Sixth survey provides view into latest investment and governance trends, including involvement of Next Gen and ESG

Northern Trust (Nasdaq: NTRS) and the Wharton Global Family Alliance (Wharton GFA) announced findings from the Wharton GFA’s sixth benchmarking survey of family offices, highlighting best practices, trends and financial performance drivers of family offices. Faced with vast geopolitical and economic uncertainty and complex family dynamics, the survey found that family offices are returning to a focus on core principles: making sure they have the right investing and governance plans, and the best strategies, to fulfill the family’s long-term goals, including:

• How family offices are responding to inflation, potential recession and geopolitical risks;
• Special considerations for direct investments;
• Interest and action related to environmental, social and governance (ESG) investing; and
• How families are most effectively making decisions and preparing the next generation to manage the wealth.

Geopolitical and Economic Uncertainty

When asked about their greatest concerns, family office respondents cited inflation (24%), the possibility of recession (18%) and geopolitical risk (17%) as top of mind. While these concerns are not surprising given the current environment, they do manifest in a similar fashion: increased market volatility.

Direct Investments and ESG Investing

Family offices have substantially increased direct private investments at the expense of making investments through private-equity firms. However, at the same time, family offices have not staffed up with private equity professionals to evaluate, structure, monitor and add value to such direct investments.

“Private investments are attractive for many family offices because of the potential for high returns, but it is imperative that they deploy the right resources to evaluate and manage these investments,” said Professor Raphael Amit, Founder and Chairman of the Wharton Global Family Alliance and the author of the Wharton 2022 Family Office report.

In addition, many family offices report that they are or plan to deploy capital to ESG investments. Even so, a significant number of survey respondents report that ESG investments amount to less than 10% of their portfolios. Hesitancy to act may be attributed to challenges in finding consensus among the family on investment themes. It can be hard to find agreement on what is ‘most’ important, as many families remain uncomfortable about potentially sacrificing returns, while others grapple with the best way to measure performance.

Succession Planning

While succession is a normal, healthy part of every family’s evolution, succession plans are rare, with just one-third of respondents having a formal succession plan in place for either the family office or the family itself. Further, when there is a succession plan in place, only 37% of stakeholders are aware of the plan.

“The risks inherent in avoiding these conversations and failing to prepare are immense. A well-planned succession process takes at least a year; the time to start is now,” said David W. Fox, President of Northern Trust Global Family and Private Investment Office Services.

Methodology

The Wharton Global Family Alliance is a world-leading research forum created by the Wharton School and the CCC Alliance. Northern Trust and Wharton have collaborated on research programs spanning multi-generational, multi-branch families and their businesses since 2017.

This report is the sixth in a series of benchmarking surveys that seek to develop a better understanding of trends and financial performance drivers of family offices. It highlights the latest knowledge and best practices that will benefit substantial global families.

For the purposes of the survey, a family office is defined as a professional organization, owned and controlled by a wealthy family, dedicated to managing the personal and financial affairs of family members.

The sample used in this survey spans 24 countries. With respect to assets under management, the majority of survey respondents have more than $1 billion in assets under management and represent families who own, manage and/or control at least one business in addition to the wealth managed by their family offices.

• Assets under management (AUM) managed by respondents, 51% have greater than $1 billion; 27% have between $500 million to $1 billion; 19% have AUM between $100 million and $500 million; and 3% have less than $100 million.
• 34% of the Family Offices in our sample serve 1-3 households, about 23% serve 4-6 households, and about 43% of the Family Offices in the sample serve more than 7 households.
• More than 30% of sample Family Offices employ 4-7 professionals. Nearly 20% are larger Family Offices that employ more than 21 professionals

Request the full executive summary here.

Northern Trust Wealth Management offers holistic wealth management services for affluent individuals and families, family offices, foundations and endowments, and privately held businesses. It is recognized for its innovative technology, service excellence and depth of expertise, with $368.3 billion in assets under management as of March 31, 2023. The Northern Trust Company is an Equal Housing Lender. Member FDIC.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 25 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2023, Northern Trust had assets under custody/administration of US$14.2 trillion, and assets under management of US$1.3 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on Twitter @NorthernTrust or Northern Trust Corporation on LinkedIn.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/terms-and-conditions.

About the Wharton School

Founded in 1881 as the world’s first collegiate business school, the Wharton School of the University of Pennsylvania is shaping the future of business by incubating ideas, driving insights, and creating leaders who change the world. With a faculty of more than 235 renowned professors, Wharton has 5,000 undergraduate, MBA, executive MBA, and doctoral students. Each year 13,000 professionals from around the world advance their careers through Wharton Executive Education’s individual, company-customized, and online programs. More than 104,000 Wharton alumni form a powerful global network of leaders who transform business every day. For more information, visit www.wharton.upenn.edu.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230620066618/en/