make your firm indispensable to elite clients.
by russ alan prince
if you have an elite wealth management practice, you might want to “upgrade” to a family office practice.
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self-proclaimed family office practices are multiplying at an incredible rate. for a great many financial and legal professionals, professing to have family office practices is nothing more than a marketing ploy.
as there is no “official” definition of a family office practice, anyone can say they have a family office practice irrespective of the expertise they can deliver. today, family offices are being described in all sorts of ways.
but, when you get right down to it, a family office is a very simple concept: “a family office is an expert coordinator of expertise that optimizes the lives of family members.”
some of the expertise is likely to be in-house, and much of it is probably outsourced. in researching family offices for decades, the most successful ones are extremely proficient at discerning the needs, wants, goals and concerns of wealthy families. they are then able to connect these insights with high-impact solutions, producing exceptional value for these families.
the growing demand for family office practices
the number of wealthy families is greater than at any time in history, and the amount and their level of affluence are greater than at any time in history. moreover, the wealthy can be excellent clients for many professionals.
the reason so many professionals say they have a family office practice is that based on our research, the wealthy – defined as families with a net worth of u.s. $10 million or more – generally prefer a high-performing family office practice to all other types of firms. for this cohort, high-performing family office practices are preferable to accounting firms with or without wealth management practices, law firms, private banks, wealth management and investment firms, insurance firms and consultancies.
the appeal of high-performing family office practices is a function of the superior results the super-rich – who have a net worth of u.s. $500 million or more – get from their high-performing single-family offices. what the wealthy want, and what a family office practice can likely provide them, are many of the same advantages the extremely wealthy get from their high-performing single-family offices.
if you choose, you can take an elite wealth management practice and expand its offerings, making it a high-performing family office practice. it comes down to greater operational functionality, often predicated on a more expansive team of leading specialists. mastery of certain processes such as discovery is required with both elite wealth management practices and high-performing family office practices.
more than elite wealth management
a high-performing family office practice will add additional categories of expertise to elite wealth management. as the managing partner of an accounting firm, this is one of the categories your firm already likely provides – at least to some degree. some other categories of expertise include:
- administrative services
- lifestyle services
- family governance services
- next-gen educational services
- special projects
administrative services tend to be very straightforward and often serve a critical role. they include:
- dealing with all tax compliance matters, including filing tax returns, audit defense, estate and gift tax execution, tracking and administration;
- developing and updating the family balance sheet;
- producing income and cash flow statements;
- providing budgeting plans;
- bill paying and expense reporting;
- tracking and reporting investments, including addressing cost and tax basis; and
- bookkeeping.
when it comes to administrative services, the high-performing family office is the chief financial officer for wealthy clients. even though these services can be very straightforward, they can be very complicated and must always be executed well.
lifestyle services are non-financial and non-legal services that tend to be very important to the segments of the wealthy. most wealthy families are greatly concerned about receiving the best possible health care. making this happen often translates into high-performing family office practice connecting family members with the appropriate concierge medical practices and monitoring the ongoing relationship.
family security is also extremely important to a large percentage of the wealthy. their affluence can make them a target for criminals and the psychologically troubled. the wealthy often rely on family security firms to provide services.
another lifestyle service of interest to some of the wealthy is philanthropic advisory. while many wealthy are very clear about the causes they want to support, some are not that sure. philanthropic advisors are engaged to help the wealthy by understanding their giving options and possibilities. some philanthropic advisors will also get involved in monitoring donated monies.
family governance services help ensure the intergenerational transfer of wealth and personal values and the continuity of family businesses. by only focusing on the transfer of financial assets, these families are not optimizing.
effective family governance often starts with delineating the family’s history and values. sharing the story of the family, and the way the business and wealth were created, can be quite educational for many family members, especially heirs who may not know important details.
for family members to work together successfully, their values, goals and expectations must be aligned. this alignment helps them truly act as a family, rather than simply several people connected by blood with little else in common. to facilitate the family coherence that enables better decision-making, many families construct vision and mission statements for their family companies.
a key benefit of well-structured family governance is superior decision-making. when the tools of family governance are in place, there are relatively few missed opportunities, family hostility is minimized, and there is greater overall emotional calm. moreover, the family business runs smoother and delivers better outcomes for family members and others, such as employees.
family governance services are not only in demand by the wealthy with family businesses, but they are also applicable to many wealthy families, especially when these families are made up of several generations. some accounting firms have the expertise in-house to provide family governance services. if not, there are specialists your high-performing family office practice can bring to the table.
next-gen educational services take many forms. they are becoming increasingly fundamental to successfully preparing future wealthy inheritors to manage and lead in today’s complex, increasingly transparent, hypercompetitive commercial landscape. education that is transformative, issues-focused and emphasizes reflective awareness is what future wealthy inheritors are looking for.
the requisite educational approach is geared intently around facilitating achievements. the focus of any viable educational program is to provide an extraordinary and highly actionable curriculum that will enable future wealthy inheritors to excel. time is a luxury few can afford. next-gen educational services have to translate into accomplishments as fast as reasonably possible.
special projects cover a range of possibilities. some examples of special projects include:
- facilitating a cross-border adoption;
- buying an island;
- arranging for experimental stem cell treatments in a foreign country;
- overseeing the construction of a 60,000-square-foot mansion; and/or
- arranging the paperwork and facilitating the process for admission to an extraordinarily exclusive private club.
this list of one-off special projects can go on and on. when it comes to special projects, external experts are almost always brought in, and the high-performing family office practice acts as coordinator and monitor.
conclusions
retainer and project fees are commonly used to compensate the high-performing family office practice for these categories of expertise. your high-performing family office practice is being paid to bring the best specialists to wealthy clients and make sure they are getting the best results possible. some of these experts might very well be accountants or even consultants in your firm.
if you are interested in working with much wealthier clients, then you might want to consider building a high-performing family office practice. if you have an elite wealth management practice, a high-performing family office practice can be thought of as an extension. besides, you might already have all the expertise in-house to deliver the desired range of administrative services. adding other capabilities is often not much of a problem for many accounting firms, as you will probably be relying mainly on external experts.