The Benefits of Adding a Wealth Management Firm to Your Advisory Team
Fee-conscious, high net worth families who have a strong estate attorney and CPA may believe a Multi-Family Office is an unnecessary addition to their advisory team and instead choose a do-it-yourself, or DIY, approach.
The real opportunity cost of working with a holistic financial advisor may be going unnoticed in some aspects of one’s financial management; however, it is quite likely that at some point a high net worth family who has chosen the DIY path will face challenges that could be detrimental.
There are many significant benefits of working with a wealth management firm that can outweigh any cost savings of forgoing that service.
You Can Put a Price on Peace of Mind
- Enabling More Informed Decision Making.
- The DIY Challenge: It’s hard to make the optimal decision when one sees (or remembers) only part of the financial picture.
- The Multi-Family Office Benefit: Working with professional financial advisors at a Multi-Family Office ensures the family is provided with a complete financial picture, comprehensive reporting, and a breakdown of the pros and cons of various alternatives, all of which help prevent suboptimal decisions that can be made from incomplete information.
- Allowing for the Highest and Best use of Time.
- The DIY Challenge: Time is a precious commodity. Successful executives and entrepreneurs quickly understand the benefits of protecting their schedules from being burdened by matters that can be handled better and more efficiently through delegation.
- The Multi-Family Office Benefit: By hiring a Multi-Family Office, these individuals are able to use their time toward their passion or purpose – whether that is building businesses, pursuing philanthropic endeavors, or spending time with family.
- Spotting the Devil in the Details.
- The DIY Challenge: All-too-often, families put time and energy into making important decisions only to drop the ball on executing the critical administrative details. An estate plan is useless if it is never signed, and life insurance benefits could be cut in half if premiums are paid from the wrong account. Individuals trying to be their own family office are left responsible for chasing the details to execute a strategy – and it is all too easy for these details to fall through the cracks.
- The Multi-Family Office Benefit: Working with an advisor at a Multi-Family Office ensures those details are understood and addressed year-after-year. Once the family makes their informed decision, they can be confident that it will be implemented by a team whose primary focus is looking after the details.
- Helping Families Avoid Being Penny Wise and Pound Foolish.
- The DIY Challenge: Both CPAs and Estate Attorneys deal with high net worth clients who are reluctant to ask for advice because of “starting the meter” on hourly billing. This hesitation can result in expertise being called upon too late when a situation has gone wrong or opportunities have been missed.
- The Multi-Family Office Benefit: Having a Multi-Family Office available to consult (outside the hourly fee model) and be an integral part of ongoing activities allows other advisors to be proactively brought in when needed and supports their ability to provide impactful, value-add advice.
- Multi-Family Offices Can Deliver Continuity.
- The DIY Challenge: Often, a person who serves as his or her own family office doesn’t consider a succession plan. And more often than not, one spouse takes responsibility for the family’s financial management, knows the landscape well, and spends a significant amount of time handling it. If something happens to that spouse, the survivor is left scrambling to ferret out information and make decisions without context or understanding of the full financial picture. And they must take on these tasks while under pressure and during a highly emotional time.
- The Multi-Family Office Benefit: Having a Multi-Family Office in place ensures there is always someone who can provide guidance in the family’s best interest and prevent a painful time from also being financially devastating.
The Perks of Experience
In addition to providing peace of mind, Multi-Family Office wealth management firms have the benefit of years of experience with other families to provide the expertise to deftly handle and resolve many of the challenges families face. And these professional wealth advisors do it all in the best interest of the client family.
- It is Not Their First Rodeo. As the name implies, Multi-Family Offices work with several families that fall into a similar wealth demographic and accumulate their own wealth of experiences and outcomes. Having “been there, done that” allows an advisor to share stories of successes and failures of other families to better inform a client’s decision-making.
- Multi-Family Offices are Skilled in Next Generation Engagement Strategies. As parents of teenagers know, it’s hard to teach one’s own children much of anything at a certain stage. However, the teenage years are actually the right time to be engaging in early financial education. Most wealthy parents spend a lot of time worrying about how their children will be impacted by the wealth and how best to prepare them to manage it, and that worry tends to be paralyzing instead of empowering. One of the greatest benefits of a Multi-Family Office is the focus on the family with the added ability to talk to the next generation as a safe, knowledgeable resource, instead of a lecturing parent.
Before considering a DIY approach to wealth management (or continuing on this path), it is important for high net worth families to consider the benefits of a Multi-Family Office, which ultimately help ensure the family’s financial objectives are being met and opportunities are not being missed.