What is a family office? How integrated financial services work for families of significant wealth

Business News | 6 Feb |

UMB Financial Corporation recently announced the formal launch of its Family Wealth offering – a multi-family office registered investment advisor focused on delivering entrepreneurial investment strategies, sophisticated tax planning and generational wealth guidance to families with significant wealth.


READ ALSO: Women and wealth: How to build a more prosperous future


What is a family office?

For families of significant wealth, it may be surprising to learn that with more wealth comes more complexity in managing those finances. When accounts and finances need full-time maintenance and management, high-net-worth families can turn to a family office to steward their financial needs, goals and plans. In particular, a family office helps the members of the family navigate everything from financial reporting to tax structuring, and from regulatory compliance to integrated investing—with an unbiased relationship.

For families without a current family office, they may be driven to partner with one as they experience an increased need for wealth infrastructure, like financial reporting or liquidity strategies, or they have grown and want a team of professionals to provide holistic guidance. Often, the families may have recently experienced a liquidity event, such as the sale of a business, which causes them to seek asset diversification with their new financial situation, or additional team members to further support their plans. Other families may find the need for a family office service if the wealth has become distributed across multiple generations, families or stakeholders. In this case, a family office can help the family build united financial goals that can help maintain, grow or protect the wealth over time.

Different family office provider options

Family office service providers can either operate as a single-family office, or a multi-family office. A single-family office is an entity specifically formed to serve the financial needs of one (usually multi-generational) family. They generally have a staff that includes investment professionals as well as tax and legal professionals. Because of the cost of maintaining a single-family office, a family generally needs to have at least $500 million to $1 billion or more in assets to efficiently operate.

A multi-family office is an organization that supports the financial needs of multiple, unrelated families. By sharing staffing and technology costs across multiple families, a multi-family office is more cost efficient for a family to access—and can offer most, if not all, of the same benefits as a single-family office.

Roles within a family office

Families of significant wealth have complex and varied financial support needs, which require niche experience, like legal, tax, investment, trust and estate, and financial planning. Family offices provide that integrated support and staffing, which helps reduce the family’s time spent managing multiple relationships or accounts. The family office consolidates the reporting and guidance from these areas to deliver a comprehensive financial view – further giving time back to the families so they can pursue more fulfilling or higher-payoff activities.

As the family’s financial needs evolve over time, the family office provider works with all of the service providers to adapt and adjust plans and goals as needed. This level of coordination, financial management and support has a substantial impact on the efficiency, cohesion and success of a high-net-worth family.

How UMB Family Wealth serves families

UMB Family Wealth is poised to work with entrepreneurial families that still own their business and are currently generating and growing their wealth. We can also support families who are in the process of selling their business. This transition phase can be tricky as the family plans to phase out one generation from the next and shift voting power and leadership roles.

UMB Family Wealth also supports financial families, meaning families that have sold their business and are now focusing on preserving and growing wealth for the next generation. This is still usually a first-generation wealth transfer and not consider inherited wealth. Finally, UMB Family Wealth can support families that have inherited wealth, meaning they need support with trusts and sustaining wealth across generations.

 

Dan Weeks is managing director of UMB Family Wealth.

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