The benefits of integration in the management of family wealth

In a previous blog I wrote about The Organisation of Family Capital. Like much of my professional thinking these views are informed by global research and my interactions with renowned private wealth sector experts.

In recent years I have become influenced by The UHNW Institute, a non-profit and independent "Think Tank", publisher and curator of exceptional thought leadership and content relating to private wealth.

One of their seminal works is The 10 Domains of Family Wealth white paper.

This groundbreaking model identifies nine disciplines relevant to the management of family wealth, each of which requires a high degree of technical expertise:

1. Estate Planning and Legal Issues
2. Social Impact and Philanthropy
3. Risk Management
4. Governance and Decision Making
5. Leadership and Transition Planning
6. Learning, Development, and the Rising Generation
7. Family Dynamics
8. Health and Wellbeing
9. Financial and Investment Management

The tenth and central domain is the many relationships and skills through which families and their advisors interact.

When I examined the landscape inhabited by the families I advise through this prism I realised that neither I nor my firm can hope to provide all the solutions they need.

The various domains are complex and genuine expertise is required to properly advise clients. That usually requires an open architecture approach to advice as almost no one service provider will have all the solutions. If they claim they do then they are almost certainly overstating their capabilities and doing their clients a disservice.

Consequently I have subscribed to a philosophy known as "integrated family wealth services", another concept developed by The UHNW Institute (specifically Jim Grubman , PhD and Tom McCullough ).

In short there are four levels of integration:

1. Siloed providers with little to no integration (e.g. lawyers, accountants, financial planners, etc all working in isolation of each other);
2. Integrated financial management (i.e. some combination of financial planning, tax planning, portfolio design, investment management, retirement planning, and insurance planning);
3. Integrated wealth management (i.e. all of the above but with estate planning and legal, risk management, administration and consolidated reporting, and perhaps philanthropic planning); and
4. Family wealth integration (i.e. where a few family offices and firms with the close collaboration of high-quality outside providers provide or procure all of the above services as a cohesive unit in a process that takes into account all the domains of a family's wealth).

In my experience, high levels of integration in the management of family wealth are worth striving for. Put another way, service providers and advisors working in silos is highly undesirable and usually detrimental to the preservation and enhancement of family wealth.

Unfortunately, this can often happen when a so-called “trusted advisor” is also a gatekeeper to a family and overly protective of their relationship or professionally insecure.

I think that the affairs of wealthy families nowadays are far too complex to be entrusted to one advisor and a better approach is for there to be a team of trusted advisors.

If that proposition can be agreed then it becomes an matter of organisation, collaboration, integration, and execution.

Integration can be achieved with some purposeful planning, strong leadership, and a collaborative, self-aware, and secure advisory group that sees the bigger picture and is willing to divide responsibilities according to what is best for the family.