Family offices have expanded rapidly, and depending on whom one believes, there are 10,000-plus of them. According to Deloitte, there are more than 8,000 that will hold $5.4 trillion in assets by 2030. That’s a lot of financial firepower. And that means that these sometimes discreet actors are looming larger on the dashboards of financial regulators and policymakers. How much risk, collectively speaking, do family offices’ activities pose? What, for example, is the situation regarding market liquidity? And what might the regulatory consequences be? For example, the failure of the New York-based Archegos business – which hit Credit Suisse – was followed by political calls for regulatory oversight of single-family offices. This issue is unlikely to go away.

To try to answer these questions is Eugenia Mykuliak , who is founder and executive director of B2PRIME Group, a global financial services provider for institutional and professional clients. The editors are pleased to share her ideas with readers and we hope it stimulates conversations. Please get involved! The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

For many years, hedge funds were seen as the biggest threat to financial market stability. But if you're looking for the next potential liquidity shock, it would be wise to look beyond Wall Street and instead turn attention to the quieter corner of the financial world. Namely, the family offices. 

Operating with minimal regulatory oversight and substantial assets – often managing billions in private wealth – family offices have become influential players in global markets. And yet, many among them remain structurally unprepared for market stress, especially given their exposure to illiquid assets and reliance on increasingly outdated manual processes. 

Take, for example, the collapse of Archegos Capital Management back in 2021. It was a family office, not a hedge fund – yet its implosion wiped out roughly $10 billion in days and caught major banks off-guard. It’s a stark reminder of how concentrated risk and operational practices lacking in transparency can cause rapid, far-reaching disruption.

And as family offices continue to grow in size and complexity, their potential to amplify liquidity shocks will also become much more acute. But things are starting to change now, and family offices are becoming increasingly in the crosshairs of regulators – especially in the wake of the Archegos collapse. The Securities and Exchange Commission has since proposed expanding disclosure obligations for large family offices, signaling a shift toward greater oversight. 

So what other steps can be taken to mitigate that risk and safeguard against the next crisis? Let’s take a look.

A structural blind spot
Family offices are unique in that they don’t have limited partners to report to. This offers privacy and flexibility – both valuable in wealth preservation – but it also means that in times of market stress, there’s no external voice to apply brakes, ask the hard questions, or demand de-risking.

Such absence of accountability is particularly dangerous in a market where alternatives dominate. According to a 2024 report by JP Morgan, many family offices allocate nearly half of their portfolios to alternative investments such as private equity and real estate. These portfolios are often highly concentrated –in some cases, 40 to 60 per cent is allocated to private equity or even a single family-held company. Additionally, emotional ties to certain assets, such as legacy businesses or trophy real estate, can make objective decision-making even more difficult.

Still, alternatives may offer attractive long-term returns, but they’re hard to exit quickly. And liquidity completely drying up at speed is a situation increasingly common in recent years. Even the most sophisticated investment strategies are not completely bulletproof. 

And since many family offices still manage operations manually – through spreadsheets, PDFs, and email – there’s often no consolidated view of risk exposure, leaving plenty of blind spots.

Many family offices also rely on third-party custodians or niche asset managers. Such reliance itself is not a problem but when they do not actively consolidate or track counterparty exposures, it might start to pose a significant risk. 

Technology is no longer optional
This is where digital transformation comes in – not just as a competitive edge but as a safety net. Deloitte surveys show that nearly 75 per cent of family offices admit they’re underinvested in operational technology needed to run a modern business. As a direct consequence, not only are they far less efficient than they could be, but they are without real-time data. It is also impossible for them to accurately assess liquidity, make timely decisions, or spot early warning signs.

The market has already seen cases where family offices couldn’t identify their exposure to a failing bank until it was too late. This isn't just inconvenient – it's dangerous. A centralized digital system that can monitor leverage and track exposures in real time has now become a core element of any risk management strategy.

Future-proofing family office strategy
So, given everything we’ve covered above, it is clear that family offices need to take proactive steps to strengthen their operating models, especially in today’s uncertain investment environment. The traditional low-profile, loosely structured approach is no longer sufficient.

First, it’s essential for them to get on with the times and prioritize the adoption of modern digital tools. Specifically, investing in systems that provide a real-time, consolidated view of their wealth is crucial. Without this visibility, decision-making remains reactive rather than strategic. 

Equally important is for them to build robust and dynamic liquidity planning frameworks for both short- and long-term capital needs. Portfolios must be stress-tested under a variety of scenarios to ensure that clients can access their capital when they need it without having to sell long-hold assets at a loss.

Beyond infrastructure, family offices need stronger governance models. In the absence of external LPs, there must be internal mechanisms that promote accountability around investment decisions and curb excessive risk-taking. If there are no checks from external parties, then those checks need to come from within.

Finally, while family offices have historically operated without too much regulatory scrutiny, that may change in the future. As such, building transparent operational structures today will go a long way toward reducing the risk of unpleasant surprises tomorrow. This includes proper recordkeeping, third-party audits, and adherence to best practices in tax, anti-money laundering, and KYC standards.