The family office market is an increasingly significant segment of the global wealth management industry. Yet, despite its growing prominence, there remains a striking lack of consensus on its size, structure, and even its definition.
Estimates of the number of family offices worldwide range wildly, from 3,500 to 20,000, depending on the source. Deloitte’s 2024 estimate of 8,030 family offices, growing at a compound annual growth rate (CAGR) of 4.8% to reach 10,720 by 2030, is one of the more recent attempts to quantify this elusive market. At the same time, some new family office market sizing models are being published.
But why is there such disparity in these figures, and what does it tell us about the nature of family offices? More importantly, does size even matter?
The Elusive Nature of Family Office Market Estimates
The family office market is notoriously difficult to size. Unlike publicly traded companies or even traditional wealth management firms, family offices operate in a highly opaque and private manner. This lack of transparency, combined with the absence of a standardized definition, makes it challenging to produce accurate estimates.
For instance, EY’s 2016 Family Office Guide estimated there were at least 10,000 family offices worldwide. Since then, estimates from Campden Wealth, IQ-EQ, UBS, Fintrx, With Intelligence, and KPMG have ranged from 3,500 to 20,000. Deloitte’s 2024 estimate of 8,030 family offices, with a projected growth rate of 4.8%, is one of the more precise figures, but even this is based on assumptions that may not hold universally.
The problem lies in the criteria used to define a family office. Some estimates focus on assets under management (AUM), using thresholds like $100 million or $250 million. At the same time some new estimates are championing the case for small family offices of only $50 million. Jan Voss, from Cape May advisors recently argued that there are cost-savings to be had even at this scale while also gaining access to other opportunities through the effective implementation of technology.
Others consider the number of employees, the range of services offered, or the structure (single-family offices vs. multi-family offices). These differing methodologies naturally lead to varying results. For example, an estimate that includes smaller family offices with lower AUM will yield a larger market size than one that focuses solely on large, institutionalized single-family offices.
What Defines a Family Office?
The lack of consensus on what constitutes a family office significantly contributes to the wide range of estimates. Common criteria include:
- Assets Under Management (AUM): Many sources use a minimum AUM threshold, often ranging from $100 million to $250 million, to define a family office. However, this approach excludes smaller entities that may still function as family offices but manage less wealth.
- Number of Employees: Some estimates consider the number of employees, with at least one full-time employee being a common criterion. This approach captures smaller family offices but may exclude those that outsource most of their functions.
- Types of Services: The range of services offered can also be a defining factor. Some estimates focus on entities that provide comprehensive wealth management services, including investment management, estate planning, and philanthropy. Others may include family offices that offer a narrower range of services.
- Structure and Ownership: Estimations may differentiate between single-family offices (SFOs), which serve one family, and multi-family offices (MFOs), which serve multiple families. This distinction can significantly impact market size estimates, as MFOs tend to be larger and serve more clients.
There are many reasons why estimates are needed for the number of family offices, but normally it would be for products and services sold into the market. These could include technology, reporting services, investment products and services and more.
What’s Driving Growth in the Family Office Market?
Despite the challenges in sizing the market, there is broad agreement that the family office sector is growing and accelerating. Several factors are driving this trend:
- Rise in Global Wealth: The number of high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals is increasing globally, creating a larger pool of potential clients for family offices. According to Wealth-X, there were 426,330 UHNW individuals worldwide in 2024, up from 395,070 in 2022.
- Increasing Complexity of Managing Investments: As wealth grows, so does its complexity. The diversification of investment portfolios, the rise of alternative assets, and the need for specialized expertise drive demand for family office services.
- Growing Demand for Personalized Financial Services: Wealthy families are increasingly seeking tailored solutions that cater to their specific needs and goals. With their ability to provide highly customized services, family offices are well-positioned to meet this demand.
- Rise in Entrepreneurial Wealth: The increasing number of successful entrepreneurs is leading to the establishment of new family offices to manage their wealth and plan for succession.
A DIY Model for Estimating Family Office Market Size
While market size estimates are often used for fundraising, market sizing, and strategic planning, they can be misleading if taken at face value. The reality is that the family office market is not homogeneous. It encompasses many entities, from small, informal family offices managing a few hundred million dollars to large, institutionalized operations managing billions.
Given the challenges in sizing the family office market, it’s worth considering Simple’s, do-it-yourself (DIY) family office market sizing model that can be adjusted based on specific criteria. Here’s a step-by-step approach:
- Determine the Relevant Population: Start with the total number of UHNW individuals. According to Wealth-X, there were 426,330 UHNW individuals worldwide in 2024.
- Account for Those Without Family Offices: Estimate the percentage of UHNW individuals who don’t have or desire a family office. Factors to consider include the simplicity of their wealth structure, their preference for other wealth management solutions, and their willingness to bear the costs and complexities of running a family office. For this example, assume that 60% of UHNW individuals don’t use family offices, leaving 170,532 individuals who do.
- Project Population Growth: Apply a CAGR to the remaining population to project growth over the desired timeframe. Assuming a CAGR of 5%, the number of UHNW individuals using family offices would grow to 205,207 by 2028.
- Estimate Translation Factors: For single-family offices (SFOs), assume an average of one UHNWI per SFO and that one-third of the group uses SFOs.
- For multi-family offices (MFOs), assume an average of 10 families/UHNWIs per MFO and that two-thirds prefer a shared structure.
- Calculate Market Size: Divide the projected number of individuals by the respective translation factors to estimate the number of SFOs and MFOs. For example, in 2024, this would yield an estimated 56,844 SFOs and 11,369 MFOs.
What Else To Consider?
While this model provides a useful framework, it’s important to recognize its limitations. The assumed percentages and translation factors are hypothetical and can be adjusted based on further research and specific market definitions. Additionally, this model focuses on the number of family offices, not their AUM or the quality of their services. To estimate market size in terms of AUM, you would need to incorporate data on average AUM per family office.
Moreover, qualitative factors like family complexity, investment needs, and desired level of control can influence the decision to establish a family office. These factors are difficult to quantify but are critical to understanding the true nature of the family office market.
The family office market is undeniably growing, driven by the rise in global wealth, the increasing complexity of managing investments, and the demand for personalized financial services. However, the wide range of estimates highlights the challenges in accurately sizing this market. The lack of a standardized definition, the opacity of family office operations, and the differing methodologies employed all contribute to the discrepancies.
While size is an important factor, it’s not the only one. The quality of services, the alignment of interests, and the ability to adapt to changing circumstances are equally, if not more, important. As the family office market continues to evolve, it’s essential to look beyond the numbers and focus on what truly matters: delivering value to the families they serve.