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[While the history of single family offices take us from the major domus of ancient Rome, to the major-domo of great households in the Middle Ages, to the “superintendent” of rich families from the 14th to 18th centuries, it was not until 1838 that the House of Morgan ushered in the formation of one of the first modern family offices. This model was then also applied by the Guggenheim, Dupont, and Vanderbilt families.
Since the purpose of the family office was to serve the specific needs of a particular family’s wealth that could comprise multiple businesses, global properties, and complex assets, it is safe to say that there were as many different family offices as there were families that needed them. Some single-family offices became so well structured and effectively managed that they offered their services to a few other rich families creating the first multi-family office and providing an outsourced option versus building your own family office. But this was a very limited option among the wealthiest families.
Today’s technological and innovation revolutions have similarly created substantial wealth across many industries. Most maybe not to the extent of the dominating families of previous centuries that necessitated the uber-wealthy’s single family office haven. But an interesting evolution – driven by a comprehensive or holistic financial planning advisor movement – is driving the formation and growing access of multi-family office services from ultra-high-net-worth to high-net-worth clients and successful business owners.
To better understand this comprehensive financial planning movement and its emerging family office business structure, we reached out to Alyssa Dalbey, CPWA®, CFP® and Wealth Manager at Schultz Financial Group (SFG) – an independent RIA firm with a decades-long commitment to deepening client relationships by offering a unique integrated package of services to create a working partnership with their clients. This belief shaped their conscious firm development decisions to provide their clients with a more holistic and carefully integrated family and business wealth planning approach that covers what they term as the “Four Capitals of Wealth” – Financial Matters, Physical Well-being, Intellectual Engagement, and Psychological Space.
We asked her questions from a practice management and business development perspective to learn from the firm’s leadership mindset and experience on how they built their firm for stronger and more extensive wealth management engagements with their clients that go beyond just asset management.]
Hortz: Did the concept of a multi-family office structure come to mind as you were consciously choosing to expand the range of your services and working relationships with clients? When did you realize you were approaching a multi-family office structure?
Dalbey: Early on, we found ourselves working with high-net-worth individuals and business owners who started families. As these families and their businesses grew and expanded, the complexities of our wealth management relationships with them increased.
The decision to expand our range of services and working relationships was driven by the need to offer more holistic and integrated wealth management solutions, ultimately leading us to adopt a more comprehensive wealth management model. There was not a single moment in time that we realized we were operating under a multi-family office model. This growth and expansion of our services happened organically.
Hortz: From your experience, why do high-net-worth and successful business owners need a more comprehensive family office structure than traditional wealth management services?
Dalbey: In working with our clients, it became clear to us that high-net-worth (“HNW”) families, not just billionaires, require a family office service structure to manage the complexities of their wealth and ensure long-term financial security and well-being. A family office provides a centralized approach to wealth management, offering personalized services that address the unique needs of HNW individuals beyond just money. By consolidating these services, a family office helps streamline decision-making and enhances the efficiency of managing wealth.
Additionally, a family office offers confidentiality and security, compiling and protecting sensitive financial information. It provides continuity and stability, ensuring that wealth is preserved and transferred across generations. For families with diverse assets and interests, a family office acts as a trusted advisor, guiding them through financial and business decisions and helping them achieve their goals across time and generations.
Hortz: What services did you determine that a family office approach should provide?
Dalbey: By asking a lot of probing questions and listening intently to our clients, many made it clear that their goals were not solely about money. Over time we learned and compiled client concerns to a more expansive redefinition of wealth and a new client dialogue into the “Four Capitals of Wealth” – Financial Matters, Physical Well-being, Intellectual Engagement, and Psychological Space – which offer the following:
Financial Matters – we gather and analyze information from the client and their other advisors (such as their CPA, estate planning attorney, etc.), to develop customized investment strategies that incorporates investments (including alternative investments), detailed financial planning, thorough tax planning and optimization coordinated with the client’s CPA, estate planning, legal advisory relating to estate and business issues, risk management mitigated through insurance and other protective measures, and philanthropic advisory. Furthermore, we can share those plans with the next generation so that their children and grandchildren may be good stewards of the family’s wealth.
Physical Well-being – we provide clients with a subscription to the Tufts Health & Nutrition Letter, which has prompted clients to engage deeper in health-related discussions with our Physical Capital Resource Manager. We also provide access to articles and resources on diet & nutrition, health & fitness, and healthy recipes, and guide clients to the information that relates specifically to their Physical Well-being goals.
Intellectual Capital – is an invaluable asset, and we recognize that it evolves throughout life. As such, we help clients identify opportunities and resources to harness their natural desires and maximize their intellectual capital during their high-earning years. Then, we help them transform it to their next career, avocation or hobby using their personal skills and experience to positively impact their future.
Psychological Space – we work with clients to identify what brings them joy and how they can share that with others, whether that be family, friends, or their community. We also help clients identify how they want to contribute to society, as giving back can enhance psychological well-being. Legacy planning is another important pillar of our Psychological Space family office services.
Most importantly, we learned that the key differentiating service we could provide HNW clients was in carefully integrating all aspects of a family’s needs and goals which informed all our decisions and recommendations. Thereby, we were given the ability to truly go beyond the traditional euphemisms of “personalized” services into uniquely tailored and bespoke solutions. The resulting Four Capitals Plan we develop together with our clients serves as the foundation for an ongoing, interactive, and personal relationship. It helps us understand our clients holistically and serve them in a meaningful way.
Hortz: How are family office services different for business owner clients?
Dalbey: While there are many areas of need for HNW families, this can be heightened for the business owner that carries the weight of the business and family livelihood on his or her back. The emotional, motivational, physical, and psychological forces need to be aligned and managed as well as the financial cash flow.
This entails even more in-depth “Four Capitals of Wealth” management and a family office structure to handle complex business needs that can also include human capital management, property management, diverse business assets, intellectual property/trademark protections, retirement/benefits programs, business/personal tax planning optimization, succession planning, eventual business sale, family/business balance, etc.
Family office services can bring together a team of highly skilled professionals, including tax specialists, legal experts, and investment bankers. Business owners benefit from this diverse range of expertise, receiving comprehensive and informed advice.
Hortz: How is investment management different for family office clients?
Dalbey: Investment management for a family office differs significantly from traditional investment management due to the unique needs and goals of high-net-worth families. Here are some key distinctions:
Family offices tailor investment strategies to the specific objectives, risk tolerance, and time horizons of the family. This personalized approach ensures that the investment portfolio aligns with the family’s overall financial plans and legacy goals. This may include separating the portfolio out into different sub-portfolios, each with their own goals and objectives.
One of the significant differences in investment management for family offices is the inclusion of alternative investments including private equity, private credit, hedge funds, commodities, real estate, art and collectibles. HNW individuals can also access exclusive investment opportunities that may not be available to the general public. This includes private deals, co-investments, and bespoke investment vehicles tailored to the family’s needs.
Family offices can also play a crucial role in educating family members about investment principles and involving them in the decision-making process. This helps ensure that future generations are prepared to manage and preserve the family’s wealth while also carrying on the family’s mission and values. We find great joy in working with the multiple generations of our clients’ families.
Hortz: Can you share with us a brief client case study that demonstrates the power of holistic financial planning and the family office model?
Dalbey: We have a business-owner client that was referred to our firm for our wealth management and business consulting services by an existing client. This business owner is single and owns and operates a successful business that is cash flow positive and has been in existence for over ten years.
Despite receiving a few million dollars of cash flow every year, this client lacked a personal investment portfolio, retirement savings, and college savings for his children. Additionally, his business had no formal operational procedures, career paths, or incentive plans. We worked with the client to develop a cash flow management plan that would satisfy both business and personal goals by accumulating investment savings in accounts for his own future, the future expansion of his business, and his children’s college education.
We also consulted with him and his management team to write job descriptions, create career paths, develop a new employee training program, put together an incentive plan, and implement an operational checklist for ensuring the business consistently delivers the quality of goods and services customers have come to expect.
We have brought in personal and business attorneys to address business succession issues and estate planning. We have consulted with bankers to establish long-term banking relationships and secure financing for business expansion. We also coordinated tax planning with both his CPA and bookkeeper.
Hortz: Are prospects that you are seeing aware of and seeking family office services or is there more education needed to explain this service model?
Dalbey: There are several reasons why many HNW clients might not be aware of family office services:
Lack of Awareness and Education – Family office services are often not widely advertised or discussed in mainstream financial education. Many HNW individuals may not be aware of the existence or benefits of family offices simply because they have not been exposed to this information. Family office services are still relatively new in being accessible for the HNW individuals and business owners as these services were exclusive to the ultra HNW families for a long time.
Traditional Financial Services – Many HNW individuals rely on traditional financial services provided by banks, brokerage firms, and independent financial advisors. These traditional services may meet their needs to a certain extent. However, once a family’s net worth starts to exceed $10-$15 million and they start prioritizing things like family legacy and business succession, family office services are critical to meeting their needs.
Limited Marketing and Outreach – Family offices often operate with a low profile and rely on word-of-mouth referrals rather than extensive marketing campaigns. This limited outreach means that potential clients may not come across family office services unless they are specifically looking for them or are referred by someone in their network.
Focus on Business Interests – For business owners, the primary focus is often on managing and growing their business. They may not prioritize or even consider the additional benefits that a family office can provide in terms of personal wealth management, succession planning, and risk management.
This article was originally published here and is republished on Wealthtender with permission.
About the Author
Bill Hortz
Founder Institute for Innovation Development
To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Read our editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.
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