How to Choose a Family Office That Is Right Fit for You
In recent years, the growth and popularity of family offices have skyrocketed, with many high-network families switching over from traditional wealth management services. In the past specialized financial service providers that focused on scattered key aspects of an individual’s personal finances, like estate planning or investment strategy, succeeded in providing the particular individual services that a family was looking for. However, in 2022, more individuals, now more than ever before, are looking for a family office financial service that is consolidated and provides all of the necessary resources, like tax planning, investment strategy, wealth management, and estate planning, all in one place. This not only provides the family with specialized convenience but also allows the family office to familiarize itself with all of the family’s wants and needs in order to provide them with focused care that they would not otherwise see among other financial institutions and offices.
However, all family offices can be different. In order to explore and figure out which family office would best suit you. It is essential to understand the different types of family offices, who they are designed for, and what effect they may have on your own family or individual financial situation.
Family Office Responsibilities
Family offices are privately held financial service companies designed to assist wealthy and ultra-wealthy individuals and families with their finances. This ensures that their financial wealth continues to grow for future generations. These private wealth management advisory firms specialize in assisting individuals and families of all backgrounds with services like budgeting, insurance, charity management, wealth transfer planning, and much more. In order to promote the generational advancement of wealth, family offices also specialize in educating younger generations in the proper handling of the wealth passed down to them by older members of the family. This can often help instill an appreciation for the wealth and the responsibilities this fortune requires from them in order to continue to carry out the family’s vision.
Types of Family Offices
Traditional Family Office
A traditional family office has a staff of disciplinary and financial experts who take on the responsibility of protecting, managing and growing a family’s financial wealth. There are many positions within the staff of a traditional family office, including tax specialists, financial advisors, accountants, estate planners, and more. Due to the nature of the family office, all personnel are employed under the same office, so there is no conflict of interest among the team. This is often an issue found when obtaining services from multiple financial firms at one time.
Within the scope of a traditional family office, there exists multi-family offices and single-family offices. Both types of traditional family offices offer the same services; however, multi-family offices offer services to multiple families, while single-family offices tend to stick with an ultra-high-networth single family. Regardless of the arrangement, both types provide personalized wealth-related solutions and plans for each particular family’s financial and household needs.
Due to the fact that multi-family offices have multiple clients, they tend to charge a smaller fee for their services. While this type of family office can be less expensive, the solutions provided tend to be less personalized as a single-family office has the luxury to focus only on a single family and come up with financial solutions specifically tailored to the exact situation the family is in. All time, resources, and professional staff must be shared among multiple families meaning that multi-family offices have less control over tailored planning than single-family offices do.
Helping you achieve your evolving financial objectives
Outsourced Family Office
An outsourced family office is another type of family office that is not interconnected under one organization. Instead, this type of family office is considered as a network of financial service providers collaborating together for a single client. These service providers include financial layers, financial accountants, and financial advisors, all providing a service to a family or individual. While these professionals work under different departments and financial institutions, they are authorized and given permission to consult with each other about the intricacies and details of a family’s financial situation. This type of family office can be set up fully virtually as well.
Each financial professional has a different role to fulfill for the family. A financial advisor might handle the investment aspects for the family, while an attorney handles the estate plan, and the CPA handles tax strategy. This allows an outsourced family office to coordinate and manage many of the same matters a traditional family office would handle. Even specialized services like family wealth education and philanthropic or charity planning an outsourced family office can support. However, while this type of family office is less expensive than both a single-family and multi-family traditional family office, the office has less control over the specific professionals managing the financial situation of a client. Plans created for each family are less tailored to their specific needs and more generic due to the lack of total control and fewer resources provided for each family with an outsourced family office.
How to Choose a Family Office That Is Right Fit for You
In order to figure out and analyze which family service is right for you and your family, it is important to ask the right questions. Figuring out exactly what financial family office services exist in your area, are the needs limited to just wealth and investment advisory services or more, and does my financial situation and net worth require guidance from an expert in areas such as trust creation, philanthropy, succession planning, and financial structure, is extremely important. Asking questions like, is there a need for a dedicated team to manage my finance, how involved do I want to be with my finances, and to what degree of control should the family office be allowed to have, are necessary to determine what type of family office would work for you and your family.
Generally, the more complex and extensive a family’s financial situation is, the more likely they are to be in need of a traditional family office setup. Ultra-high networth families typically seek services from single-family traditional offices, while medium to high-networth families typically seek cheaper services from multi-family traditional offices and outsourced family offices as they do not need exceedingly tailored plans.
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