Overseeing significant wealth brings with it a host of tasks beyond just managing investments. Keeping tabs on ongoing tasks, aligning family initiatives, and ensuring a legacy’s intent are a few things that are necessary to preserving and managing a family’s assets. Things like financial education for the next generation; overseeing philanthropic initiatives; coordinating the management of various properties and interests; or administering aspects and processes related to estate planning—all of it can become too much for even a well-informed and experienced individual to handle. As a solution, some high-net-worth (HNW) families may choose to establish or acquire the services of a family office: an enterprise that provides services like accounting, investment management, estate planning, and others, packaging them together into a single source that meets the particular needs of the family and permitting the family greater control over outcomes, all while delegating many of the day-to-day decisions to the experts in the family office.
While many may be familiar with the largest family offices—Cascade Investment, established by Bill and Melinda Gates, for example—there are many more family offices in operation, some of them serving a single family, and some serving multiple families. A recent estimate by Ernst & Young placed the number of family offices dedicated to serving a single family at around 6,000. More importantly, each family office, notwithstanding its size, is as different as the family or families it serves. In other words, when you’ve seen one family office—you’ve seen one family office.
Most wealth managers typically serve multiple clients, providing oversight of investments, taxation, insurance, estate planning, and other financial needs. But for some HNW families with at least $10 million or more in net worth, the focused assistance that a family office-like service provides, can afford the family coordinated, professional management that encompasses much more than their investments. In fact, since family wealth services can include just about any type of service that a particular family organization might want or need, they can be structured as uniquely as the family itself.
Family wealth services come in two basic varieties: single-family offices that serve and are employed by a single family—typically with assets in the $100 million range—and multi-family wealth services that offer services to a select number of HNW families.
The first consideration for whether family wealth services is the right choice is, as suggested above, the level of assets. Family organizations with less than $10 million in assets may often be better served by simply working with a private wealth manager who can then refer the family stewards to providers of outsourced services. Alternatively, families with net assets in the $10–$50 million range might do well to consider the services of an advisory firm that can elevate services to the needs and desires of ultra-high-net-worth families.
It’s also important to look at the particular characteristics of the family and the nature of its assets. The greater the complexity in any of these areas, the more important it is to evaluate whether family wealth services can provide the comprehensive service required. On the other hand, it is just this sort of complexity that often makes these services valuable and worthwhile.
Finally, the family’s goals, aspirations, and values must be assessed in light of the services the family office will be expected to provide. Will the focus be on educating and preparing the next generation? Does the family own assets abroad, or are there family members living internationally whose needs must be considered? Does the family’s intended legacy include philanthropic goals that may require specialized estate planning, tax advising, or compliance attention? Does a large portion of the family’s wealth consist of far-flung real estate holdings that could benefit from unified management, coordinated with the family’s other financial priorities?
If you are a family steward who is wondering whether your wealth management needs would be better served by a firm that understands the needs of wealthy families, JFS Wealth Advisors would appreciate the opportunity to discuss the pros and cons with you. Please contact us to set up an appointment. For additional insights on offering financial wisdom to younger generations, click here to read our article, “Giving the Gift of Financial Literacy.”