Is a Family Office a Good Wealth Management Strategy?

August 16, 2023
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If you are an ultra-high-net-worth individual (UHNWI), you have many important financial issues to consider. Managing significant wealth can bring unique challenges. Having a trusted wealth management advisor (or team of financial specialists) can help you make better decisions with your financial assets. One option to consider is hiring a family office.

What is a Family Office?

Family offices differ from traditional financial advisement or wealth management service providers. They are more specialized to the needs of very affluent individuals or families. They can help manage a wide range of needs, including financial planning, investment management, accounting, charitable contributions, tax planning, wealth transfer planning, estate planning, business succession planning, legal services, and more. A family office may also provide non-financial services to their clients. Examples include travel planning or private schooling.

Ultra-wealthy families need very comprehensive wealth management plans, which is the reason why family offices exist to serve these needs.

Single-Family Office vs. Multi-Family Office

There are also different types of family office structures. Some are considered “embedded” as they form organically within a successful family business. The right managers, experts and service providers fall into place over time and cover the family’s various wealth management needs. Next, there are single-family offices. This is a group solely devoted to the needs of one family (potentially including multiple generations of the family). Lastly, there are multi-family offices. These are wealth management firms who represent multiple ultra-wealthy families and individuals, with all the requisite services provided.

Advantages of a Family Office

There are several benefits to having a family office if you have immense wealth that needs to be planned for, managed and protected. The primary advantage is having all of your service providers working together as a team. Everyone is moving in the same direction with the same priorities and working together to achieve your specific financial goals. This can offer greater returns. You may be able to save some expenses with a family office, as well. Splitting your financial, legal, business and other planning needs up between multiple firms and individual service providers will generally cost more overall. With a family office, you are paying one cohesive group to handle everything.

Disadvantages of a Family Office

Of course, it’s very important to hire the right family office and make sure you have the best people in place on your wealth management team. This can be one concern with putting all your nest eggs in one basket, so to speak. One key disadvantage of using a family office structure is the concern that they move you in the wrong direction. Yes, everyone is working together toward the same financial goals and this gives you a better chance of achieving them. The big question is if these are the right goals.

A family office is worth considering for ultra-high-net-worth-individuals and families. At Illumination Wealth, we provide all of these key financial services to a wide range of clients. From financial advisement and investment management to tax planning, business planning and estate planning, we can cover all your wealth management needs with a similar holistic approach you might find at a multi-family office.

To learn more about our wealth management services and to discuss your specific financial goals, please contact us today.