The next generation of New Jersey’s successful family-owned businesses is taking a hard look at their family offices and are wondering if there’s a better way.

“Next gen-ers” aren’t necessarily convinced they need the service offerings of traditional family offices, like household or real estate management, investment or even accounting advice.

Today, the next generation of family-owned business leaders is showing a general lack of enthusiasm for running their own family office, which is expensive, and yet, the lower-cost multi-family office option seems too impersonal.

Then they are asking the question: “Do we really need family offices at all?”

Despite these questions, and challenges, the family office business is doing well.

Huge Growth Ahead

There are an estimated 8,030 single-family offices in the world today, up from 6,130 in 2019, a 31% increase. The number is projected to grow by 12% to 9,030 family offices next year and by 33% to 10,720 family offices by 2030, according to research by the Family Office Exchange (FOX), an organization for families, family office professionals and trusted advisors.

In 2019, the total estimated wealth for families with family offices was $3.3 trillion. In 2024, it was $5.5 trillion, a 67% jump in five years. This wealth is expected to grow by 73% to $9.5 trillion by 2030, a notable 189% rise between 2019 and 2030.

Following a similar trajectory, family offices’ total estimated “assets under management” in 2024 was $3.1 trillion and is expected to rise by 73% to $5.4 trillion by 2030, a 75% increase over a 10-year period.

According to research firm Cerulli Associates, overall wealth transferred between 2021 and 2045 is predicted to total $84.4 trillion.

Despite this projected growth and massive transfer of wealth, family offices are rightly worried. There is a huge shift in the generational makeup of the “high wealth” population underway over the next 15 years, and this will have far-reaching implications.

By 2040, today’s ‘next gens’ (Generation Z and Millennials) will comprise almost 35% of the global “ultra-high-net-worth” population, up from just 8% today.

Generation X (currently aged between 44 and 59) will account for 45%, almost doubling from the current 25%. Meanwhile, the combined share of the Baby Boomer and Silent Generation (and older) will fall steadily from 67% to just 20%.

Meanwhile, echoes of “the third-generation curse” reverberate as only one in 10 family offices now represent legacy families (four generations or older), raising concern over families’ ability to retain their wealth long-term.

Family Office Challenges

So, what exactly are family office managers worried about? The list is long: next generation quirks, persistent inflation, private equity (PE) investment risk, hybrid workplaces, ESG investing, cryptocurrency, more government regulation, cheaper operating costs, technology, AI and generally just more and cheaper alternative options.

There are other challenges, too, not the least of which are family office investment and accounting strategies.

Considering recent geopolitical uncertainty and volatile markets, many family offices are shifting toward more liquid, risk-managed portfolios. Diversification across asset classes and geographies is a key priority to protect long-term capital and ensure resiliency.

According to a Morgan Stanley analysis, PE, venture capital, private credit, private real estate and infrastructure investments have historically overperformed public markets. This is the table where family offices usually get to play their best cards. Family offices on average allocate 45% of their portfolios to alternative asset classes.

Another datapoint is a UBS report that says over 80% of family offices invest in PE, and of those family offices, every year an increasing number are making direct investments.

According to a UBS survey, 74% of families are likely to increase their PE allocations and believe these investments will continue to outperform public equities. This appeals to entrepreneurial families (read next generation) for a more hands-on approach to their investments.

Technology, ESG and Regulation

UBS and Campden Wealth Research reports say 62% of family offices are using artificial intelligence (AI) or are planning to do so soon. What does AI do? It can help make investment decisions, improve risk management, enhance the client experience and offer better tech interfaces with clients.

While family offices are wary of investing in ESG and “greenwashing,” they do recognize their resources can make a difference when they invest wisely. And the next generation wants more of it.

A Campden report mentions 37% of North American family offices engage in sustainable investing. This steady increase in sustainable investing is directly related to younger members of the family having more influence in running the family office, as the older generation moves on.   

When it comes to government oversight, family offices have been subject to light regulatory oversight due to the focus on personal wealth versus investor wealth, but that looks to be changing too.

U.S. lawmakers are considering legislation, called wealth taxes, around how assets and investments are being taxed and to what degree family office investments threaten the economy and the financial system.

How this all plays out will be up to how savvy next generation leaders and family office executives play their hands, or if the next generation aces them out altogether.