Why should wealthy families use a multi-family office? What is it and how is it different from traditional wealth management?
Wealthy families often turn to family offices for management of their complex affairs. But not all families can afford to establish a single-family office and employ staff to manage their financial, legal and household affairs. Multi-family offices are therefore becoming increasingly popular as a lower-cost alternative.
With a highly personalised and professional approach, a multi-family office serves the needs of multiple wealthy families and offers some key points of difference.
A single point of contact
In traditional wealth management, wealthy families are dealing with and coordinating the advice of various bankers, lawyers, financial planners and accountants themselves. We’re often told by clients that it feels like they are constantly managing their wealth and the administration that comes with it, rather than enjoying it.A multi-family office appoints a single professional as the point of contact for the management of a family’s financial, tax, governance and legal affairs, which saves the family time and increases efficiencies.
It’s a proactive service that helps families gain control of their time and offers a professional set of eyes over complex transactions. This professional has a clear understanding of the challenges wealthy families face, giving them peace of mind and comfort, knowing their needs are well looked after.
A multi-family office broadens the definition of family wealth to include family harmony and unity. This is different to traditional wealth management, where family wealth is defined purely as the financial assets the family owns. A multi-family office includes in its service offering (either internal or outsourced) a Family Governance process to help families navigate the emotional side of wealth.Money matters can create many emotions, especially when those matters relate to distributing the family wealth to the next generation. Research is telling us that it is no longer enough to simply draft a will, set up trusts and companies and expect that everything will work itself out when we pass. Rather, families are required to engage the younger generation, develop proactive plans, have open and honest conversations and work together to create structures, entities and plans that meet the true needs of the family. The governance service helps affluent families achieve intergenerational wealth harmony.
It is one thing to receive a large sum of money, but another entirely to be responsible for its management. Traditional wealth management fails to adequately prepare the younger generation to receive family wealth, as the focus is on the patriarch and matriarch.The younger generation are beneficiaries of large sums of money with little knowledge or understanding of how to manage it and generally without familiarity of their parents’ advisers. It’s at this point that the younger generation usually leave their parents advisers and set out on their own journey, which can either be good or bad.
A multi-family office recognises the need to engage, educate and empower the younger generation and offers highly personalised services to aid and prepare the heirs for the wealth transfer. Early exposure to wealth management, education around superannuation, tax, investments, and legal issues helps the younger generation feel prepared and ready to receive the gift and responsibility of managing the family wealth.
Establishing a single-family office and hiring experts in finance, tax and can be costly. A multi-family office is a more affordable alternative that provides families with personalised services in finance, governance, tax and legal. The level of service received by families creates the feeling of having their own single-family office, but at fraction of the cost.
While they will share some common attributes, such as those listed above, every multi-family office will provide different services and every family has different and unique needs, so it’s important to chose carefully. The decision must be the right fit for your family as it’s a decision that will play a key role in your family’s future, wealth, and fortune.
Multi-family offices aim to enhance your family’s chances of a successful intergenerational wealth transfer and will seek to work with, rather than replace, your existing service professionals. The family and their needs are at the core of the service offering.