Understanding Family Offices: Benefits for Ultra High Net Worth Families

Did you know that while many families build wealth, only a few manage to preserve it across generations? Family offices are becoming essential tools for ultra high net worth families to achieve this goal.

What is a family office and what do they do?

Family offices are specialized teams of professionals dedicated to managing the wealth of a single family. Their primary mission is to preserve and grow wealth for current and future generations. Beyond financial management, family offices often handle personal aspects of family life, such as:

• Paying bills
• Running homes
• Arranging travel
• Overseeing household staff
• Coordinating security
• Managing special assets like art collections, private aircraft, and yachts

With the rise of wealth creation in recent decades, thousands of family offices have emerged, collectively controlling trillions of dollars. However, their names often remain under the radar to maintain confidentiality and security.

The core service of many family offices is wealth management.

Wealth management is at the heart of family offices. This involves not just investing family wealth but also ensuring that cash works harder and planning for future wealth. Here are some key strategies employed by family offices:

• Building a long-term investment portfolio: A well-structured portfolio is crucial for preserving and growing wealth.
• Diversifying investments: Family offices often extend beyond traditional equities and fixed income into specialist assets, such as direct private investments and commercial properties.
• Strategic borrowing: Efficient borrowing can help families exploit opportunities and maintain financial efficiency.

Family offices take a holistic view of borrowing needs, whether for home loans, aircraft financing, or portfolio borrowing. They also ensure that family cash remains accessible while being put to work.

Planning and structuring wealth through trusts.

Effective wealth planning is essential for smooth transitions between generations. Family offices often create wealth plans and structures, such as trusts, to facilitate this process. Given that many wealthy families operate across multiple jurisdictions, family offices serve as a hub to manage these complexities.

Additionally, family offices provide consolidated reporting and accounting for diverse investments, helping families assess their tax obligations and submit returns efficiently.

Family offices play an important role in family continuity.

Family offices do more than just manage wealth; they help uphold family continuity and unity. Many family offices assist families in defining their values and missions, including how they wish to contribute to society. They also prepare the next generation to be responsible wealth owners through:

• Crafting formal education plans
• Organizing regular family forums
• Encouraging open discussions

By promoting shared values and good communication, family offices can strengthen family bonds and ensure that wealth management aligns with family goals.

Deciding to set up a family office is a major decision.

Establishing a family office is a significant commitment, traditionally associated with billionaires. However, today, it can make sense for families with at least $200 million in investable wealth. For those with less, a multi-family office—shared with other families—can be a viable alternative.

When considering a family office, families should reflect on several questions:

• Are there wealth management needs that aren't being met?
• What new activities could a family office enable?
• Would a family office enhance the family's lifestyle?
• How well would the dynamics of a family office fit with the family's culture?

Engaging with family office consultants can help families explore these questions and conduct a thorough analysis.

Conclusion

Creating a family office can be a powerful way to preserve and grow family wealth tailored to specific needs and objectives.

As you consider the potential benefits of a family office, what aspects of your family's wealth management could be improved?