The family office market is still underrepresented in Europe, with an average penetration rate of 18% of ultra-wealthy individuals. However, the market is poised for rapid expansion due to a high concentration of wealth in the region as well as a significantly underserved ultra-high net worth population, according to a new report, The European Family Office Market: Where Is the Opportunity? from Celent, a Boston-based financial research and consulting firm.
Key findings of the report include:
The European high net worth market represents nearly 27% of total wealth and has been growing at a consistent 8% rate in the last two to three years, versus a market average of 10-11%.
There are approximately 28,500 ultra-high net worth individuals (UHNWIs) in Europe, whose collective wealth totals $3.3 trillion. This population represents a potential revenue pool of $16-20 billion and is growing at 6% a year. Many market players are serving ultra-high net worth individuals, with various business models-single-family office, multi-family office (MFO), private banks, universal banks (global banks), and family office services providers-offering a wide range of services with different levels of sophistication and customization, from financial planning to company and strategy management, family continuity, and lifestyle management.
In more mature markets such as the US, the multi-family office is the emerging winning business model with 85% market penetration or at least 5,000 MFOs, mainly due to the need to manage increasing multigenerational family assets and the model’s enhanced productivity. Celent estimates that there are a total of 1,920 MFOs in Europe, representing 45% of the family office market. MFOs will continue to represent the strongest growth among different types of family offices as multi-generational family assets increase and families seek the greatest value for their money.
Single-family offices will continue to thrive within their niche as some of the wealthiest families continue to demand complete privacy and control.
The European market is less mature than the US market and is still very differentiated. Of the markets evaluated, Switzerland is the most developed and still shows high potential; it has the highest presence of independent multi-family offices, and many of its single family offices are rapidly evolving towards the multi-family office model. In the coming years, Switzerland will consolidate its position as the European hub for family offices, taking advantage of its position as the most developed FO market, exploiting its still great growth potential, and building on its reputation as home to the international wealth managers of choice.
In the next two to three years, family offices will seek technology to automate the tasks that are key to serving their wealthy clients including reporting, investment management, and contact management.