Managing wealth requires considerable time and attention. While this may seem easy, family business, philanthropy, personal and other obligations can make demands that leave little time to concentrate on oversight, investments, addressing individual needs and distribution. In many cases, the solution for wealthy families is to outsource everyday management and maintenance tasks, so that lives running efficiently. Family offices solve this dilemma by offering a holistic approach to wealth (and family) management.
A family office is designated by an individual family to oversee, facilitate and maintain a family lifestyle and legacy. It provides the family with desired oversight of assets, management of bill payments, resources and frees up valuable time to focus on other endeavors, such as philanthropy or growing the business.
Single-family offices are created by high-net-worth families and serve only that family. These entities employee managers and staff and are managed as businesses. They form a robust platform for long-term planning, daily maintenance of assets, collective and individual funds management and bill payments, and can serve as a resource and in an advisory capacity in many areas. Services are chosen or created by the family based on goals, desires and interests and can include financial strategy, planning and investing and governance.
Multi-family Family Offices
Because single-family offices are very costly to set up and maintain, many are opening their doors and forming multi-family offices. A multi-family office often drastically reduces administrative costs through economy of scale. Multi-family offices serve several families through a pool of shared staff. In both single-family and shared-family offices, the family office manages assets and integrates daily operations by handling a constellation of tasks such as insurance, bill payments, cash management and tax planning. As private wealth continues to grow and priorities of younger generations shift, multi-family offices will likely increase in number.
Family offices make wealth management consistent, objective and remove emotions when distributing funds. This important buffer protects assets from those who would otherwise deplete the fortune. By employing a separate legal entity to manage wealth and lifestyle needs, the family is less involved personally, yet they do maintain a great degree of control through oversight and direction.
Many high-net-worth individuals want to preserve their wealth for future generations. A family office can structure the fortune to ensure transference and help educate younger generations on matters of wealth management. Preservation is especially important when the original business has been sold and the third (or even the fourth) generation are living on family money.
Convenience is another important component of a family office. While outsourcing specialized services can sometimes make good financial sense, in-house providers remove extra links in the chain and limit conflicts by streamlining the management process. All the necessary tasks required to manage and maintain wealth are handled in one location by professional advisors who can easily communicate with each other.
In practice, there is no template for a family office. Your professional financial advisor should be able to provide insight, counsel and a road map of sorts. They are familiar with supporting multi-generational families, individuals, entrepreneurs, and businesses with the customized flexibility they require to keep their lives in order. A family office can easily integrate your financial advisor to be part of the Family Office team.
At LifeSteps Financial, we have developed the first step in outsourced financial management with our Family Office/Bill Pay services. Built at the request of clients, we offer a range of specialized services that include bookkeeping, insurance resources and management, rental collection and management, bill payments and support with other aspects of financial and wealth management. We regularly work with other family advisors (i.e. CPAs, bankers, mortgage professionals, attorneys, insurance brokers, etc.) and can assist in tax planning, consulting on loans, storing financial documents and providing financial reporting.
As financial management becomes more complex, it is wise to consider options. Contact your financial advisor when you want to consider additional support in managing assets.
This report is for information purposes only and is not a recommendation for any particular security. Mention of individual securities should not imply that we own the security or have owned it in the past. In addition, the information provided here should not form the basis for investment decisions. Past performance is no guarantee of future results. This information should not be used in any transaction without the advice and guidance of your Tax Professional. LifeSteps Financial has not independently verified, or attested to the accuracy or authenticity of the information, including any investment performance measurement.