The number of professionals and firms claiming to be multifamily offices or providers of family office services is growing. There is clear evidence the popularity of the business model the exploding, and that this trend is only going to intensify.
In a survey of 611 financial advisors whose primary offering was investment management and who had five or more years continuous experience, about a quarter said they offer some combination of family office services. More telling is that about 60 percent said they’ll be providing some array of family office services within two years.
Topping the list of services advisors anticipate offering is wealth planning, which was cited as a top goal by 70 percent of advisors. Legal strategies and financial products that mitigate taxes, transition wealth efficiently between generations and protect assets are all part of the wealth planning domain. For many of the very wealthy, especially the ultra-wealthy, it is where the magic happens and is therefore an essential part of sophisticated wealth management.
Forty percent of advisors are looking to provide the wealthy with financing options. A third expect to deliver concierge health-care choices. Less than 20 percent are looking to be project managers. Fewer than 5 percent are inclined to provide administrative services.
Teaming Up
Most advisors who provide family office services will need to team up with other professionals. For example, advisors are not directly going to deliver concierge medical services. However, they can facilitate the process between the wealthy and appropriate providers.
The benefits of delivering family office services are clear. To begin with, the business model is attractive to affluent clients and gives advisors an edge over the competition. Additionally, family office services enhance the relationship between advisors and clients.
The family office model can improve communications, strengthen relationships and enhance profitability. Value-added services like concierge health care and project management can go a long way to cementing the bond between the advisor and wealthy clients. Furthermore, many of these services, such as wealth planning and financing, can generate substantial revenues.
As advisors move to provide family office services, some will get it right and others will likely crash and burn. The decision to provide such services needs to be carefully thought through, with solid attention paid to the strategic and financial implications.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.