With trillions in transition, trust has never been more important for wealthy families

Undoubtedly, the last two decades have brought substantial changes – technological, political, societal and economical. The nature of wealth and its creation has also shifted. Perhaps a generation ago there was still a large portion of family offices founded on inherited wealth tied to traditional family companies or large illiquid estates that managed assets such as land and property. Today, more families are experiencing first generation wealth, with the UK now home to approximately 1,000 family offices [i]; while the number of single family offices is estimated to have doubled since 2008 [ii].

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This expansion reflects the sweeping changes to economies that have allowed entrepreneurs to take advantage of explosive technological growth and the interconnected power of global markets. Worldwide, predictions are for approximately 9,000 family offices by the end of 2025, rising to 10,720 by 2030[i]. In line with this, estimated total global family office assets will reach $9.5 trillion by 2030 – a 189% increase[ii].

Points of initiation for family offices are also changing. Most family office owners now appear to be entrepreneurs or entrepreneurial families, with 55% of family offices established this century and only 5% owned by heirs[iii]. Wealthy families who once might have experienced one major business exit event, are now realising multiple exits and setting themselves up as expert angel investors, expanding the horizons of the new market sectors they have forged.

Family leadership is also becoming more diverse. Our Business Insights and Business Exit programmes have revealed how wealth is now represented within new professions and skillsets and a broader range of societal backgrounds, ethnicities and genders. We’re seeing greater diversity in leading family offices and indeed the diversity of wealth owners will increase as $124 trillion moves between generations around the world during the largest wealth transfer in history between now and 2048[iv].

We’re now two decades into the digital revolution and the power technology has brought through investment capital and operational change is clear – 53% of family offices have invested in generative artificial intelligence (AI)[v]. Likewise, equity markets have been buoyed by the advance of AI and the rise of tech giants. In line with that and the heritage of instant access media, the windfalls for intellectual property are becoming more apparent, giving greater agency to creators who in turn are building innovation feedback loops.

This evolution shouldn’t be simplified as the fast and sudden versus the old and slow. Families who have managed wealth for generations are not precluded by change. Indeed, we know it is their own innovation and adaptability that has helped maintain and grow their wealth over the long term. Rather, these new variables present ongoing growth opportunities for all of us within the family services ecology.

Against this backdrop of consistent change, we can see the equally consistent tenets of what matters to families – responsibility, preservation, education and happiness.

Twenty years ago, Coutts did not have a dedicated offering for families with significant wealth which could tie together those family tenets. Today we do. A small core has grown to a dedicated cohort, helping ultra-high-net-worth (UHNW) families manage over £15 billion of total assets across the balance sheet.

That growth has happened in line with an ongoing expansion of our capabilities, well beyond financial planning or simply being there to transact and execute for them. We are able to convene all the services of Coutts as their wealth manager, but I’d argue that what’s more important is being cognisant of their needs and concerns at all times. While wealth may not alter day-to-day interactions, it inevitably introduces moments that require expert insight and discretion at crucial moments in a family’s journey.

We’ve learnt to make sure we have the right conversations with the right people at the right time. Our role here is to rationalise the meaning and purpose of significant wealth. That in itself has become more complex as family missions have moved from maintaining wealth to growing its possibilities – not only through balance sheets but by application and gifting. The rationalising of this must be right for each family as a whole and each family member as an individual – whether we are speaking to a FTSE 100 CEO or introducing the fundamentals of investing to a teenager.

We do not pretended to know everything. Our role is to bring in experts where we have a knowledge gap to ensure the standard of the advice expected is always met. That may involve a horology expert ahead of purchasing a unique timepiece, a specialised tax adviser or an art market aficionado to help grow a family art collection. We’re acutely aware of the complex nature and diversity of UHNW clients’ asset bases, so in doing this we want to ensure these networks collaborate with their team, building their investment ecology. Our clients may not have those connections, but we do.

One space in which our work with clients has become particularly impactful is through our philanthropy service. Increasingly, clients have sought to apply their wealth through giving, driving meaningful and lasting change worldwide. Our philanthropy experts have been able to facilitate this in a way that complements and informs their family philosophy, bringing a long-term purpose to the responsibility heads of families bear as custodians of wealth. In doing this our philanthropy specialists have partnered with each family to discuss their aims and connected them with experts in respective fields who can guide their giving to ensure maximum impact.

Another hugely rewarding aspect of our work is how we’ve seen our clients’ children come into their own over the last two decades. We’re very conscious of the ‘great transition’ of wealth between generations but the reality is that transition is a constant in family life. Of course there will be moments such as retirements, inheritances and appointments but the learning process is fluid, for us and our clients. We think about this deeply, pairing every generational family member with an appropriate adviser, whose career timeline matches the client’s and who will be ever present through every major stage. Some of the youngest clients we have had the privilege to advise were not yet ten years old. Today, we continue to support them as they navigate their twenties.

Twenty years ago, daily phone calls and face-to-face meetings were very much our primary client interactions. Today, though around two thirds of our interactions are digital, we remain just a phone call away for all our clients and can meet them any time. That is so important as first and foremost, we believe personal interaction is critical to build the relationship and understanding central to looking after family wealth. Digital capability must now complement and support this seamlessly.

Looking ahead, we know good advisers will always need to be caring and understanding, however, the future also belongs to a family office service that knows how best to utilise technology for their clients – as well as communications that will involve value creation through investment services, ever faster transactions and the appropriate application of AI. The flip side of this will be keeping our clients safe – from fraud and nefarious actors within an increasingly interconnected data-driven world. Again, this underpins our own covenant as interested and responsible partners who can empower families to act without worry or hindrance.

Our own purpose has also evolved over time. While we can, and do, provide every service, connection and introduction we can for families, we recognise the importance of empowering them. If we get that right, they’ll have the agency and confidence to fulfil all their ambitions. That is by no means a hands-off approach, it means we’re active partners who have set out to grow with them through the journey. As wealth for families has changed over the last 20 years, the premium on service – trust – has only become more important. Each one of our services is an active part of that growth process and only by getting each one right can we ever hope to have opportunity to build the trust that will be the foundation of relationships across generations.

This article is taken from Your family and their future our guidance for wealthy families marking 20 years of Coutts family office services.

[1] Family offices and the contemporary infrastructures of dynastic wealth, Glucksberg and Burrows, London School of Economics, https://eprints.lse.ac.uk/75899/1/Glucksberg%20et%20al._Family%20offices.pdf

[2] The Family Office Insights Series – Global Edition, Deloitte The Family Office Insights Series - Defining the Family Office Landscape, 2024 | Deloitte Global

[3] The Family Office Insights Series – Global Edition, Deloitte The Family Office Insights Series - Defining the Family Office Landscape, 2024 | Deloitte Global

[4] PwC Global Family Office Deals Study 2024, PwC, PwC's Global Family Office Deals Study 2024

[5] The Great Wealth Transfer: Capturing Money in Motion, Cerulli Associates, https://www.cerulli.com/reports/us-high-net-worth-and-ultra-high-net-worth-markets-2024

[6] The role of AI in the future of family offices, Farrer & Co, The role of AI in the future of family offices

The above article has been written and published by Coutts Crown Dependencies investment provider, Coutts.