Ultra-High-Net-Worth (UHNW) families, whose wealth spans generations, have many demands beyond investment advice. In addition to comprehensive wealth management, these families require consolidated financial reporting, tax planning, risk management, asset protection, multi-generational education, philanthropic guidance, and other services. Because each family’s situation is unique, our UHNW clients often ask, “Should we form our own Single-Family Office to address our family’s specific objectives?”
A Single-Family Office (SFO) is established exclusively to manage the financial and personal needs of an individual family. The alternatives are a Multi-Family Office (MFO) or a Virtual Family Office (VFO). An MFO, as the name describes, is an entity managing the assets and affairs of two or more families. A VFO utilizes the family’s current service providers while an advisor or family member coordinates their efforts and manages day-to-day communications and projects related to the family.
The primary benefit of an SFO is endless customization to your family’s specific situation. Additionally, it allows full control by, and participation from, family members. An SFO has a dedicated team who knows and understands family dynamics and may offer lifestyle and concierge services.
Providing all necessary functions within an SFO has its downsides, however, mostly in terms of cost and limited resources. Hiring the staff for an SFO is expensive, and finding, managing, and retaining talented people to fill the diverse roles required is difficult. Families need to be honest with themselves as to whether they can hire best-in-class professionals across all disciplines to match the expertise they could receive through outsourcing. Opening your own SFO also requires fixed investments such as office space, technology, professional set-up fees, etc., to accommodate them. The total ongoing costs of establishing an SFO are estimated between 100-200 bps annually and can be higher for families with assets at the lower end of the UHNW spectrum.1 Even if a family can afford these costs, they may be unnecessary.
It may be that your family can hire an MFO like RVP to manage your financial life at a lower cost and leverage greater talent and capabilities. Because MFOs work with many families in similar circumstances, it allows them to achieve scale advantages across their clients and to share best practices among them. Often, families can more efficiently achieve their goals by working with an MFO to meet most of their demands at a lower cost and leveraging substantial resources and expertise. Third-party MFO firms like RVP have the benefit of objectivity, which can be critical and may be lacking in an office closely and exclusively tied to the family. Additionally, an outside advisor like RVP brings broader perspectives and ideas that come from working with many families just like yours.
To decide what is best for your family, it is important to understand and define your family’s situation and goals. Explore what is hindering your ability to achieve these objectives. “Family Office” can mean something different and serve very distinct roles for various families. It is important to identify the most simple, economical, and effective solution to your family’s needs.
For over 20 years, RVP has excelled in helping UHNW families identify their unique requirements and then build customized solutions and action plans around these needs.
RVP’s Family Office services cover the full spectrum of wealth management, from investment management and tax planning issues specifically relevant to affluent families, to sourcing private investments, educating the next generations about family wealth, and coordinating sophisticated estate planning strategies, among others. Below is a closer look at some of these service areas that go beyond financial planning basics.
- Consolidated Reporting
- A comprehensive understanding of your current financial situation is critical to planning for the future. RVP has invested in technology to gather and understand your financial picture and to track and monitor its progress toward your goals going forward.
- Establishing and Executing an Investment Strategy
- RVP works with clients to craft an Investment Policy Statement (IPS) that can be used to set strategic and tactical targets. An IPS combined with robust reporting keeps clients disciplined and improves decision-making, especially in times of market stress.
- RVP has a proven performance track record in implementing clients’ investment plans. We are process and outcome-oriented.
- Estate Planning and Trust Administration
- All estate planning strategies have “seasons,” and depending on the economic and legislative environments, the strategies that are most attractive at any given moment in time will change. Our team can help you assess your options, build a comprehensive estate plan, and then tailor our advice considering the trusts and other entities that exist going forward.
- Sourcing and Sizing of Private Investments
- At RVP, we strive to add value for our clients by considering strategic opportunities in limited-access investments. Our team can help you identify investment opportunities beyond the traditional stock and bond markets and integrate those opportunities into your family’s wealth management plan in a thoughtful and deliberate manner.
- The amount of your commitments are as critical as the investments themselves, and RVP focuses on properly pacing and diversifying your private investments.
- Philanthropic Planning
- Many of our clients support multiple causes and organizations through charitable giving, and some even run their own private foundations. As wealth managers, our role is to help you decide how to give in the most efficient way possible, as well as help manage any charitable entities you establish.
- Family Education
- The duty of being a good steward of family wealth is of the utmost importance. We mostly work with first-generation wealth creators. Imparting their values to their family is a long process, one that requires a delicate handoff of responsibilities from one generation to the next. We can support you in transmitting those values, and our role includes presenting educational topics and engaging in ongoing conversations to help your children and grandchildren prepare for the responsibilities of managing family wealth.
Our experienced team is dedicated to helping clients achieve a successful family legacy. To learn more about our Family Office services and to see if RVP is the right fit for you and your family’s objectives, please visit the Family Office Services page of our website or connect with your RVP wealth team.
[1] https://www.privatebank.citibank.com/insights/the-costs-of-running-a-family-office – August 9, 2022
Disclosure
Information contained in this article is obtained from a variety of sources which are believed though not guaranteed to be accurate. Past performance does not indicate future performance. This article does not represent a specific investment recommendation.
No client or prospective client should assume that the above information serves as the receipt of, or a substitute for, personalized individual advice from Relative Value Partners, LLC which can only be provided through a formal advisory relationship. Clients of the firm who have specific questions should contact their Relative Value Partners counselor. All other inquiries, including a potential advisory relationship with Relative Value Partners, can be directed here.
Relative Value Partners merged with Kovitz Investment Group Partners, LLC as of August 2024. All Insights are opinions of the author as of the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete, and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.