Bolivia is estimated to have more than 7,000 people with accumulated wealth of US$1 million and 205 people considered ultra-wealthy, with combined wealth of US$25 billion, according to the World Ultra Wealth Report published by UBS. Most belong to family businesses or built their wealth through them. Family businesses often share concerns about diversifying their investment portfolios and preserving their assets. Family wealth can struggle to survive beyond three generations: the second may appreciate the value of hard work, while the third may forget it. Against this background, we explain what family offices are and the benefits they offer.
What are family offices?
Family offices are private wealth management advisory firms serving ultra-high-net-worth investors. They differ from traditional wealth management firms by offering a fully outsourced solution for managing the financial and investment affairs of a wealthy individual or family. Many provide budgeting, insurance, charitable giving, family business, wealth transfer and tax management services.
Understanding family offices
Family offices are generally divided into single-family offices and multi-family offices, sometimes called MFOs. Single-family offices serve one exceptionally wealthy family, whereas multi-family offices are closer to traditional private wealth management practices and develop their business by serving multiple clients. A family office may also handle non-financial matters such as private education, travel arrangements and other household affairs.
Providing wealthy families with advice and services under a comprehensive wealth management plan goes beyond the capacity of any one professional adviser. It requires a coordinated team of legal, insurance, investment, estate, business and tax professionals to provide the necessary planning, advice and resources. Most family offices combine asset management, cash management, risk management, financial planning, lifestyle management and other services, giving families the essentials to address the issues they face in the complex world of wealth management.
After a lifetime of accumulating wealth, high-net-worth families face obstacles when seeking to maximise their legacy, including heavy taxation, complex property laws and difficult family or business issues. A comprehensive wealth transfer plan must consider every aspect of a family’s assets, including the transfer or management of business interests, asset disposition, family trust administration, philanthropic wishes and continuity of family governance. Family education is an important part of a family office’s work: it includes teaching financial matters and instilling family values to minimise intergenerational conflict. Family offices collaborate with advisers in each relevant discipline to ensure that the wealth transfer plan is coordinated and aligned with the family’s wishes for its legacy.
Many family offices act as a personal concierge, managing personal affairs and lifestyle needs. Services may include background checks on household and business staff; home and travel security; aircraft management; planning and arranging travel; and streamlining business affairs.
