European family offices must prepare successors for risks during major generational transition
A third of European family offices will be taken over by the next generation within the next 10 years, but many are not fully prepared for succession.
Family offices expect cyber attacks to increase in the next 12 months, with over a third having experienced an attack in the past year.
European family offices are in the midst of a major generational transition, according to a new report from Campden Wealth sponsored by Deloitte Private. The report found that a third of the next generation have already assumed control of their family wealth, and 34 per cent will do so within the next 10 years. Despite this, a key risk is ‘unpreparedness for succession’, as only 12 per cent of family offices feel that the next generation is fully prepared.
Following the COVID-19 pandemic and an uptick in cyber incidents, family offices are increasingly focused on risk management. Over a third of European family offices (38 per cent) experienced a cyber attack over the last 12 months, higher than the global average of 30 per cent.
Mark Stokes, partner and UK Family Office Lead at Deloitte, said: “We are in the midst of a major generational transition of wealth. Alongside a focus on investment returns, it is critically important that family offices prepare themselves and the family for this transition. This includes managing existing and emerging risks like cyber attacks, which is a growing concern for family offices.”
The family office market is expanding rapidly and families plan to take advantage of the economic recovery post-pandemic. More than half of family offices are seeking new investment opportunities, with 51 per cent also planning to allocate more to direct private equity investments, and 43 per cent to private equity funds.
Dr Rebecca Gooch, senior director of research at Campden Wealth, said: “Broadly speaking, family offices are feeling bullish about the economic climate in 2022 and are shifting into more growth-oriented investments. They are known for being nimble investors with deep pockets and patient capital, so they have been able to capitalise on changing market conditions and benefit from strong investment gains, particularly in the private and public equities space.”
European family offices are more engaged in sustainable investing compared to the global average, with those doing so currently allocating 29 per cent of their average portfolio to sustainable investments, compared to 23 per cent globally. However, this is expected to rise rapidly to 44 per cent over the next five years. The main focus for family offices in their sustainable strategies is climate change, supported by 78 per cent of European family offices and 73 per cent globally.
Dr Rebecca Gooch added: “Family offices have been flocking to sustainable investing at a rapid pace. Not only are more family offices adopting a sustainable approach each year, but sustainability is also accounting for a growing proportion of their portfolios. Investment into this area is expected to grow rapidly within the next five years.
“COVID-19 has rocketed the already steadily growing engagement in sustainability among families, as has a growing awareness about the dangers of climate change, an area that has become the number one target for investment by family offices and their next generation.”
In terms of investment, European family offices are beginning to focus more on cryptocurrency, with over one in four (28 per cent) investing in the asset. Whilst crypto currently makes up only one per cent of their investment portfolio, 17 per cent of family offices plan to allocate more in 2022.
Mark Stokes added: “Family offices are feeling optimistic about the economic recovery, with the majority seeking new investment opportunities across traditional asset classes, as well as venturing into new assets such as cryptocurrency.”
Notes to Editors
About The Global Family Office Report: Regional Series
This report is based on statistical analysis from 385 surveys with family offices worldwide, with 108 (28 per cent) being based in Europe. The European edition is part of The Global Family Office Report: Regional Series 2021, which consists of three regional reports covering North America, Asia-Pacific and Europe.
Deloitte Private is the brand under which firms in the Deloitte network provide services to privately-owned entities and high-net worth individuals. In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms.
Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.
The information contained in this press release is correct at the time of going to press.
For more information, please visit www.deloitte.co.uk.
About Campden Wealth
Campden Wealth is a family-owned, global membership organisation providing education, connectivity, research and networking opportunities to families of significant wealth, supporting their critical decisions, helping to achieve enduring success for their enterprises and family offices, and preserving their family legacy.
Campden Research supplies market insight on key sector issues for its client community and their advisers and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique proprietary data and analysis based on primary sources.
Campden Wealth owns the Campden Club, a private, qualified and invitation-only members club representing multi-generational business owning families, family offices and private investors across 39 countries, and the Institute for Private Investors (IPI), the pre-eminent membership network for private investors in the United States. Campden further enhanced its international reach with the establishment of Campden Family Connect PVT. Ltd., a joint venture with the Patni family in Mumbai in 2015.
For more information: www.campdenwealth.com