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Family Office Or Independant Cohesive Team?

Managing family wealth has a set of unique situations. There’s a need to integrate different capabilities. After you recognize these challenges, you’ll likely opt for a family office to manage assets that aren’t related to the business operations. 

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7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

Ultra-high net worth families may find themselves in a position where they want to integrate their advisors into a family office. If you decide to go in this direction, you’ll be faced with the challenge of hiring some of the best experts in different fields to come and work exclusively for your family. 

These professionals have been extremely successful in their fields, with long and extensive experience, and they tend to be very busy. This can mean that the cost of setting up a family office can be daunting.

Since the cost of a family office can run anywhere from $500,000 to over $10,000,000 per year, it can take a few hundred million dollars of wealth before it makes economic sense.

The advantages, however, are multifaceted. A family office can handle their wide range of affairs, whether financial or personal. It amounts to a private management firm that takes care of such services as investment advice, charitable giving, insurance, tax services, estate planning, and wealth transfer, and much more.

It can also schedule travel, make arrangements for private schooling, and handle a wide variety of household issues. 

When setting up a family office, it’s essential to understand that there’s no single standard to follow. You need to consider your investment objectives, appetite for risk, and the desire to have control over wealth management. 

The family office not only provides those services, but it also encourages and nurtures leadership and strong family values. You can customize the office to serve all your family’s needs—whether it is paying the bills, dealing with lawsuits, walking the dog, booking air flights, taking care of property maintenance, hiring gardeners, or taking care of the jet and yacht. Whatever the particular needs of the family, the office can be called into service.

For ultra-high net worth families, those requirements can be quite extensive. They need a dedicated group that knows the family and its issues well and can work in concert to make sure its affairs run smoothly.

A study conducted by Graystone Partners found that there were over 5,000 family offices in the U.S. These offices ranged from the first to the sixth generation, with assets ranging from $100 to over billions of dollars. However, don’t let these numbers scare you as a family office can have a family member and an accountant handling the financial and legal issues. 

Apart from these core responsibilities, the family office can be used to equip and empower the family’s younger generation.  The leader can share his or her knowledge of business topics during office meetings.  The office can also be a place the leader uses to install values to the younger generation to continue the family’s legacy. 

In essence, the family office is a way to control your financial and administrative affairs; it can also deal with the details of personal arrangements to take the burden off your family. A dedicated staff provides highly specialized services solely to your family. Another option, however, would be an office that tends to the needs of several families. This is a way of keeping expenses down by sharing the costs of paying for the staff necessary to accomplish those services. In either case, the office is there to fulfill your family’s directives. The biggest advantage is the level of customization of services. The family drives the delivery of services.

A successful family office needs similar fundamentals as those of a family business. There’s a need for a defined organizational structure, excellent communication, budgeting, and a clear mission/vision statement. You also need to have a strategic plan that outlines the type of services it seeks to provide and the people who will provide them. 

In the atmosphere of the family office, you can safeguard your family legacy and values and develop the leadership to become the future stewards of the wealth. As you can see, the office can do far more than deal with finances, although that’s a major part of it.

Independent Cohesive Team

An alternative to the family office is to bring together an open architecture, independent-yet-cohesive team. Many ultra-high net worth families are reaping the benefits of advisors and firms with open nonproprietary architecture platforms. To start out, you should have a go-to advisor who coordinates on your behalf. The team can then manage investment policy statements for multigenerational wealth, asset allocation (arguably the most critical part of an ultra-high net worth wealth performance), investment selection, and performance reporting. The biggest two advantages of this alternative are (1) low cost and (2) you don’t have to hire brilliant professionals away from their high-paying jobs.

A Relationship of Trust

In the end, however you structure your relationship with advisors, you want to be able to go to sleep at night knowing your family’s wealth is in good hands. So when you choose someone to be a part of the team of professionals that contributes to the ongoing health of your finances, once you have done all the due diligence and considered his or her credentials, education, and experience, step back and ask yourself: “Is this someone I truly trust?” Is this someone who looks you in the eye, who gives you a firm handshake? Do you like this person? 

You will be working together for a long time, and if the vibes don’t seem right at the beginning, it is a sign to bail out. If you feel like rolling your eyes, then nothing the advisor says really matters at that point. Look to see who’s next on your list to interview.

Don’t settle for someone who just seems “okay.” Shoot for the best. When you’re heading into a war, you want to be sure that the person who has your back is someone you absolutely trust.

When deciding on either a family office or an independent cohesive team, it’s essential to weigh the pros/cons and take a proactive approach. Talking to a financial advisor in Fort Lauderdale will help you analyze the best approach to use when deciding to set up a family office or opting for an independent cohesive team.