The appeal of the family office has grown significantly from earlier days, when the Rockefellers epitomized the concept one office serving one familiy.
We’ve come a long way since then. It’s now common to have families with similar goals and interests sharing a team of dedicated professionals, enhancing operating efficiency in terms of both service and cost. Multifamily offices now serve families with as little as $5 million in investable assets.
Family offices, when structured properly, excel at bringing together and collaborating with a suite of professionals, including a family attorney, family accountant and others to manage their affairs. As family wealth grew and the need for more complex services rose, it became more costly for these families to manage their wealth holistically, with each advisor being a spoke on a wheel rather than an individual silo.
Responding to the increasingly complex needs of wealthy families, family office services should encompass a broad range of disciplines: financial and retirement planning and counseling, investment management, estate and tax planning, cash and asset management, asset raising and private lending, business succession planning, philanthropic legacy management, travel planning and the management of aircraft, yachts and other hard assets, and real estate and overall family governance. Finding professionals to manage such a comprehensive range of services is among a family office's greatest challenges.
Product-driven cultures, whether they be banks, wirehouses or money managers, are proving to be bad service models when it comes to serving the high-net-worth. Providing a suite of products that are transactional in nature, designed to generate profit, falls short of what a wealthy family needs. Lumping broad and diverse services together to cut costs, without customizing the solution to fit the needs of the client, usually drive away the wealthy rather than serve them.
Successful family offices are the ones that realize you can no longer define wealth solely by the amount of material possessions a family may own. Given the complexity that great wealth creates, non-financial assets are often overlooked, such as family governance, family dynamics and the multi-generational roles the members play. The most successful family offices are the ones that manage both the material and non-material assets of their clients.
Nadene Salzman is vice president of wealth management at Source Financial Advisors in New York City.