Wealthy families and individuals of the 19th century had access to in-house staffs of trusted advisers offering wealth management, preservation, and generational planning among other services. The array of services offered by these family offices included hiring and management of household staff, travel planning and whatever else was required by their employers’ lifestyles and financial affairs; think “Downton Abbey”. The concept of a family office has been modernized and now focuses on offering personalized wealth preservation and management as well as providing a link to a large number of specialists on an as-needed basis including lawyers, travel and health consultants to name just a few. Some families have a large full time and typically highly educated staff and others may have one or two key managers who work alongside family members helping them execute projects and day-to-day operations.
Professionals engaged in providing wealth management services to affluent individuals usually focus on retirement and estate planning, asset protection and preservation, and development of investment strategies for asset growth. A family office takes wealth management to another level. There is a lot of privately held money at stake when there is a family office, so outside professionals will always be a part of the process, but the family office is the quarterback and data hub so these important tasks are interwoven with tax analysis, business growth and fostering of new ideas. This creates a big-picture view which considers all of the competing objectives and provides for a comprehensive plan.
Wealth management provided by an in-house, privately staffed family office continues as the premier choice of affluent families throughout the world, but other options now exist for those up and coming or who do not feel the need for full-time staff. Instead of an in-house operation, today’s family office offering financial management, wealth preservation, and estate planning services can be provided by a private company or firm.
Family office firms tailor their services to the individualized needs of the person or family for whom they provide the service. These firms may designate 3-4 people to a given family on an as-needed basis. The important distinction is that these firms ensure each family has a responsive team made up of several individuals who do not have to spread themselves too thin. Again, they must be connected, highly educated and extremely responsive to fill this role. Service professionals usually make up the team, including accounting, insurance, and charitable giving advice along with traditional wealth management, retirement and estate planning, and wealth development. With accountants and lawyers, it typically does not make sense to have full-time professionals so outsourcing for those is essential whereas financial advisors, bookkeeping, and charitable endeavors tend to be in-house roles.
Operation of an in-house family office staffed by employees of a family or individual or family office services provided by a private company has their limitations. An in-house family office is expensive to staff and operate limiting its use to only the wealthiest individuals and families.
Outsourcing the family office to a private company might reduce the cost, but the funds available for investment and business development are limited to those of the family or the individual for whom the office is established. Multi-family offices have developed to take advantage of funding from multiple families or individuals to increase investment opportunities while spreading out the cost of the operation of the family office.
A key distinction between a family office and services usually associated with wealth management and estate planning is the emphasis on the family. A family office focuses not only on the creator of the wealth as much as it does on the needs and expectations of future generations of the family.
Educating and serving the interests of the spouses, children, and grandchildren of creators of wealth is essential to promoting generational planning. One of the functions and benefits of a family office is to prepare future generations for the wealth that eventually will pass to them.
Families and individuals using family office services benefit from having access to the advice of a team of experts capable of devising personalized and coordinated investment and wealth management strategies. Services can be as broad or as narrow as needed to satisfy the needs of current and future generations.
The professionals at NM Law, APC, have more than fifty years of collective experience providing trusted advice and representation to businesses and individuals in succession and estate planning, asset acquisition and preservation, and wealth management. NM LAW, APC has the ability to provide the legal component of a family office’s outsourced team, as they have extensive experience representing closely-held businesses and their owners through all different types of transactions including third party agreements, entity formation, succession planning, and acquisitions. They also function as trusted advisers to trustees and board members. Contact NM Law, APC today at (949) 253-0000 to schedule an appointment.
Disclaimer: This article is intended to provide a general summary of laws in the State of California and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.