Key Takeaways
- • Family offices with at least $1 billion in assets spent an average of $6.6 million in annual operating costs, according to a J.P. Morgan Private Bank survey, up $500,000 from the bank's previous family office poll in 2023.
- • Rising compensation for investment talent is the largest driver of cost growth, as family offices compete with private equity and hedge funds for investment professionals.
- • About 80% of family offices outsource at least part of their portfolio, but only 28% cite reducing costs or resource burden as a main reason, with track records and access to private investments ranking higher when selecting advisors.
- • Advisors warn that heirs may consolidate or unwind single-family offices after the founding generation dies, given the sticker shock of current expense levels.
Summary
As the wealth of the world's richest individuals has grown, so has the cost of running their private investment firms, according to a recent report by J.P. Morgan Private Bank. Family offices with at least $1 billion in assets spent an average of $6.6 million on annual operating costs, an increase of $500,000 since the bank's previous family office survey in 2023.
William Sinclair, global co-head of J.P. Morgan Private Bank's family office practice, attributed much of the increase to rising compensation for investment talent, the largest component of operating budgets. He described a "war for talent," noting that family offices compete with private equity and hedge funds when building investment teams. Family office consultant Kirby Rosplock, CEO of Tamarind Partners, said the expense growth reflects the volume of wealth created over the last decade, which requires more staff and systems to support it. Offices typically cut expense lines only when assets are shrinking, she said.
The survey also found that family offices have widely embraced outsourcing. About 80% reported outsourcing at least some of their portfolio, but Sinclair said this reflects talent shortages more than cost reduction, since only 28% cited lowering costs or resource burden as a main reason. When choosing external advisors, respondents ranked desirable track records and access to private investments well above cost considerations.
Natasha Pearl, a family office advisor, said some principals pay little attention to cost creep, prioritizing the confidentiality and control of a single-family office over third-party vendors. Many principals also lose track of expenses across multiple investment entities and holding companies. Pearl expects the next generation to scrutinize these costs more closely, and heirs may consider consolidating or unwinding the family office after their parents die.
William Sinclair, global co-head of J.P. Morgan Private Bank's family office practice, attributed much of the increase to rising compensation for investment talent, the largest component of operating budgets. He described a "war for talent," noting that family offices compete with private equity and hedge funds when building investment teams. Family office consultant Kirby Rosplock, CEO of Tamarind Partners, said the expense growth reflects the volume of wealth created over the last decade, which requires more staff and systems to support it. Offices typically cut expense lines only when assets are shrinking, she said.
The survey also found that family offices have widely embraced outsourcing. About 80% reported outsourcing at least some of their portfolio, but Sinclair said this reflects talent shortages more than cost reduction, since only 28% cited lowering costs or resource burden as a main reason. When choosing external advisors, respondents ranked desirable track records and access to private investments well above cost considerations.
Natasha Pearl, a family office advisor, said some principals pay little attention to cost creep, prioritizing the confidentiality and control of a single-family office over third-party vendors. Many principals also lose track of expenses across multiple investment entities and holding companies. Pearl expects the next generation to scrutinize these costs more closely, and heirs may consider consolidating or unwinding the family office after their parents die.
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