Family offices of tomorrow: more than just investing

The Hong Kong government has high hopes that its new tax regime, which provides profits tax concessions on qualifying transactions of family-owned investment holding vehicles managed by single family offices, will encourage more family offices to set up and operate in the city, create new business opportunities for the asset and wealth management sector and generate demand for other related professional services. 

Globally, the family office market is forecast to grow to USD 16.71 billion in revenue in 2025, from USD 11.08 billion in 2019. According to data from Forbes, New York City has the most billionaires in 2023 at 101 people, followed by Hong Kong with 70 billionaires, and Beijing with 68 billionaires, and this concentration of wealth is making Hong Kong the emerging regional hub for family office business. 

When family offices decide where to set up their operations and locate their investments, tax treatment is often a key factor influencing their decisions. However, there is a geographical component too: Hong Kong is strategically situated within North Asia and is a gateway to the Greater Bay Area and China as a whole making it a top choice for families looking to tap into opportunities in this region. 

While each family office may have different needs, there are some essential aspects that most family offices value: a sophisticated financial services environment, ease of doing business across borders, and convenience of communication and travel. However, a family office is more than just about investing. It is also about passing on and enriching a family legacy, which includes educating the next generation on topics such as family governance, entrepreneurship, and philanthropy.  

Philanthropy, in particular, is a growing focus for Asia’s Ultra-High-Net-Worth Individuals (UHNWIs), as they allocate more of their wealth to good causes. Many family offices now seek to combine capital preservation with supporting broader societal value and solutions to pressing global problems and next generation heirs are particularly keen to steer family office investments to ESG and sustainability themes. However, most family offices are ill-prepared for the demands of greater transparency, public scrutiny and crises.  

As family office profiles and influence skyrocket, the ever-increasing demand for transparency and information exchange is a growing concern for more than half of family offices. As this trend continues, controlling the narrative, internally and externally, is becoming imperative. To this end, families are starting to borrow from the playbook of asset managers, investment banks and corporates to deploy sophisticated communications strategies to better access investment opportunities, attract talent and manage reputation. 

Private market investors transformed their communications approach in response to growing competition, regulation and public scrutiny, and family offices are now doing the same. As in private equity, family offices should tell their story through their portfolio companies. By communicating the positive impacts of their investments in operating businesses, family offices can craft a reputation as desirable investors and responsible community members, improve access to deals and talent, and mitigate negative attention. 

To do this successfully, family offices need to identify relevant journalists to help them tell their stories. However, they must build media relationships before they need them. The default position of many family offices is to hire communications advisors after a crisis strikes. Families should engage advisors before a crisis occurs and develop a plan that assesses potential risks, anticipates future issues and sets out the operating principles and practices for a variety of possible scenarios. 

Family offices should also be doubling down on creating their own content to complement the information they share through the media. This could include content about their investment approach, specialism or sector focus, information about their investment portfolio, and stories about the business, philanthropic or personal interests of the principals. 

As family offices open up about their objectives, investment approaches, and philanthropic activities, they become relatable to their stakeholders and employees, the media, those seeking investment and the greater public. This allows them to craft their reputations as desirable employers and investors as well as responsible and engaged citizens who want to make a positive impact in the world. 

Over the past few years, the demand and sophistication of wealth management solutions by UHNWIs in Asia has increased, giving rise to the emergence of family offices as key players in the region’s economic scenario, and the evolving role of these organizations and the growing responsibilities they take on present new strategic challenges from the point of view of communication and public affairs.  

Family offices need to reorient their thinking to focus on larger strategic goals, including transparency, effective communication and reputation management. Those who continually focus on integrating them across their organizations will find themselves in better positions to face the challenges and take advantage of the opportunities that present themselves in the coming years.