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  • Writer's pictureZSS CPAs

What Is a Family Office?

Have you ever wondered why some financial planning firms call themselves family offices? It's because they serve families — sometimes one single family, but more often several. The key is that family offices focus on the ultrawealthy to offer wealth management plans.

And those plans coordinate legal, insurance, investment, estate, business and tax disciplines — pivotal issues that face families of high net worth. Family offices oversee day-to-day management: centralizing financial operations; coordinating income and estate tax planning; managing asset allocation, investments and insurance products; and facilitating wealth transfer and succession planning.

They even act as a kind of personal concierge for families, handling personal business affairs and lifestyle needs: conducting background checks on personal and business staff; providing personal security for home and travel, aircraft and yacht management; travel planning and fulfillment; and streamlining business affairs — even paying the cleaner and the gardener.

There are as many kinds of family offices as there are families. Some families may join with other families to establish a multifamily office to create economies of scale. Doing this makes it easier for the professionals to provide objective advice because their livelihood isn't tied to one particular family. But this doesn't work for everyone, as some families may not want others to know intimate details about their affairs.

The general rule of thumb is that using a family office typically costs about 1% of the assets being administered. The UBS Global Family Office Report of 2019 saw an average of 1.17% in total costs, including operational, administrative and performance-related costs. Family offices draw on additional expertise as required — and using a mixture of in-house and outsourced services can provide a useful check on the dependency of the family on the family office.

If you're in the market for a family office, you may look for such services as the transfer or management of business interests, disposition of the estate, management of family trusts, philanthropic options and continuity of family governance. Family education falls into their purview as well, as most family offices are adept at educating family members on financial matters and instilling family values to minimize intergenerational conflicts.

As you can see, family offices provide more than standard wealth management services. Tax compliance work, access to private banking and private trust services, document management and recordkeeping services, and family support services are functions you should look for. One family office says it put one of its team members through a program to earn a master's degree in social work with more than 1,500 hours of clinical training so that it could advise its clients on care and living options when a family is faced with a member with Alzheimer's disease or other specialized needs.

Different families have different needs. Give us a call so we can help you find the right solution for your situation.

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