Deloitte Private partner Elise Elliot said key players in this marketplace now include private banks, private client groups, trust departments, and the wealth management arms of banks and broker-dealers.
Despite this competition, Ms Elliot said family offices are still often the best vehicle to preserve and protect family wealth.
Families often establish a family office (FO) to invest the cash generated from a liquidity event such as the sale of a family business, the result of a significant inheritance or the build-up over time of cash flows from a trading business.
The FO structure comes in a range of models, with some offering full-service operations that include investment management, legal, accounting, and tax advice while others provide only administration and oversight. Others comprise various combinations of these services.
“The advantages of the structure, including direct oversight, customisation of services and privacy, cannot be matched by any other entity,” according to Deloitte private partner Elise Elliot.
“However, many large financial service institutions are devoting significant resources to serving wealthy families, making the space very competitive,” she added.
Family dynamics are the greatest risk to the success of the family office and for preserving wealth for future generations, according to a recent Private Wealth Outlook report.
Ms Elliot said it is important that a family office is governed appropriately and families have access to the right skill to make sure their money is managed correctly.
“When considering the composition of a family office, it should not be comprised purely of family members but with individuals with the skills needed to govern the business,” she said.
The most common issues that cause a breakdown in families include:
• Lack of communication
• Lack of transparency
• The preceding generation keeping control
• Lack of education
• Inequalities amongst family members
Deloitte has just released its 2014 Private Wealth Outlook: Championing Growth report which focuses on the private wealth industry and family offices.