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A guide to family offices: What you need to know

A guide to family offices: What you need to know

Synopsis
5 Minute Read

A family office is like a personal advisor that manages a family's financial and personal affairs. It provides services such as tax planning, estate planning, charitable giving, education, and family governance planning.

MNP’s family office services focus on four key areas:

  • Making sense of your wealth and assets,
  • Simplifying information about your wealth and taxes,
  • Maintaining harmony among family members, and
  • Reducing administrative duties.

This article explores common questions about family offices, when and why they might be appropriate, and how they can benefit high-net-worth families and owners of family businesses.

National Leader, Family Office Services

If you're a family with significant wealth, you may have heard about family offices. But what exactly is a family office — and how can it benefit you?

This guide will answer the most common questions about family offices. This should help you understand how they can help you manage your wealth and plan for your family's future.

What is a family office?

A family office is like a personal advisor for a family's financial affairs. Family offices help you make financial decisions by outlining the pros and cons of your options and keeping you on a path to success.

Essentially, a family office is a dedicated advisor that manages your family’s financial and personal affairs. Many family offices offer a wide range of services, including tax planning, estate planning, charitable giving, education for younger family members, and family governance planning.

What services does a family office provide?

Family offices can provide a range of services, depending on your needs. You can get help with plans for managing and preserving your wealth, including estate planning and tax services.

If you have a big family with unique interpersonal relationships, you could benefit from a comprehensive governance plan that details how decisions get made.

At MNP, our family office services focus on four key areas:

  • Making sense of your wealth and assets,
  • Simplifying information about your wealth and taxes,
  • Maintaining harmony among family members, and
  • Reducing administrative duties.

We can help you understand your financial situation, develop a customized plan, and implement it over time. Our goal is to help you manage your tax liability, preserve your wealth for future generations, and ensure you can achieve your long-term financial objectives.

What types of families typically use family offices?

Family offices are often linked to high-net-worth families with a complex mix of wealth and assets. These families rely on their family offices to help simplify wealth management, improve decision-making, and create family harmony.

The typical family office has significant wealth or assets, usually over $100 million. However, MNP's service is designed for a wide range of family business owners. These families have complex and intersecting needs that are often overlooked until it's too late.

MNP's family office services can help you create a governance structure to drive good decision-making, a family charter that gets everyone on the same page, and help to preserve the wealth you’ve built.

How do family offices handle philanthropy and charitable giving?

Helping clients achieve their charitable goals is one of the key functions of a family office. Family office advisors can provide a personalized and coordinated approach to philanthropy that ensures you maximize the impact of your giving.

Family offices can help you develop a comprehensive vision and plan that aligns your impact and legacy goals for future generations. This can include strategies for tax-efficient giving. Advice on when to execute your giving strategy. And the creation of charitable foundations or donor-advised funds.

They can also help you evaluate the impact of your giving and track outcomes over time.

What is the difference between a single-family office and a multi-family office?

A single-family office works with just one family. A multi-family office is a firm that advises a range of families. Both types of offices typically provide a wide range of services, but there are some key differences.

Single-family offices

Single-family offices (SFO) are typically set up to manage and preserve one family's financial and personal affairs. These provide a more personalized service, but they can be more expensive to run.

The staff are intimately familiar with the family's finances and personal preferences. Single-family offices tend to offer highly customized services to meet the unique needs of a specific family.

The single-family office would also help the leaders of the family determine a plan for their future. For example, it can help identify the person who would take over a family business's leadership and support their growth into the role.

Advantages of SFOs:

  • Highly personalized services tailored to the specific needs of the family.
  • Staff are dedicated to serving the needs of one family. They profoundly understand the family's finances, investments, and personal preferences.
  • High degree of control and involvement in managing the family's wealth.
  • Greater privacy and confidentiality.

Disadvantages of SFOs:

  • High cost of operating.
  • Limited access to expertise and resources.
  • Potential for key person risk if key advisor(s) leave the SFO.

Multi-family offices

A multi-family office (MFO), on the other hand, is an advisory firm that serves multiple families. Multi-family offices provide similar services to SFOs but work with multiple families instead of just one. MFOs can offer economies of scale by pooling resources and sharing costs across multiple families. They also have a wider range of expertise, given their experience with so many different situations.

Multi-family offices are typically more cost-effective, but they may not offer the same level of customization.

Advantages of MFOs:

  • Economies of scale can provide cost efficiencies.
  • Access to a wider range of expertise and resources.
  • Built-in succession planning in case a key advisor leaves.

Disadvantages of MFOs:

  • Less personalized services.
  • Less control and involvement in the management of the family's wealth.

At MNP, we offer a hybrid approach that combines the best of both worlds. We provide a personalized service tailored to your family's needs. We also leverage our expertise to help you achieve your long-term goals.

What is the minimum amount of wealth needed to justify a family office?

It’s better to consider the challenges you're experiencing instead of your net worth when determining whether to use a family office. If you want to maintain harmony among family members, build wealth, and create a clear roadmap for your family's future, a family office can help.

That said, family offices can be expensive to operate. It's important to balance the costs and benefits before deciding whether to use one.

At MNP, we work with clients of all sizes and can customize our services to meet your specific needs. We believe every family deserves access to the same expertise and service, regardless of their wealth.

MNP Family Office Services

Navigate the key decisions and milestones of your family and your business. We’ll support you through the critical steps of wealth planning, financial road mapping, and ensuring a smooth transition from one generation to the next.

How do family offices handle tax and estate planning?

Tax and estate planning is a mix of personal and pragmatic decisions. A family office will start this process by discussing your goals and building the most efficient plan to achieve them. Your plan will be unique to you, but it is informed by our expertise and insight.

At MNP, we take a holistic approach to tax and estate planning. We work with you to understand your financial situation and goals. We will then develop a customized plan to manage tax liability and maximize wealth.

We also help you navigate the complex legal and regulatory environment surrounding estate planning. This will ensure your plan is compliant and effective.

What's the difference between a family office and family wealth management?

Family office and family wealth management are both services that help wealthy families manage their finances and assets. Still, there are several key differences.

A family office is dedicated to managing your financial and personal affairs. Family wealth management is a broader set of financial services, such as investment management, that help high-net-worth individuals and families maintain their wealth.

A family office focuses on the intersection of wealth, family, and business. This team ensures all parts of the equation are thriving and helps you build a long-term plan for maintaining success and harmony. Family wealth management has a narrower focus. As the name implies, its mandate is to grow the wealth you've built and mitigate the impact of taxes.

Both services play a role. A family office focuses more on helping you achieve your long-term goals and maintaining family harmony.

Is a family office right for you?

As you think about whether a family office is right for you, take some time to consider the challenges you're currently facing.

What steps are you taking to address those challenges?

Think again about the four pillars of family office services: making sense of your wealth and assets, simplifying your tax structures, maintaining family harmony, and reducing administration.

Do you feel your current processes and understanding are achieving the best outcomes in these areas? Do you see these becoming overwhelming or burdensome as your family and your business grow and evolve?

Are there any areas where you could use additional support or expertise?

Maybe you feel confident in your wealth management but struggle with family office relationships. Or you could feel overwhelmed by the tax impacts of your wealth and the time required to manage it all. Every family is different, and family office services can be tailored to focus on the most critical areas of your unique situation.

Which challenges can you address on your own?

Not every family business requires a family office. Many family offices start with standalone advisory services that eventually grow into a more cohesive structure over time. Whether you need a family office depends on the costs of managing your wealth, family members, and other factors.

By looking honestly at your situation, you can determine whether a family office is necessary. You can also determine where it might help you achieve your goals and overcome any hurdles you may be facing.

Contact us

If you're interested in exploring this option further, don't hesitate to contact an MNP Advisor for more information. We're here to help.

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