J.P. Morgan Private Bank releases inaugural report on global family offices

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Apr 29, 2024, 09:00 ET

Survey data reveals top objectives, investment preferences and management trends for ultra-high-net-worth families

NEW YORK, April 29, 2024 /PRNewswire/ -- J.P. Morgan Private Bank today unveiled its Global Family Office Report, offering insights into how the firm's family office clients worldwide manage investments, governance, succession planning, and family office operations. The report, based on a survey of family office principals and professionals, provides a quantitative perspective on global family office practices.

"J.P. Morgan has been working with family offices for more than 200 years, starting close to home with the creation of one of the first family offices, the House of Morgan, established in 1838," said David Frame, Chief Executive Officer, J.P. Morgan U.S. Private Bank. "This report reflects our continued commitment to understand and serve clients through a platform unmatched in this space."

J.P. Morgan conducted an online survey from October through December 2023 among 190 family offices from across the globe with an average net worth of $1.4 billion.

"The wealth and complexities of ultra-high-net-worth families has continued to grow over the last decade, which has led to a significant increase in the number of single family offices worldwide," said William Sinclair, Head of the U.S. Family Office Practice at J.P. Morgan Private Bank. "By surveying our clients, this inaugural report offers a valuable benchmarking tool for family offices to understand how their peers are addressing challenges they may face today, or in the future."

Andrew L. Cohen, Executive Chairman of J.P. Morgan Global Private Bank, added, "as we have done for many years, J.P. Morgan will continue to be a source of strategic insight and advice for global families for decades to come."

The Private Bank's report draws from the provided survey responses to identify clear trends and preferences among the firm's Family Office clients.

Alternative investments are in favor.

Family offices are diversifying their investment portfolios, with nearly 80% working with external investment advisors. Notably, the average portfolio currently has a 45% allocation to alternative assets, targeting an 11% return, private equity is the most commonly held asset class at 86%, and infrastructure is the least commonly held at 9%.

"This represents a multi-year shift we are seeing among many family offices. They are more willing to take illiquidity risk, in order to achieve greater potential long-term returns," said Jamie Lavin Buzzard, Head of Investments and Advice of the U.S. Family Office Practice.

In addition to the focus on alternatives, family offices are consistently developing core, liquid portfolios. On average, these portfolios allocate 26% to public equity and 20% to fixed income and cash.

Family offices are grappling with cybersecurity.

Cyber-attacks are on the rise and family offices may be an easy target. Nearly a quarter of family offices surveyed reported exposure to a cybersecurity breach or financial fraud, yet only one in five noted that they have cybersecurity measures in place. With that in mind, 40% of family offices reported that cybersecurity is a top gap for improvement.

The cost of operating a family office is rising.

"Family offices are focused on managing costs, and recruiting and retaining top talent. Like any business, these two objectives may find themselves at odds amid staffing particular roles and services," said Elisa Shevlin Rizzo, Head of Family Office Advisory at J.P. Morgan Private Bank. "Outsourcing certain functions through a hybrid approach is becoming more common among family offices of all sizes."

Large, established family offices with $1 billion or more in assets under supervision have average annual operating costs of $6.1 million, making management and strategic outsourcing a priority. Nearly 40% of small and midsize family offices, with assets under supervision ranging from $50 million to $999 million, outsource investment management to some extent.

Preferences for staffing and executive roles differ between U.S. and international family offices. U.S. offices are less likely to have nonfamily members as CEO/President and CIO, with rates of 45% and 71% respectively, compared to 64% and 90% internationally. Furthermore, U.S. offices are more likely to have unpaid family members as CEO/President, at 29% versus 7% internationally.

Family offices are preparing the rising generation for the future.

A primary concern identified by family offices regarding the upcoming generation is their preparedness to inherit wealth. Interestingly, nearly 30% of respondents lack a structured approach to prepare the younger generation for this responsibility.

Notably, the strategies for preparing the younger generation vary among regions. In the U.S., respondents noted that philanthropy is the primary method to engage the next generation, with a third also requiring external professional experience. Internationally, family offices claim that involvement in the family business is most common, often coupled with external work experience and capital for entrepreneurial ventures.

To learn more and view the full Global Family Office Report, visit privatebank.jpmorgan.com/globalfamilyofficereport.

Select global families have access to 23 Wall, a specialized global team that provides many of the world's institutionally-minded families with access to the firm's intellectual capital, balance sheet and deal flow across the entirety of J.P. Morgan's businesses. The team engages with more than 700 families, representing over $4.5 trillion in private capital, offering direct access to all of the Commercial & Investment Bank's capabilities. 23 Wall aims to deliver holistic, global coverage of the firm to the world's largest families, partnering with them as institutions in terms of capabilities, strategic partnerships, financing, and access to private deals.

J.P. Morgan Private Bank's family office platform is extended by its U.S. Family Office Practice, comprised of more than 150 professionals, including 40 formerly practicing partner level estate and tax attorneys, the Private Bank's Advice Lab, Global Investment Opportunities (GIO) and Outsourced Chief Investment Officer (OCIO) teams. The practice specializes in delivering advice and strategies to ultra-high-net-worth U.S. families seeking to enhance an already established family office, to establish a new one, or to benefit from outsourced family office services without an independent office structure.

About J.P. Morgan Private Bank

J.P. Morgan Private Bank provides customized financial advice to help wealthy clients and their families achieve their goals through an elevated experience. Clients of the Private Bank work with dedicated teams of specialists that bring their investments and financial assets together into one comprehensive strategy, leveraging the global resources of J.P. Morgan across planning, investing, lending, banking, philanthropy, family office management, fiduciary services, special advisory services and more. The Private Bank oversees more than $2.6 trillion in client assets globally. More information about J.P. Morgan Private Bank is available at privatebank.jpmorgan.com

SOURCE J.P. Morgan Private Bank