The US firm has issued its inaugural study of global family offices around the world, drawing out their views on topics from philanthropy to bitcoin, succession planning and the risks of government controls.

A study of family offices finds that they’re engaged in cryptocurrencies, are wrestling with succession plans and philanthropy, and are worried that regulators could interfere with their business.

The findings came from a report produced by BNY Mellon Wealth Management in its inaugural global family office study. The report, entitled Shifting Horizons: Insights Into How Family Offices Are Responding to Rapid Economic and Social Change, was produced in partnership with the Harris Poll. It drew from the views of 200 personnel at family offices each managing more than $150 million in assets. Half of the family offices are in the US, with the remainder being in the following countries: the UK, Canada, Switzerland, Luxembourg, Hong Kong, Singapore, Germany, Italy, Brazil, Australia, India, and South Africa.

Some 81 per cent of respondents said that increased regulatory oversight of family offices is a form of government intrusion, while 66 per cent said that succession planning is very or extremely important. Seventy-seven per cent of them have some interest or involvement in cryptocurrencies.

The concerns about regulation have grown since legislators in the US, such as New York-based Democrat Congresswoman Alexandria Ocasio-Cortez, introduced HR 4620, the Family Office Regulation Act of 2021. The act would limit how family offices are exempt from the definition of “investment adviser” under the Investment Advisers Act of 1940. Pressure for such regulations, which figures in the sector say are dangerously misconceived, increased after the collapse of the Archegos Capital hedge fund business in 2021 which was structured as a family office. (Arguably the calls for tighter controls on family offices are part of a wider agenda of concern about high wealth inequality in the US.)

The BNY Mellon report found that only one in four of those surveyed were aware of the proposed legislation. Interestingly, while 80 per cent agree that increased regulation and oversight would help protect investors against sudden financial implosion, roughly the same proportion view it as a government intrusion on family finances (81 per cent).

Another finding related to family offices’ use of private banks. Only three in 10 (29 per cent) family offices facilitate private banking services for their clients, with capital markets (brokerage services, mutual funds), cash management and credit, and lending provided most often. Offices using private banking are likely to continue using it, but others say they are unlikely to get involved, the study found. 

“Private banking seems to be providing a significant opportunity for those family offices that offer it to their clients, as the commitment to continue offering this service is very strong among this group,” the study found.

Philanthropy
A relatively important area for family offices, the study showed that the philanthropy sector remains one where they have work to do. Almost three quarters of family offices surveyed are involved in philanthropy to some degree, only 30 per cent have documented strategies. “This gap indicates a need in the family office space to optimize gift-giving and align strategic, financial, and philanthropic goals,” authors of the report said. 

As far as succession planning is concerned, a high percentage of respondents recognized that it is an important area, but families can struggle to get this right. Half of family offices are actively engaged in succession planning and have initiated action plans, while 38 per cent have started discussions on the topic. Some 17 per cent “very strongly agreed” with the statement “it is a difficult topic by nature and the tendency is to avoid it,” while 25 per cent agreed, 28 per cent “somewhat agreed” and 31 per cent said they “do not agree.”