Managing the affairs of the ultra wealthy

Why all the buzz about family (and multi-family) offices? There’s $46 trillion reasons why, based on a recent Bloomberg article that summed up family wealth assets globally. An estimated 128,000 to 200,000 ultra high net worth individuals (UNHWs) have more than $30 million of investible assets, which makes them candidates for a family office firm.

A majority of the UHNWs reside in the U.S. with Florida being a top five state. WealthX estimates there are over 4,700 UHNW’s in Florida with a 12 percent growth rate during 2014.

Where did the family office concept come from? It goes back to the 6th century when a majordomo could speak, make arrangements, or take charge for the affairs of the royal family and its wealth.

“The original U.S. family offices were created by wealthy early 19th century merchants who hired trusted advisors to oversee their wealth and provide for their families due to their extended travels. For example, John D. Rockefeller started his family office (Rockefeller & Co.) in the late 1880’s.

Today, Fox Family Office Exchange estimates there are 2,000 to 5,000 U.S. single-family offices and thousands of firms operating as multi-family offices. The family office concept has evolved from a cottage industry into an important wealth management sector that manages trillions of dollars of family wealth.

What does a family office do?

A family office hires a wide range of professionals across multiple disciplines – taxes, estate planning, accounting, bookkeeping, investing, etc. – to work for wealth familes and help them manage and execute their ongoing wealth management activities.

By hiring a dedicated team of individuals, families ensure that their needs are exclusively addressed and their agenda is driving all of the decision-making activities. Family offices generally manage budgeting, insurance, charitable giving, family-owned business, wealth transfer, family governance, reporting and data aggregation and tax functions for the family households.

A family office can cost more than $2 million a year to run! For this reason, multi-family offices have emerged to enable wealthy families to share professionals, resources, costs and best practices, among other areas.

What are the benefits of utilizing a family office/multi-family office? The key advantages include:

Independent advice from an experienced, professional team that knows the family, understands their wealth picture, and guides them through the complexity around wealth decision-making

Negotiated cost savings from vendors and providers that directly benefit the family

Access to best practices around investing activities, financial matters, estate and tax planning, family governance and education, and family philanthropy

Integration/coordination by a central family office team of the many advisors/specialists who support the family

Caveat emptor! With the demand for family office services, the growth of “imposters” who cloak as family offices has emerged. We will discuss this in a future column. ?

Julie Neitzel is a Partner and Advisor with WE Family Offices in Miami and a board member of the Miami Finance Forum. Contact her at Julie.Neitzel@wefamilyoffices.com or 305.825.2225.

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