Ultra-high-net-worth families are considering cutting back on their offerings at their family offices, merging with other family offices, or even closing, after 81% of their investment strategies have been affected by the credit crisis and market correction, according to a study released Monday by U.S. Trust, Bank of America Private Wealth Management.
 
The 2009 U.S. Trust/Campden Research North American Family Office Survey, which is part of a larger study entitled “Building for the Future,” reported that 31% of family offices might close due to the difficult market environment.

Meanwhile, 28% are considering opening to non-founding family clients, to increase their investment opportunities by having greater assets under management.

“The tumultuous economic and market climate of the last thirteen months has exposed the weaknesses and strengths of the family office model, and as a result, we are going to see family offices increasingly concentrating on core competencies and looking to others to provide non-core services,” said Mindy Rosenthal, managing director of Campden’s North American Business and author of the research. “Now more than ever, family offices will be considering significant organizational changes ranging from consolidation with other family offices, opening services to non-family clients or possible closure.”
 
The study also showed that family offices are focusing more heavily on managing liquidity and becoming more opportunistic, while returning to their core mandates: offering financial advisory services, such as trust and estate planning, financial planning, and tax planning. Family offices also seem to be learning from the Ponzi schemes and other financial catastrophes that have been front-page news over the past year. The survey participants reported that the most important qualities of financial service providers are confidentiality and reputation.
 
“Scandals and widespread investment losses have left family offices poised for a period of significant evolution,” said Belinda Sneddon, group executive, U.S. Trust Family Office, which is a unit of U.S. Trust, Bank Of America Private Wealth Management.  “The family office model is turning back to basics, enhancing risk assessment and focusing on its strengths which lie primarily in wealth management services.”

The research was conducted between June and September 2009 by interviews and an online survey with family office executives and family principals from 40 single-family offices and 10 evolving multi-family offices in North America.