RSM’s 2024 Family Office Operational Excellence Survey Unveils Strategic Shifts Amid the Great Wealth Transfer

CHICAGO – (February 29, 2024) – RSM US LLP (“RSM”) – the leading provider of assurance, tax and consulting services for the middle market – today released its 2024 Family Office Operational Excellence survey exploring how 100 leading U.S. and Canadian family offices are adapting their operations to overcome complex challenges such as evolving tax laws, technology advancements, cybersecurity threats and the ongoing talent shortage.

“Family offices are facing a time of great challenge and change,” said Tony Wood, national leader for the global family office practice at RSM US LLP. “They find themselves at an inflection point where they will need to address a variety of pressing concerns related to their people, processes, data and technology to strengthen their operating model, focus on long-term growth and maintain resilience across their entire enterprise, including their operating businesses and investment structures. Furthermore, with $84 trillion of intergenerational wealth transfer projected through 2045 as a part of the ongoing Great Wealth Transfer—$16 trillion of which is expected over the next decade—the backdrop for operational optimization and resilience is as compelling as ever."

While prioritizing the confidentiality of these traditionally private entities, the survey delivers insights into the drivers reshaping family offices’ operational strategies to cut costs, save time and realign their operating model for the future.

Family Offices Face Best-in-Class Technology Dilemma
As technology continues to advance, family offices grapple with the complexities of maintaining cutting-edge solutions internally. While family offices acknowledge the critical importance of data and technology in their operations, 62% of single-family office respondents agree that delivering best-in-class technology in-house poses a challenge.

There are notable disparities in technology use based on family office establishment dates, with cloud technology preferred by an overwhelming 80% of family offices founded between 2015 and 2023. Conversely, 71% of family offices established in the 1970s and 1980s use automated investment reporting, while only 35% of those founded over the last decade do.

Because family offices rely on technology for day-to-day operational efficiency and strategic decision making, transparency and real-time access to information is crucial. Top uses for technology by single-family offices include:

• Data aggregation for wealth management (87%)
• Cloud-based data storage (70%)
• Automated aggregation of financial data (60%)
• Automated investment reporting (60%)
• Automated payroll and payments (56%)

Cybersecurity Concerns Take Center Stage
Family offices understand that cybersecurity incidents can disrupt normal business operations and lead to downtime, financial losses and reputational damage. Guarding against cyber threats is especially relevant for family offices given that many offices operate on legacy systems and have less sophisticated infrastructure, thus increasing their vulnerability.

Eighty-three percent of single-family office respondents identified cyberattacks or data breaches as their most significant operational risk with respect to technology, yet only 3% consider their investment and operational technology to be leading edge.

While more than half (65%) of smaller family offices said a cyberattack or data breach was their greatest risk, the proportion jumps to 83% for midsized family offices and 89% for large family offices. In truth, all family offices are at risk; the fewer security measures in place, the greater the risk.

Regardless of family office size, respondents ranked business disruption as their next biggest concern after a data breach or cyberattack. The newer the family office, the lower the perceived risk of business disruption was, according to respondents.

While only 12% of respondents said they experienced a cyberattack in the past 12 months, the number of attacks was highest among midsized family offices (20%). Nonetheless, 71% of single-family offices reported being only somewhat confident in their ability to prevent a cyberattack.

Outsourcing as a Game-Changer
Against a complex backdrop of evolving tax laws, the ongoing talent shortage and continued cybersecurity threats, and further challenged by the Great Wealth Transfer underway, outsourcing has emerged as a strategic solution that 96% of survey respondents report leveraging in the past 12 months.

Outsourcing offers family offices specialized expertise, scalability, cost-efficiency, enhanced technology and risk management. When a family office chooses to outsource their non-core functions, they can better focus their resources and attention on their core competences, such as wealth preservation and strategic planning—thus enhancing overall efficiency and effectiveness during this unique window of intergenerational wealth transfer.

Survey results revealed more favorable attitudes toward outsourcing among smaller and newer family offices when compared to their larger and longer established peers. Eighty percent of small family offices agree outsourcing is important to mitigate risk for complex estate, legal and tax issues, versus 63% and 32% of respondents from midsized and larger family offices, respectively. Seventy percent of respondents from newer family offices (established since 2015) agree that outsourcing can allow the organization to focus on delivering value versus only 33% of respondents from family offices established before 1990.

For more information or to access the full report, please visit this link.

About the Survey
Survey data that informs the 2024 RSM Family Office Operational Excellence report represents 100 family offices across the United States and Canada with substantial variation across family office size, generations, respondent profile, operating business sector, years in operation and expense base. Data were collected from Aug. 14 through Aug. 22, 2023, using a sample provided by Gerson Lehrman Group (GLG). To qualify for the survey, respondents had to hold some level of authority in decision making for the family office. Additionally, the family office had to have at least $150 million in assets under management (AUM). Differences in family office size are defined by AUM as follows: Small = $150M to $999.9M, Midsize = $1B to $4.9B, Large = $5B or more.