Family Is What Threatens a Family’s Fortune. Tales From Those in the Know.

The biggest risk family offices face isn’t taxes, regulations, or investments that go south—it’s the family itself, according to the executive of one of these offices.

This executive is speaking from experience. The rich, self-made patriarch he works for hasn’t made a succession plan for his family office despite being in his 70s and unhealthy. Without a plan, the patriarch’s wife and two of his three adult children are on a spending path that could deplete half the family’s wealth by the third generation, the executive said in an interview for a Deloitte Private report published on February 28.

“Overspending is the biggest risk—the numerous houses they have bought that need to be managed, the household staff, the drivers, private jets, yachts, et cetera,” he said. “They have become accustomed to a certain lifestyle.”

The interview was one of 10 experiences of anonymous family office executives that revealed the complexity of managing wealth for super large, super rich families. Their stories are offered to lift a veil on these notoriously private enterprises, “to help the family office community learn from the best about how to successfully navigate the complicated world we live in and plan for long-term success,” according to Rebecca Gooch, global head of insights at Deloitte and a report author.

These offices typically oversee investing and wealth management, but also tasks ranging from day-to-day financial management to estate planning. According to a September report from Deloitte, the number of single-family offices globally increased nearly 31% to an estimated 8,030 last year from 6,130 in 2019, while assets under management rose by 63% to $3.1 trillion.

The rich, ailing patriarch is failing to put a succession plan in place because he fears upsetting those close to him who have taken on senior roles in the family office, despite lacking competence, the executive said.

Deloitte included this case study to show that challenges with succession are common within the wealth community, and are rarely discussed in public. “Normally, they are too private to do that, and once a family loses their wealth, they are no longer captured in family office studies,” Gooch said. “In turn, this is a very interesting and personal warning to the community.”

By contrast, the CEO of another family office described how much he enjoyed working for one of the wealthiest and most high-profile people in the world who wants to spend down his fortune by combating climate change and supporting science and research into neurodegenerative diseases. “We are here to look after the principal, manage what he has, and frankly, to give his money away to good causes,” the CEO said.

The way this family tackles issues is innovative, even among family offices, Gooch said. “The team looks at a problem, such as climate change, and thinks about how to tackle it from a variety of perspectives,” she said. “They look at it from a sustainable investing angle, a philanthropy angle, and a political action front to see if policy changes can make a positive difference.”

Another large, prominent global family—with their main offices in Africa and the U.K.—decided it best to split its operations into two branches to cater to separate wings of the family, a move that runs counter to the more common path of keeping a family together to achieve economies of scale and to avoid redundancies, according to a chief operating officer with the family.

“It was a painful process, but in hindsight, it was the right decision,” the COO said. “Families should feel empowered to do good in their respective ways.”

Other families detailed their experiences with cyberattacks, including the CEO of a U.S.-based office that suffered two attacks in quick succession. In separate research published late last year, Deloitte found 43% of family offices had a cyberattack in the past 12 to 24 months, up from 15% in 2016. Yet nearly a third don’t have a cybersecurity strategy in place, Gooch said.

Although many families now have stories to tell, they “still have a long way to go before they are adequately prepared—and the threats around them, particularly with AI and deep fakes, are rapidly growing in sophistication.”

Corrections & Amplifications

The rich, ailing patriarch described in the report is failing to put a succession plan in place because he fears upsetting those who have taken on senior roles in the family office. An earlier version of this article incorrectly said it was family members who have taken on senior roles.

Yet nearly a third of those surveyed don’t have a cybersecurity strategy in place. An earlier version of this article incorrectly said it was more than a third.

It’s the corporate gamble of the moment: Can you run a company, increasing sales and juicing profits, without adding people?

American employers are increasingly making the calculation that they can keep the size of their teams flat—or shrink through layoffs—without harming their businesses.

Part of that thinking is the belief that artificial intelligence will be used to pick up some of the slack and automate more processes. Companies are also hesitant to make any moves in an economy many still describe as uncertain.

JPMorgan Chase’s chief financial officer told investors recently that the bank now has a “very strong bias against having the reflective response” to hire more people for any given need. Aerospace and defense company RTX boasted last week that its sales rose even without adding employees.

Goldman Sachs , meanwhile, sent a memo to staffers this month saying the firm “will constrain head count growth through the end of the year” and reduce roles that could be more efficient with AI. Walmart , the nation’s largest private employer, also said it plans to keep its head count roughly flat over the next three years, even as its sales grow.

“If people are getting more productive, you don’t need to hire more people,” Brian Chesky , Airbnb’s chief executive, said in an interview. “I see a lot of companies pre-emptively holding the line, forecasting and hoping that they can have smaller workforces.”

Airbnb employs around 7,000 people, and Chesky says he doesn’t expect that number to grow much over the next year. With the help of AI, he said he hopes that “the team we already have can get considerably more work done.”

Many companies seem intent on embracing a new, ultralean model of staffing, one where more roles are kept unfilled and hiring is treated as a last resort. At Intuit , every time a job comes open, managers are pushed to justify why they need to backfill it, said Sandeep Aujla , the company’s chief financial officer. The new rigor around hiring helps combat corporate bloat.

“That typical behavior that settles in—and we’re all guilty of it—is, historically, if someone leaves, if Jane Doe leaves, I’ve got to backfill Jane,” Aujla said in an interview. Now, when someone quits, the company asks: “Is there an opportunity for us to rethink how we staff?”

Intuit has chosen not to replace certain roles in its finance, legal and customer-support functions, he said. In its last fiscal year, the company’s revenue rose 16% even as its head count stayed flat, and it is planning only modest hiring in the current year.

The desire to avoid hiring or filling jobs reflects a growing push among executives to see a return on their AI spending. On earnings calls, mentions of ROI and AI investments are increasing, according to an analysis by AlphaSense, reflecting heightened interest from analysts and investors that companies make good on the millions they are pouring into AI.

Many executives hope that software coding assistants and armies of digital agents will keep improving—even if the current results still at times leave something to be desired.

The widespread caution in hiring now is frustrating job seekers and leading many employees within organizations to feel stuck in place, unable to ascend or take on new roles, workers and bosses say.

Inside many large companies, HR chiefs also say it is becoming increasingly difficult to predict just how many employees will be needed as technology takes on more of the work.

Some employers seem to think that fewer employees will actually improve operations.

Meta Platforms this past week said it is cutting 600 jobs in its AI division, a move some leaders hailed as a way to cut down on bureaucracy.

“By reducing the size of our team, fewer conversations will be required to make a decision, and each person will be more load-bearing and have more scope and impact,” Alexandr Wang , Meta’s chief AI officer, wrote in a memo to staff seen by The Wall Street Journal.

Though layoffs haven’t been widespread through the economy, some companies are making cuts. Target on Thursday said it would cut about 1,000 corporate employees, and close another 800 open positions, totaling around 8% of its corporate workforce. Michael Fiddelke , Target’s incoming CEO, said in a memo sent to staff that too “many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.”

A range of other employers, from the electric-truck maker Rivian to cable and broadband provider Charter Communications , have announced their own staff cuts in recent weeks, too.

Operating with fewer people can still pose risks for companies by straining existing staffers or hurting efforts to develop future leaders, executives and economists say. “It’s a bit of a double-edged sword,” said Matthew Martin , senior U.S. economist at Oxford Economics. “You want to keep your head count costs down now—but you also have to have an eye on the future.”

Family Is What Threatens a Family’s Fortune. Tales From Those in the Know.

JPMorgan Chase has a ‘strong bias’ against adding staff, while Walmart is keeping its head count flat. Major employers are in a new, ultra lean era.