North American family offices has seen wealth increases in the last year according to new stats from RBC and Campden Wealth
Family offices in North America have seen their wealth increase in the last year, taking collective AUM to an estimated US$179 billion.
With an average AUM of $1 billion, 58% of ultra-high-net-worth families’ family offices posted growth in the year from 2020-21 while 86% of those individual families experienced a rise in wealth.
A new report from RBC and Campden Wealth reveals that family offices continued to focus on growth markets and technology with 74% investing in healthcare; 64% in biotech; 61% in fintech and nearly half (49%) in artificial intelligence.
Unsurprisingly, these investors are feeling bullish as we head into 2022.
“It’s a testament to their strength as sophisticated wealth management vehicles that most of the wealth holding families around the world saw their fortunes increase over the year, despite the Covid-19 pandemic,” said Dr. Rebecca Gooch, senior director of research at Campden Wealth. “With the 2020 recession following a V-shaped curve, family offices, known for being nimble investors with deep pockets and patient capital, were able to capitalize on changing market conditions and benefit from strong gains in both the private and public equities space.”
However, despite their confidence, family offices do face several challenges.
More than one quarter of respondents said they have been victims of a cyberattack and half have been targeted in a scam. Most (92%) believe that these incidents will escalate in the coming years.
Risk management along with investment governance, valuation policies and human capital oversight are all seen as high governance priorities.
Succession planning is also a key focus for family offices with only half of respondents having a plan in place; and only around half of these plans are written formally.
The challenge for succession planning noted by half of respondents is having a family member qualified enough to take the reins.
“A succession plan is absolutely critical for families of wealth – whether or not they have a business, said Angie O’ Leary, head of wealth planning at RBC Wealth Management - US. “And the plan needs to go well beyond who will get what when. Families of wealth must establish foundations of trust and communication and adequately prepare the next generation to inherit wealth. Failure to do so can lead families to lose the wealth they have created.”
Fintech and ESG
The report shows that more ultra-wealthy families are using fintechs for their financial transactions: 34% said fintech plays some sort of role in their financial transactions, 6% said fintech is used in a majority of their financial transactions, and 61% said fintech will replace traditional banking services in the future.
Sustainable investing is also a growing area of interest for North America’s family offices.
However, while 42% of family offices globally currently invest sustainably, this is led by 57% of those in Asia-Pacific and 45% of those in Europe, compared to 34% in North America.
When considering the share of family offices’ portfolios that are sustainable investments, allocations are expected to rise by a considerable 76% in North America and 61% globally over the coming five years, with climate change the main focus.
North America’s ultra-wealthy families are also increasing their philanthropic activities with 70% saying they were involved in philanthropic giving, irrespective of whether the family additionally has a foundation.
Family offices gave an average $9.3 million in 2021 and 53% have a clear and purposeful strategy for philanthropic donations. Of these donations, causes related to education and health received 93% of the total.