A Look back at our 2021 US Family Office Report

At the start of 2021, we created our USA Family Office report to explore predicted trends for the year ahead. Half-way through 2022 and we thought it was the perfect time to look back and see not only if we were right but what has happened in the US Family Office market that no one could have predicted.

  • Social Mobility.

We were so confident that Social Mobility would be a pivotal trend in 2021 that we titled our report ‘The Year of Social Mobility and Outside Expertise’.

We anticipated that looming changes to taxation policy, the ongoing pandemic and an approaching cost of living crisis would begin to push Family Office professionals away from the city for a more affordable and balanced lifestyle. It turns out, not only were we right but we underestimated just how big an impact it would have on the global jobs market.

As work-from-home rules became commonplace, professionals of every age began to move interstate to save money on taxes, create a more enjoyable working environment and achieve a better work-life balance. As the rules relaxed, those who couldn’t offer the new American dream began to lose the best talent as candidates took control of their own destinies and became more selective than ever before.

By autumn, economists were crowning 2021 as the year of the Great Resignation with over 4.4 million people leaving their jobs by September alone and this number continues to grow into 2022 as our recent poll revealed that 80% of Family Office professionals to be seeking a move in the next 12 months.

Now, for the first time in history, there are more vacancies than employees in the likes of the UK and with more Family Office opportunities on offer, a global acceptance of flexible working undermining the more traditional proposition of a Family Office and a rivalry with tech firms for the best talent, Family Offices must do everything they can to retain their critical staff.

  • Intergenerational Wealth Transfer.

Our next prediction was a huge increase in the amount of Family Offices transferring their wealth to the next generation.

At the time of writing our 2021 US report, Biden had just taken office and promised to increase federal income tax from 37% to a pre-Trump rate of 39%, corporate tax from 21% to 28% and estate tax from 40% to 45%. He also pledged to return estate tax to its 2009 threshold which meant lowering the exemption amounts from $11.58 million for estate and gift taxes to $3.5 million for the estate tax and $1 million for the gift tax. A reversal of the step-up in basis rule which would jeopardise future wealth transfers.

The talk of changing taxation paired with a sudden realisation of mortality caused by the coronavirus pandemic prompted a conversation around succession planning and we predicted 2021 to be the year of the wealth transfer. It seems we were right on this one too.

In fact, the Financial Times reported that an astonishing $446BN is to be transferred over the next decade, $5TRN if you take a 30-year-view. This process was firmly commenced in 2021 with 58% of Family Offices telling us at Agreus that they had a succession plan in place and a further 66% telling BNY Mellon that a succession plan was more important now than ever before. We have also seen a record-number of Family Offices elect a next-generation family member to their Board to ensure their wealth, once transferred, is in good hands with those who understand the inner workings of a Family Office.

With Biden’s billionaire tax looking more and more likely, wealth is certainly set to be transferred in the masses.

  • Something none of us predicted, more regulation.

Family Offices across the world were hit with what quickly became known as the Archegos Scandal in 2021. It was not the first big scandal to hit the Family Office space and while it will certainly not be the last, its unwelcomed arrival in March sent shockwaves through the entire US Family Office community. It was met with talk of a lobby to increase regulation and disclosure, swiftly followed by a Democrat-approved bill to require Family Offices with over $750M to register with the Securities and Exchange Commission (SEC).

The new bill unpicked much of the Dodd-Frank Act passed some 10 years ago by also ending the exemption of SEC registration for Family Offices with non-family member investors. The bill had been designed to give the SEC more information about the size, portfolios and leverage taken on by Family Offices and was the first legislative response to the Archegos scandal.

Since then, the fear of more regulation has only grown stronger with a recent poll of ours finding 54% of Family Offices expecting more regulation by the end of 2022. A recent announcement by The Commodity Future Trading Commission only built on this concern with Chairman Rostin Behnam stating it would not surprise him if there were more Bill Hwang’s out there and a bid to catch them said the top US derivatives regulator is ratcheting up scrutiny of Family Offices.

Not only would further regulation go against the very DNA of Family Offices but perhaps the biggest loss of all would be how it could deter UHNWI’s and Families from establishing Family Offices. The most influential and fluid investors today and the very entities that form the backbone of investments in technology, pharmaceuticals, making a social impact and delivering change in the world we live in. The very entities that are reinjecting life back into the global economy by supporting SMEs. This is not something we could have predicted but a trend that we think might unfortunately last well into 2022 and beyond.

With a US recession now looming, more opportunities than candidates and regulation rearing its head, we think 2022 is set to be the most disruptive year yet.

What were your predictions for 2021 and were they right?