
Rather than totally shutting down, some family offices were using the cheaper option of an “outsourced chief investment officer” while retaining functions such as property management and family travel, Sinclair said.
Where offices had continued for several generations, “it’s just too big to continue to operate, too many cooks in the kitchen”, said Bates. As families grow across the generations, a governance structure set up around a founder may no longer be able to manage the differing views.
“When it’s the fourth generation . . . it depends how much the kids hate each other by then,” said Andrew Apfelberg, partner at US law firm Greenberg Glusker. Younger generations can also have different priorities from older family members: “Social justice investing versus pure capitalism,” said Apfelberg.
Despite the challenges, the number of North American family offices is still growing, according to Deloitte. By 2030, it expects the number to increase to 4,200, managing $2.3tn.
Some wealthy people had recently taken a pause in considering whether to shut down their family offices as they waited for political and economic uncertainty in the US to subside, said their advisers.
“Uncertainty encourages family offices to somewhat hunker down and not make great changes and there is a feeling here . . . of great uncertainty,” said Apfelberg.
Meister said: “If the market is volatile, people freeze.”
