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May 18, 2020 | President's Blog

Part I: The Multi-Family Office

One of the most common questions prospective client families ask me is about the advantages of working with a multi-family office. “I have an estate planner, and a CPA, and an investment advisor,” they say. “Can’t I just work with them and get the same result?”

Well, yes and no. It’s fair to say that some individual advisors can do the same things as a multi-family office. However, I also think it’s fair to say that this process does not always produce the optimal outcome.

The services provided by multi-family offices are often much broader than other types of advisors.  Many other types of firms describe themselves as “family office teams” that operate inside brokerage firms or big banks, even though most do not provide tax preparation or tax advice. Many do not pay a family’s bills or provide strategic support to the family’s charitable foundation. Even fewer will help a family analyze investment opportunities that are presented by firms other than theirs. Many multi-family offices can and will do these things.

I recently saw a distressing example of this. A prospective client’s team of advisors, including an excellent attorney, had recently updated the family’s estate plan. The new plan incorporated a shared family entity to consolidate management of assets across multiple branches of the family.  However, when the entity documents were signed, no one took responsibility to open bank or investment accounts, retitle assets into the new entity, or track contributions and distributions to ensure they were made by and to all partners in proportion to their ownership. No one brought up a governance process i.e., periodic meetings to discuss the operations of the entity. Without that process, the planning effort was at best incomplete and, ultimately, at risk of not delivering the expected benefits.  The plan had an excellent design, but its execution was flawed.

The value of a comprehensive approach in all stages of the process including design, execution, and monitoring (with adjustments, as needed) is equally apparent in other segments of the financial world.  An entrepreneur making an investment in a new company would seek input from multiple disciplines such as finance, marketing, operations, and human capital. If a key discipline was omitted or if each advisor worked independently at any step along the way, there would be questions about how the investment would turn out.

The same principles are true when advising a family that has significant multi-generational wealth, a complex web of entity structures, difficult tax issues, and no structure to facilitate family decision-making. Advising a multi-faceted “enterprise” like this with a one-dimensional approach seems inadequate.  An integrated team, working together through every step, seems almost certain to generate better outcomes. This, more than anything, defines the way I view a multi-family office.