What Is A Family Office And Do You Need One?

For those who don’t use one, the term family office probably conjures up images of several generations of a single family working together, generally in one location, often operating a small business. And while that could be one definition, in the world of financial services, the term family office has a much broader connotation. Instead of a physical location where the family works together, a family office generally is a private wealth management firm offering a range of personalized services that go way beyond investment management or financial planning. A family office differs from a typical financial advisory relationship in its breadth as it often provides a range of concierge services that greatly eclipses any single stand-alone service required by ultra-high-net-worth (UNHW) families.

Some of the confusion may stem from the fact that the original family offices managed the financial affairs of a single, extremely wealthy family such as the Rockefellers, Vanderbilts or du Ponts. Such single-family offices still exist but the wealth management industry has evolved so that multi-family offices can bring a higher level of expertise than most single families can attract. Truth be told, few top tier professionals want to work for a single family.

Is Your Advisor Really a Family Office?

Although many wealth advisory firms provide some family office services, their pitch may be more aspirational than factual. Since there is no hard and fast definition of what separates a family office from the more common financial advisory relationship, there is a great deal of subjectivity both as to a family’s needs and the service offering. At a minimum a family office denotes an in-depth, holistic approach that provides clients with services that addresses many aspects of their daily financial life from high-level financial planning, investment management and family governance issues on down to more mundane services such as bill paying, staff payroll and concierge services.

Do You Need a Family Office?

Not everyone who is considered UNHW needs a family office, but those who do all agree that having a family office makes life a lot less stressful. It can be especially helpful to those family leaders who personally handle most aspects of a complicated and time-consuming financial structure.

For those who travel often, whether for business or pleasure, a family office assures that the family’s financial life continues to run smoothly —bills are paid, staff is supervised, investment portfolios are managed, taxes are filed. This can become especially important for former C-suite executives who after they retire and no longer have a personal assistant at their beck and call.

Having a family office can also provide tremendous peace of mind and is available to handle many of the one-offs life presents. One of our clients lost their wallet while on a family vacation in Prague. Just the thought of dealing with such a hassle while in another country can send one into a tailspin. But in this case, after an understandable moment of initial panic, the client reached out to us and the hassles became our problem while the client continued their vacation. In relatively short order we contacted banks, addressed credit cards, and replaced lost documents, including their driver’s license. The examples of one-offs are endless.

Ultimately, for ultra-high-net worth families whose financial needs can be extremely complicated a family office provides enormous value because it provides an integrated service model that accounts for everything financial in one place. Very often when families choose to work with multiple professionals, important items can fall through the proverbial “cracks.” The oversight a family office provides greatly reduces omissions created by individual financial silos.

A family office is not for every family, but for those with significant assets, complicated financial lives and a desire to make the mundane, as well as the complex, flow a bit smoother, a family office can be an ideal solution.

This article was originally published by Rob Clarfeld in Forbes Magazine.