May 8: Family offices will miss First Republic, but they’re not worried

May 05, 2023
4 months ago
First Republic

The past several months have been one wild ride. Sam Bankman-Fried and FTX, Silicon Valley Bank and now JPMorgan’s acquisition of First Republic Bank.

I can’t help wondering: What does this all mean for the future of wealth management?Kristen_Oliveri

To try to answer this question, Marcus Baram asked family office professionals to weigh in on the recent fallout and predict what’s to come.

Also in this issue, we learn that millennials are three times more likely to move their money during volatile times compared with their baby boomer parents, according to a new Ernst & Young report. Given that the millennials began their careers during the financial crisis of 2008, they’re strapped in and ready for turbulence, allowing them to remain nimble and increase allocations in active investments.

As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].

HANDPICKED: Family offices will miss First Republic, but they’re not worried 


While the markets have been buoyed by JPMorgan’s takeover of First Republic Bank on Monday, family offices and wealth managers have so far been largely nonchalant about the deal involving a regional bank known for catering to wealthy clients. 

It has been a big topic of conversation among clients, said Joseph Reilly,  CEO and founder of Circulus Group, which provides investment and strategy consulting to family offices. But the collapse of the nation’s 14th-largest bank didn’t rattle their nerves because family offices don’t tend to park their deposits in one savings account. 

“They always have money in motion,” Reilly said. “The idea that you’d have a lot of deposits somewhere and be worried about is not top of mind.” Family offices, he said, tend to have various accounts set aside for spending, paying bills, tax reserves, capital calls, some working capital for various businesses, a little emergency reserve and to pay for the family office itself.

“Family office or not, most people with deposits over $250K have been wary of putting all their eggs in one basket and had already opened accounts at more than one bank, but this drove home the point,” said Katherine Hill Ritchie, who has worked as an adviser to family offices through her firm, Private Capital Investments LLC.

That sentiment was echoed by Andrew Busser, president of family office at Pitcairn. “I spoke to one of our clients on Monday,” he said. “They told me they are less worried now than they were a few weeks ago because they’re under the $250K FDIC insurance limit, and the bank being taken over by JPMorgan is a source of comfort because it is large and stable.”

The takeover of First Republic did dominate the mood at the Milken Institute’s Global 2023 Conference, where wealthy investors also were preoccupied with the slowdown in the economy, the repricing of risk in the banking and real estate sectors, and the debt ceiling debate in Washington, reports Pensions & Investments, a sibling publication of Crain Currency

Yet the closing price of the S&P 500 is the same as it was a year ago despite all the banking mayhem, said Rishi Kapoor, co-CEO of Investcorp. “The intervening 52 weeks, we’ve gone through three bank failures over here, one in Europe, meltdown in the UK budget," Kapoor said. "Who could have imagined we’re exactly where we started?”

Indeed, this time feels different from even a month and a half ago during the collapse of Silicon Valley Bank, Reilly said. “No one is worried about a major bank crisis," he said. "The anxiety is more toward recession.”

It could be a good time, however, for family offices to think more strategically. “You can put money in places that will earn real risk-free interest,” Reilly said, explaining that more tenuous options such as CDO strategies, CAT [catastrophe] bonds and the AT1 bond that was famously wiped out with Credit Suisse will go away. Additionally, many opportunities in private debt are available, as regional banks are expected to pull back on business lending, he said. 

The one drawback is the loss of a bank that was prized by many wealthy investors for its culture and responsiveness to clients. That enabled them, as well as other regionals like Key Bank, to start family-wealth divisions and draw clients away from impersonal big banks. 

Family offices were drawn to banks like First Republic because they had a more personal experience compared to the big banks, which never quite get how to work with family offices, Ritchie said.  

For now, former First Republic customers are hoping for the best.

"Our client’s only concern was whether or not they will be able to get the same level of service and attention from JPMorgan that they are used to from First Republic," Busser said. "Time will tell."

Huge generational divide among the wealthy when it comes to active investing


Millennials are nearly three times (73%) as likely to move their assets compared with baby boomers (29%) during times of volatility, reflecting a major generational divide among wealthy investors, according to a new survey, the Ernst & Young Global Wealth Management Research Report. Half of millennials reported increasing allocations to active investments, compared with just 22% of boomers.

“If you’re a millennial, your investing experience most likely started within the last 15 years, since the great financial crisis of 2008,” said Mike Lee, EY Global Wealth & Asset Management leader. “Your experience with traditional markets has been quite rocky. Whereas if you’re a boomer, you’re familiar with the mantra of steady markets.” 

The volatility of the past few years has prompted wealthy investors to take a more defensive position. Their leading goals are now focused on protecting against inflation and ensuring financial security – with a marked decline in diversifying wealth and the importance placed on purposeful financial legacy, such as transitioning wealth to family and charity, the survey found. 

The survey of over 2,600 wealth management clients around the world also revealed some interesting contradictions. 

Though only two in five clients think that wealth management advisers have provided the right level of planning advice to them, family offices expect to increase their use of such advisers – from 6% in 2021 to 9% in the next three years.

In addition, 84% of clients view wealth transfer planning as equally or more complex than two years ago, with only 28% of them saying their adviser has engaged their children or family adequately in planning activities. Only 27% of clients' children believe that their needs are heard and met by their family's current wealth provider.

Family offices have increased their use of wealth management advisers in recent years, with 6% of them using them in 2021, 7% in 2023 and 9% saying they expect to use them in three years’ time.


Here’s where family offices plan to put their money in 2023: According to the new Goldman Sachs Family Office Investment Insights Report, a substantial proportion of family offices plan to increase allocations to these asset classes during 2023: 48% of respondents increasing their public market equities allocation, 41% in private equity, 39% in fixed income, 30% in private credit and 27% in private real estate and infrastructure.

Dolby Family Ventures invests in biotech firm: The early-stage venture firm backed by the family of the late inventor Ray Dolby took part in a $36 million Series A funding round in Therini Bio Inc., a company developing therapeutics for neuroinflammatory diseases.

Arnault has been an NFT skeptic, but he’s buying them: LVMH Chairman Bernard Arnault, the world’s richest person, called nonfungible tokens a “bubble” during an earnings call last year. But he has snapped up quite a few NFTs as part of his art collection, says Ian Rogers, the former chief digital officer of LVMH. 

Help us with a story: We’re working on a story about how family offices are shaping the health care industry. If you have any comments on the topic, reach out to [email protected]