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EXCLUSIVE: A Walk Around Germany's Single-Family Offices Sector – Part 1

Tom Burroughes

23 January 2024

In this detailed feature, WealthBriefing looks at the Germany-based family offices industry, one that can sometimes slip under the radar of the international business media – with certain key exceptions, such as when it came to light that a German couple involved in the Pfizer vaccine programme were backed by a family office. This feature, which runs in two parts, starts with an examination of the territory, and the role of German banks. The second part features comments from three prominent Swiss banks which also serve this market. (This news service took a broad look at Germany's wealth sector some time ago. A lot has happened in the intervening years.)

Germany’s family offices market is not as closely followed as those in the US, or even the UK and Switzerland – perhaps reflecting an English language media tilt – but its collective size means that banks have been rolling out business units to serve it.

This news service took time out from the usual 24-hour news mayhem to look into how large the German single-family offices (SFOs) sector is and, what major domestic and international banks’ strategy is towards serving this market. 

There have been scores of commentariessurveys, white papers, and even books about the world’s family offices market. Banks, research institutes and others crank out several surveys to work out what single-family offices want, how banks can serve them more effectively, and trends about pay, technology problems, and more. This tends to be a broadly English-language area, with many reports coming from the US, for example. Amidst all this, the German-language market perhaps falls under the media radar. (On a separate tack, banks certain banks and service providers will also talk about their “DACH” regional approaches – Germany, Austria and Switzerland.)

Banks also seek high-margin business as cost pressures and other forces to continue to bite. This means that family offices are seen as lucrative, long-term clients worth cultivating. But to do the job properly takes time and resources. Players such as , told this news service. (Highworth is a database on SFOs worldwide. This news service is its exclusive media partner. To register for the firm’s database, click here.)

“However, there are significant differences between the two markets. The German SFO market is almost entirely domestic in its nature, while the UK one, for example, has a higher share of founders who come from overseas, as does the Swiss market,” Graham said. “In the case of the UK market, the Highworth Single Family Office Database shows that 28 per cent of single-family offices have founders who are not British, while the Swiss SFO market has 34 per cent of founders who are not Swiss.”

The Highworth database shows a total of 228 German SFOs, varying in size from tens of millions of euros to multi-billions. (As with all these matters, calculating the exact size of the SFO market isn't easy because some family offices will go to considerable lengths to stay anonymous. The size of the sector can also be exaggerated, including structures that arguably aren't family offices at all.)

Banks must appreciate these differences and position accordingly. In talking to several German, Swiss and international lenders, several common themes emerge: SFOs are preparing for NextGen assumption of control of business and wealth; there is more focus, it seems, on active asset management, including direct investing; SFOs need continued support for areas such as cybersecurity, and the sector is seen as growing at a steady clip. 

Mostly, German family offices tend to be linked to the country’s Mittelstand sector of small, medium-sized, and large manufacturing and service sector companies that are typically family controlled/and/or owned. Carmaker dynasties are among the richest family office players. For example, there is the eponymous family office of the late CEO of German auto giant Volkswagen, Ferdinand Piëch. By far the largest is FERI AG, one of the family offices linked to the Quandt family behind automaker giant BMW. 

In one memorable case, it turned out that the couple involved in the development of the BioNTech Covid vaccine – distributed via Pfizer – had been backed by a German family office, Athos Service GmbH. 
 


The views of German banks

Berenberg
It’s perhaps fitting that in a sector where dynastic tradition can count for much, that Germany’s oldest bank, , says it covers this industry. The firm said it estimates that it has access to just under 400 SFOs – it knows the organisation and the family officer who looks after the respective family. (That does not mean that these are all its clients, the bank said.) In 2020, the bank created a dedicated service for this segment, Dennis Nacken, head of family office and family-owned business at the Hamburg-headquartered firm, said.

“At Berenberg, family offices and ultra-high net worth individuals are of the highest priority,” he continued. “We set up a specialised centre of competence for family offices and UHNW individuals in which we offer individualised and objective products and services combined with a discreet, fast, and solution-oriented approach,” Nacken said.

He said services and products include help in setting up a family office structure, strategic asset allocation consultancy, specific liquid and illiquid investment solutions or exclusive access to (pre-)IPOs and direct investment opportunities, he said.

Nacken said that SFOs mainly ask for investment solutions (managed accounts), strategic asset allocation advice and specific investment ideas such as direct investment or real estate opportunities. 

This publication asked Nacken whether SFOs in Germany have become more willing to put themselves into the public realm.

“As a rule, SFOs are less visible because they seek protection in anonymity. But there is a tendency for more and more SFOs to open up. Either to be able to source more deals or they also work as profit centres and scale their resources by offering products to third parties,” he replied.

He added that Berenberg brings SFOs together, through its “Single Family Office Conference,” for example – a networking platform for principals and single-family offices. 

Nacker added that he expects further growth in the space, particularly when NextGen wealth holders take over responsibilities from their elders.

Deutsche Bank
, the country’s largest bank, said that depending on the definition of SFO, it covers about 300 of them. “We have been hosting networking events like our Family Officer Symposium (FOS) with more than 100 participants for more than 25 years,” a spokesperson said. 

The Deutsche Oppenheim Family Office AG operation is the in-house multi-family office of Deutsche Bank which covers about 35 to 40 single family offices. “The total number of single-family offices in Germany has been estimated to be currently somewhere between 350 and 500. We have therefore a very significant market share in Germany,” it said.

The family offices market is important for Deutsche. “The advisory of family officer, serving their very specific and individual needs, is one of the core services of Deutsche Bank’s wealth management. The sector is also very important because it shows upcoming trends of the entire banking industry and client base and therefore gives insights into what other clients might demand in in the future,” the bank continued. “Last but not least, it brings substantial volume which can have a significant impact on the bank’s revenues.”

Unsurprisingly, Deutsche’s work in areas such as corporate and investment banking plays into its service model for SFOs. “Many private clients have a significant stake (and wealth) bounded in the assets of the company. For specific corporate finance needs, Deutsche Bank opens its internal network to connect clients to our Corporate or Investment Bank globally,” the lender said. “Whenever there is demand for continuing liquidity – e.g., when much of the client’s wealth is an illiquid stake in a company, Deutsche Bank can provide Lombard loans to ensure the flexibility of making strategic investments without the need for stiff long-term loan contracts.

“Structural questions concerning the pros and cons of setting up an investment vehicle in a specific country and the benefits of a well-designed inheritance strategy are of high interest too,” it added.


Bethmann
Another domestic German bank player is . The firm said it covers SFOs, but declined to give a specific number of its clients. “We have always been a first point of contact for FOs/SFOs across the country,” a spokesperson for the Frankfurt-headquartered bank said. 

Among trends it sees sees, Bethmann said there is an “increasing demand in the development and harmonisation of sustainable investment guidelines and sustainability reporting.” The bank said that another core service for UHNW individuals and family offices is its succession planning.

The second half of this article will examine views of Swiss banks serving the Germany market.