4 Factors Why Wealth Management is necessary for Family Offices

Family offices are an outsourced solution for financial and investment management of affluent families or individuals. Primary factors to establish a family office include: need to preserve family wealth, consolidation of assets, ensuring transfer of wealth to future generations and dealing with unexpected liquidity influxes. Private wealth management advisors are employed by family offices to review and resolve issues pertaining to family finances, administration, legal and taxation. Wealth management has also gained prominence because of the aspirations of the affluent families to more control their investments, fiduciary affairs, and lifestyle management. Let’s partake in reviewing some factors which deem wealth management necessary for family offices-

1. Private Wealth Management

Wealth managers offer a financial diagnosis for family offices, defining strategic asset allocations according to aspirational needs and risk appetite. Based on this, wealth managers source most appropriate fund managers and investment ideas to the client. Once the client is onboard with the investment mandates and benchmarks, wealth managers allocate assets and complete the transaction. They also prepare a thorough report of the investment execution and performance, for the client to review and compare their investments in a uniform manner.

2. Asset Reporting

Family offices need to have a tab on their assets, acquisition costs, depreciation, and disposal. Wealth managers review and provide information such as the asset breakdown by type, and comparison of previous to current month data, depicting the percentages of holdings allocated to each asset class. They help in tracking fixed assets for financial accounting, preventive sustenance and theft preclusion. Moreover, wealth managers provide due diligence to the client regarding-

●    Assets listed in Access
●    Asset Chain of Custody
●    Asset History Report
●    Assets needing audit
●    Retired assets report

3. Estate Planning

Wealth managers manage an affluent individual’s assets, in the case of their incapacitation or death. They supervise the transfer of assets to heirs and settlement of estate taxes if any. Estate planning negates the possibility of a clash of interests amongst heirs. Wealth managers offer extensive estate management services like-

●    Creation of will
●    Setting up of trust accounts in the name of beneficiaries to limit estate taxes.
●    Establishing a guardian for living dependents
●    Reducing the taxable estate by establishing annual gifting
●    Setting up of the durable power of attorney (POA) to supervise other assets and investments.

4. Alternate Asset Classes

Alternative assets are gaining popularity amongst family offices, due to their unconventional nature in terms of the investment portfolio. These assets include rare coins and stamps, artworks private equity, trading strategy indices, venture capital and hedge funds. Investing in such alternate asset classes help diversify an investor's portfolio. Being non-traditional investments, they help in sustaining market volatility. Due to their lower liquidity and mispriced value, alternative assets offer excellent arbitrage opportunities. Investing in alternative asset classes isn’t appropriate for everyone. As a result, it is necessary to take the help of wealth managers, who review client’s risk tolerance and investment objectives before offering ideas to invest in new opportunities.

Last Few Words

Family offices are more than just one individual, and their wealth needs to be sustained to reap dividends over a substantial time period. To maximize their wealth management efficiency, services of wealth management firms is a necessity. Wealth managers understand your investment needs and goals, thereby providing appropriate investment guidelines to maximize wealth, and deal with unexpected liquidity influxes.

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