Rich family offices place trust in global custodians

Global custodians can look forward to a lucrative new market, thanks to the growing professionalisation and globalisation of wealthy families.

According to new research from Northern Trust and Scorpio Partnership, Swiss family offices face growing demand from family members for specialist back office services, prompting a need to outsource. They have to provide detailed, consolidated reporting to individuals who may be scattered about the globe.

Northern Trust, which has E77bn under custody on behalf of family relationships, expects to see this grow significantly. Lucille Knapp, head of wealth management in Europe, the Middle East and Africa for the Chicago-based giant, said there was growing recognition “that families are not necessarily best served by having a single trusted family adviser”.

She added that families, especially younger members, were aware of the power of technology, and could see ways in which they could be better served.

The need to outsource also stems from a trend towards alternative asset classes such as hedge funds or private equity, and from the breadth of investment demands within families.

“One generation might just care about income, while another might want capital growth,” said Ms Knapp. “They might all have different risk levels. An individual in a pension fund of 40,000 members does not get that kind of attention.”

The findings reflect a shift in attitude by traditionally secretive Swiss family offices, which have tended to keep back office functions in house. Ms Knapp said families were aware of the changing nature of the financial world, and prepared to put their trust in external organisations.

Knapp: generations have differing needs