Hiring a financial advisor to manage your wealth is a move done to maximize your economic return and achieve optimal outcomes for your money. As with any service, not all financial advisors are the same. Each service has structure, clarity, and consistency standards for client financial objectives.
Here, we compare the two main types of financial advisory services in the form of family office vs wealth management.
What Are Family Offices?
A family office is a fast-growing subcategory of financial advisory services. They are focused on assisting ultra-high-net-worth individuals in managing and controlling their family’s finances, legal matters, tax obligations, and administrative requirements. These offices are specifically engaged by families rather than individuals to manage family wealth.
There are two primary types of family offices. There are single-family offices that will serve a single family. Then, there are multi-family offices that serve many clients.
Family Office – Services
Family offices exist to manage the day-to-day finances of family wealth and build and preserve it for the current generation and generations. A family office will carefully manage an investment portfolio, engage in risk management, and help navigate wealth management structures without conflict of interest.
In addition to what we’ve already mentioned, a family office can advise on wealth transfers with minimal interference. They offer short-term and long-term investment strategies. If you’re pursuing a new family business venture or require support with an existing family business, a family office aids with that. They can also unite the family, develop professional talent, and support entrepreneurship within the family structure.
What Is Wealth Management?
Wealth management targets individuals, gathering information on client needs and providing strategies on asset and estate management, long-term financial planning, tax planning, investment portfolio building, and accounting. A wealth manager usually has multiple clients and sometimes offers more experience than a family office can at guiding wealth growth through time-tested financial strategy.
Wealth Management – Services
While family offices are tailored to high-net-worth families that require aid in everything from budgeting and investing to wealth transfer planning and tax services, wealth management serves clients from all backgrounds and income levels. Wealth management is much less costly, but the advice is fairly standard and applies to individuals looking for reasonable protection over their wealth.
Family Office vs Wealth Management
A family office is always acting in the best interest of the family. It’s their sole duty to support their single client in most cases. A wealth manager may have dozens of clients. They are probably applying the same strategies across the board with many of them. The client is not necessarily receiving the most personalized guidance through wealth management, which may or may not be important to them.
Wealth managers do not offer a lot of personal attention as they usually serve many affluent investors, all seeking the same services. They are also more traditional with their offer, such as tax planning and asset management. A family office is more holistic, going beyond the basics of financial assistance and advising on subjects like entrepreneurship, charity, and family wealth protection.
Family Office vs Wealth Management – Investment Planning
As family offices deal with people with significant amounts of money, the fees are often slightly higher, and the services are far more comprehensive. The investment plan you receive from a family office is very personalized to the family, ensuring the family gains the benefits they are expecting and with limited risks. In the family office world, there is no cookie-cutter one-size-fits-all in managing assets, investments, and wealth.
Family Office vs Wealth Management – Financial Services
Family offices can be assigned additional duties beyond wealth management, including expense management, family governance structures and issues, financial education, and professional development. Wealth management financial advisory services cannot compare to all that a family office provides, particularly for affluent families.
Family Office vs Wealth Management – Financial Planning
With wealth comes many complications. A family office overseeing your family accounting, budgeting, and accounts can help simplify the complexities that come with having a lot of money. Furthermore, a family office has the expertise and experience to ensure what you want to do with your money is completed in the most legal way, where all tax obligations are fulfilled and all regulations are followed.
Family Office vs Wealth Management – Expertise
A family office is not strictly comprised of wealth management experts. Family offices have to be able to handle complex high-net-worth investment scenarios. They are typically made up of the best-educated lawyers, insurance experts, investment advisors, estate planning professionals, business managers, tax consultants, and more.
