Multi-family offices generally have wealth planning expertise in house but also rely heavily on external experts, as they do with investment managers. Usually, the more complex wealth management situations are outsourced, depending on the level of expertise among office specialists. The more the multi-family office can offer wealth planning expertise to a broader number of wealthy clients, the more likely the firm is going to use experts from within. The offices likely need at least some in-office expertise, in any case, to effectively coordinate the external wealth planning specialists.
Administrative services: These services tend to be very straightforward and frequently mechanical, but they often serve a critical role. They include:
• Dealing with all tax compliance matters, including the filing of tax returns, audit defense, estate and gift-tax execution, tracking and administration;
• Developing and updating the family balance sheet;
• Producing income and cash-flow statements;
• Providing budgeting plans;
• Bill paying and expense reporting;
• Tracking and reporting investments, including addressing cost and tax basis; and
• Bookkeeping.
Some multi-family offices provide a wide range of administrative support services (though rarely compliance) using in-house experts. Most often, the offices have arrangements with high-net-worth accounting practices or other types of providers to deliver administrative services.
Lifestyle Services
These are non-financial and non-legal services that benefit super-rich families. Of great concern to most wealthy families and individuals is health care. This often requires multi-family offices to connect family members with concierge medical practices and oversee the ongoing relationships. Family security is also very important to super-rich families, and there are security firms that provide a range of services such as privacy and cyber protection, personal protection services and investigations, and due diligence.
Some lifestyle services may be offered by in-house staffers. If the multi-family offices can deliver this expertise to a number of wealthy individuals and families, it makes having the in-house expert cost effective.
Special Projects
Multi-family offices regularly engage in the management of one-off projects. These can include, for example:
• Facilitating an adoption from another country;
• Buying an island;
• Arranging for experimental stem cell treatments in a foreign country;
• Overseeing the construction of a 60,000 square foot mansion; or
• Arranging the paperwork and facilitating the process for admissions to a private club.
For special projects, external experts are almost always brought in, and the multi-family office acts as coordinator and monitor.
Delivering Synergistic Outcomes
The attraction of top-of-the-line multi-family offices is that they can generate synergies among the various forms of expertise they provide either directly or with outside help. By combining their focus on the wealthy with the vast range of potential services and products, they can make available just about anything the family or individual wants. Many wealthy investors, for example, can pretty consistently benefit in various ways from the combination of investment management and wealth planning—say, to eliminate the taxes on gains produced by an investment portfolio. This type of thinking (followed by action) is just about automatic at the better multi-family offices. It is much less common for a lot of other types of providers.
Special projects are another area where wealth planning can be highly synergistic. From the buying and selling of private islands or private jets or yachts, from adoptions to paying for unique cravings tax efficiently, wealth planning can often get the results wealthy families seek in the most secure and cost-effective manner.
What this shows is that well-managed multi-family offices are fairly adept at duplicating the advantages that single-family offices offer when it comes to serving the super-rich. And next to other sorts of providers, they have proved to be a more effective way for the wealthy to achieve their financial and personal goals.
Russ Alan Prince is president of R.A. Prince & Associates.