The global wealth boom is fueling the creation of record numbers of family offices. It also comes with its own problem of scammers. Fundraisers and scammers are posing as family office representatives to scam gullible investors, but some are just in it to “pump their egos,” several industry veterans told CNBC. “Fake family offices are rapidly increasing,” said Ronald Diamond, who runs Diamond Wealth, a co-investment syndicate of more than 100 families. “There’s all the money in family office space right now. So every bank, every law firm, every accounting firm wants a piece of (that money). So if you say you have a family office, everyone will want to talk to you,” he said. Last year, a Singapore resident was found guilty of running a $10 million scheme to trick people into investing in pre-IPO technology companies, including Airbnb, by posing as the head of a prominent family office. He impersonated a Man Capital executive by creating a fake email domain and online profile, pretending to have connections to some of Egypt’s most prominent entrepreneurs, and lulling his victims into a false sense of security before deceiving them. Some people do it not for money, but for self-esteem and self-worth. They think that if banks take them out to lunch and people ask them out, it means they are loved. Prestel and Partners Family Office Conference Tobias Prestel True family offices rarely raise money from the public or sell investment products, but only manage and invest their own family’s wealth, experts said. However, not all scammers are looking to make a quick buck. Some people put on pretenses not to deceive others, but to be recognized as important members of society. They pretend to be family offices in order to gain a certain social status and respect. “That’s why people say, oh, I’m a family office founder, just to be with the crowd and be somebody,” said Tobias Prestel, managing director of the Prestel Family Office Conference and Partner Family Office Conference. “If you say I’m a family office, banks will invite you to lunch, asset managers will take you out to dinner, and everyone who wants to sell you something will treat you well.” Industry experts said the rise in fakes is a natural byproduct of the influx of money and attention into the industry. According to the latest statistics from Deloitte, there will be 8,030 private offices worldwide in 2024, an increase of almost 31% over the past five years. That number is projected to increase by 12% to 9,030 by the end of 2025 and 33% to 10,720 by 2030. The total number of funds they oversee is vast and continues to grow. Family offices currently manage approximately $3.1 trillion in total assets, which is expected to increase by 73% to $5.4 trillion by 2030. Why it’s fake and how to spot it The information vacuum seems to be encouraging scammers. In many markets, genuine single family offices (SFOs) are exempt from registration as long as they only manage family funds. There is no need to be registered on the public regulatory register or a license to manage funds. Industry experts say these privacy norms often make verification difficult. For example, in Dubai, an SFO does not require a full financial license as long as it manages only one family’s money. Similarly, family offices in the United States are typically exempt from registration with the Securities and Exchange Commission if they serve only one family and are wholly owned and controlled by family members. Single family offices are established to manage family money and must not solicit money from third parties. “Investors should understand more about the background of an investment partner before committing to an investment,” a spokesperson for the Monetary Authority of Singapore said, adding that citizens can contact the SFC if they have any questions about a family office’s background. The Monetary Authority of Singapore said parties approached by entities soliciting funds must verify their identity and check whether they hold the appropriate licenses. A MAS spokesperson told CNBC: “Single family offices are established to manage family funds and should not solicit third-party funds. Any entity soliciting third-party funds must hold a capital markets services license.” In response to questions about what steps the country had taken to prevent family office-related fraud, the UK Financial Conduct Authority said it “continues to work with partners to stop crime, including fraud and illegal financial promotion.” The Dubai Financial Services Authority declined to comment, while the U.S. Securities and Exchange Commission, largely shut down due to the government shutdown, did not respond. It also doesn’t help that some wealthy individuals are generally very private and have little or no information accessible online. Diamond highlighted a practical challenge: “It’s hard to do background checks on billionaires, right? Because they’re usually very private.” Family offices are therefore increasingly dependent on each other to compare notes. Industries vet each other through community references and behavioral evidence. This is something that investors can also try before putting money into schemes proposed by family office representatives. Diamond said his quickest filter is to call and ask some established families in the area. If no one has heard of them, that could be a potential red flag and requires deeper investigation. Similarly, Ryan Lin of Bayfront Law, which works with Chinese family offices in Singapore, pointed to strong family office linkages in the city-state and said representatives sometimes check in through WhatsApp groups. “So if I have never heard of this thing (family office) and they claim to have lived in Singapore for 30 years, something is wrong,” he said. If someone came up to me and said, “Hey, I’m a second generation from a wealthy family in Singapore,” alarm bells would go off. Then send me a 400-500 word summary to prove this. The veteran CEO of Canopy Mu Chen Industry suggested that seeking information about past investments and co-investment partners and confirming the source of wealth could help confirm the authenticity of the purported family office. Excessive compensation actions to prove legitimacy also tend to ring alarm bells. Mu Chen, CEO of Canopy, which liaises with family offices established in Singapore, said family offices generally don’t tend to share too much information and rarely take the lead in pushing products. These people are often courted, not the other way around. “True family offices have a lot of people chasing them,” he said. “If someone came to me and said, ‘Hey, I’m a second-generation member of a wealthy Singaporean family,’ that would set off alarm bells. Then send me a 400-500 word summary to prove this.”
