What are family office services?

According to Deloitte, family offices “are becoming an economic powerhouse”. Research from the professional services leader found that the total estimated wealth for high-net-worth (HNW) families with family offices has leapt from US$3.3 trillion to US$5.5 trillion since 2019 — a 67% increase in just five years. Evidently, creating a family office could be one of the shrewdest investments you can make.

So what is a family office, and do you need one? A family office is a specialised form of wealth management service that sees a financial firm support the financial, investment, and lifestyle needs of HNW families. The goal of a family office is to preserve and grow wealth for the benefit of future generations, while also managing the sometimes complex financial affairs of those with significant wealth.

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Because of this complexity, deciding the correct mix of family office services needed can be a challenging task. In this article, we’ll explore the nuances of this wealth management service, answering what family office services are and whether you need them.

What are family office services?

By now we know that family office services are designed to manage the sizeable wealth of families and make sure this wealth is not only retained for future generations but continues to grow. Let’s take a closer look at what specific services are typically offered by advisors.  

Estate and succession planning

One of the main priorities for those typically requiring family office services is estate and succession planning. Here, the HNW family is seeking support in transferring wealth to the next generation in the most efficient way. Advisors will aim to do so through a mix of trusts, wills, and tax-efficient strategies that aim to maximise the preservation of wealth.

Investment management

Because HNW status is often achieved in part through successful financial investment, family office services seek to sustain or create a diversified and investment strategy tailored to the client’s risk tolerance and financial goals. Advisors can step in and take control of an existing strategy — optimising where needed — or build a bespoke strategy from scratch.

Tax planning

Another common focus from family office providers is tax planning. Here, the aim is to optimise tax efficiency for the family’s wealth while making sure of compliance with all relevant tax regulations. This could include managing the tax implications fora family with investments across borders, where laws from multiple jurisdictions need to be considered.

Philanthropy

Many HNW families wish to use their wealth to support important causes, and make sure their efforts and funds are maximised in doing so. Family office advisors can support here too, setting up and managing charitable foundations and other philanthropic efforts.  

Lifestyle management

Some HNW families call on support in managing their personal affairs. This could include managing multiple properties and the private staff required to maintain such assets. It can also include luxury assets such as private jets, yachts, or luxury vehicles, which often requiring sizeable leases or loans to acquire and also need careful attention to maintain their condition and value.

Which organisations usually offer family office services?

As a specialised service, not all financial firms will provide family office services. Here are some of those that do.

·      Dedicated family offices: Some firms set up solely to offer family office services.These organisations could be a Single-Family Office, which looks after one family with significant wealth, or a Multi-Family Office, which serves more than one family. A Multi-Family Office advisor usually charges lower fees than a Single-Family Office.

·      Boutique investment firms: Smaller boutique investment firms sometimes extend their services to cover family office requirements as a complement to their investment management specialism.

·      Accounting firms: Accounting firms will also sometimes broaden their offering to include family office services, given the wide expertise they already have in investment, law, taxation, and asset management. Reckon Financial Services falls under this category. We take care of the complexities of modern-day accounting and financial services not only for business owners but also many HNW families and individuals on multiple continents.

·       Trust companies: Trust companies can also support with family office services, as the trust and fiduciary services they provide are already a key part of wealth transfer between generations.

Signs you might need family office services

As wealth grows, complexity usually arrives with it. Read on for common signs that suggest you may require family office services.

No cohesive investment management

A lack of a cohesive long-term strategy and as a result, inconsistency in the performance of your portfolio, could be a sign that your investment needs have outgrown your resources. Here, bringing in family office support could be the right choice to help create a cohesive plan for your investments and their growth.  

Overload of administrative tasks

Many HNW families reach a point in their wealth journey where the burden of managing assets and investments becomes too complicated, creating risk. This is often the moment where family office support is necessary — before challenges become critical problems.Bringing in an advisor here can often be a catalyst for a new period of growth, as the injection of expertise creates new wealth generation and preservation opportunities.  

Inconsistency across advisors

In some cases, HNW individuals bring in family office services as a way of consolidating and simplifying their network. As wealth grows, some families find that managing the multiple different advisors accrued over time becomes too complex, with inconsistency seen across the services provided. Consolidating under a single advisor is often the answer for better performance.

Greater international exposure

Third-party support can also be beneficial when a family encounters greater international exposure, such as business expansion into new markets or the decision to seek tax residence in anew jurisdiction. In this situation, the legal, taxation, and investment implications must be navigated carefully to avoid compliance issues and avoidable expenses.

The last word

For many, family office services are an investment that pays handsome dividends. Calling on additional support to strategise and optimise one’s wealth can preserve it for the next generation, while also making sure a structure is in place to sustain wealth long into the future.

Talk to the experts before making your next move. Contact Reckon Financial Services today to explore whether a family office is right for you.