What is a multi-family office?

Your family has many needs across multiple generations. These include investment management, tax and estate planning, charitable giving and much, much more.

As your family becomes wealthier, you probably won’t have the time, expertise or desire to manage it all yourself.

That’s why many families choose to have a dedicated team of professionals manage their wealth in an integrated way.

The richest families set up an office whose sole focus is managing the family’s affairs. The Rockefellers were the first family to set up an office to handle their family’s affairs way back in the 1800s. In recent years, more and more wealthy families have set up offices.

But running a single-family office costs millions of dollars a year and that puts it out of the reach of all but the super-rich. However, there is an alternative known as a multi-family office.

What is a multi-family office? It’s a team of professionals that looks after the affairs of several families.

Families share the costs

This allows the families to share the costs of running the office. And that makes a big difference in how much they have to pay for the services they receive.

Multi-family offices come in many shapes and sizes. But they all should offer complete confidentiality and highly personalized service.

They should also provide you with integrated wealth management. This means the team takes a holistic approach to your family’s affairs.

From financial planning to investment management to tax optimization, estate planning, insurance needs and coordination of charitable giving—each part is aligned with the others.

Your team should also coordinate the work of specialized experts such as accountants and lawyers. It should make sure all the administration is taken care of and you’re kept fully informed and consulted as your family’s situation evolves.

This kind of an integrated approach offers many benefits. They include:

  • the convenience of having a one-stop shop where all of your financial affairs are managed under one roof
  • personalized service based on a deep knowledge of your family
  • access to a network of expert advisors
  • reduced costs thanks to resource sharing and economies of scale

Things to watch out for

If you think a multi-family office might be right for your family, there are a few things you should watch out for as you search for a firm.

First and foremost are the fees. You want to make sure you’re paying a reasonable amount of money for the services you receive.

One thing to be careful about is the investment products you are being sold.

Funds and insurance products can have sales commissions and management fees imbedded in them. And there can be other kinds of fees, such as those charged for so-called wrap accounts.

Often, these various fees will be in addition to an overall charge for managing your family’s financial affairs. It can all add up to a heck of a lot of money and eat up all your investment returns. So, buyer beware.

You will also want to make sure the firms you are considering have the experience, resources and expertise to provide the kind of fully integrated wealth management that I talked about.

Your participation is important

Finally, your family will play a critical role in making your family office a success.

You should communicate constantly amongst yourselves to avoid conflicts and ensure a common vision. Then, you can work closely with your team to find an approach that’s right for your family.

The result will be financial security and peace of mind for many years to come.