Family offices are booming. Clients, however, are unlikely to have one unless they are ultra-high-net-worth, multigenerational and have complex banking and investment needs.
Family offices share common characteristics but are each one of a kind, William Sinclair, head of J.P. Morgan Private Bank's U.S. family office practice, says in a recent interview with ThinkAdvisor.
"If you've seen one family office, you've generally seen one family office — every family has unique characteristics," Sinclair says. "The advice has to be very tailored."
The global private banking division has been advising family offices for more than 200 years, but only in July did it formalize that effort when it launched the dedicated practice.
Working with established and new family offices, it also outsources family office services to investors without the office structure. The practice's family offices recently have been focusing on investing in private markets and on portfolio tax efficiency, Sinclair notes in the interview.
JPMorgan works with 40% of U.S. families with a net worth of more than $100 million and more than 60% of the nation's billionaires.
In a follow-up exchange via email, he discusses the Private Bank's 2024 Global Family Office Report, a client survey released on April 29.
While nearly a quarter of clients reported exposure to a cybersecurity breach or financial fraud, most of the offices have neglected to take cybersecurity measures.
The study found continuing robust activity in alternative investments, "a multi-year shift among family offices," the report calls it.
Here are highlights of our two conversations:
THINKADVISOR: What's the biggest challenge in helping family offices?
WILLIAM SINCLAIR: If you've seen one family office, you've generally seen one family office — every family has unique characteristics. The advice has to be very tailored.
Is a family office appropriate only for ultra-high-net-worth families?
In terms of the cost of running them, most have to have a significant level of wealth for it to make sense.
Investment management, administrative services, trustee services and philanthropic work are commonly outsourced.
Is a family office a company in and of itself?
It's a unique, separate legal entity. There's an owner and employees of that entity.
Every family office has a lead principal. Sometimes that's a family member; sometimes, an external person. Family offices generally employ at least one non-family member.
Are family offices growing in number?
Yes, as we've been seeing continued wealth growth across the globe. [Another reason is] the wealth transfer that will occur in the U.S. over the next two decades.
Families are thinking about planning for the next generation.
JPMorgan established a dedicated family office practice only in July. What can you say about its growth?
We see it growing in terms of new families we're working with. Over 60% of the billionaire families now in the U.S. are working with JP Morgan Private Bank.
What have you been focusing on recently in the family office investment area?
