MFOs: The Future Of Financial Services For The Wealthy

Both FWA and FOX stress that the better MFOs provide objective advice, rather than being product driven. And they both agree the MFO is the platform through which ultra affluent families will access financial advice and services in the future.

Both single and multi-family offices offer a wide range of services focused on wealth management. This may include investment management and coordination, integrated financial, tax, and estate planning, record keeping and reporting. The services extend as well to risk identification and mitigation, management of other assets (including multiple homes, aircraft, art, etc.), family philanthropy, and coordination of the family itself (including family continuity and business succession).

Some also manage travel coordination and other personal concierge services ranging from bill paying to walking the dog. But to some high-end clients, the focus on management and education of the family is of greater importance than financial issues.

While some MFOs, particularly those focused primarily on investment management, tend to outsource, minimize, or even overlook the "softer" issues, many families view these as critical. The needs–development of a family mission statement; organizing annual family meetings and multi-generational educational sessions that focus on family values and the family legacy; and development of a family foundation and other activities–are as important to many families as the preservation of their financial wealth.

The coordination and management of both financial and soft issues are important to most families of significant wealth but may be especially useful for families who have sold a closely held business. In many of these situations, the CFO or other person on the corporate payroll may have provided financial services, and the family identity may be closely tied to the business.

The transition from a family with an operating business to that of a financial family can be a hazardous time, as they are bombarded with numerous investment and service providers. While many of these providers may be top-of-line, someone with both expertise and objectivity is needed to provide due diligence and guidance through a cumbersome and confusing process.

While the family members may have been successful in their former careers, many decisions they now face are highly technical. These decisions often require a specialized, trusted advisor who can greatly enhance their chance of a making successful transition, thereby preserving the family's wealth and legacy.

From a life insurance advisor's perspective, this can be a lucrative but expensive market to penetrate on a national scale. While developing relationships locally can be achieved through personal or professional contacts, membership and meeting attendance for the various national family office associations can be prohibitively expensive in both money and time.

Experience has shown it can take years to develop these families as clients, as evidenced by the numerous advisors who have attempted to enter this market only to disappear after a couple of years of generating no measurable or tangible results. These families and their key advisors want to see a serious long-term commitment to their market before they are willing to engage in lengthy discussions.

It is incumbent upon the insurance advisor to be as knowledgeable as the other advisors at the table. This requires ongoing education and research in the areas of wealth transfer, business succession and charitable planning, to name a few. Additionally, the insurance product offerings must be comprehensive.

Many SFOs and MFOs understand the difference between retail and institutionally priced life insurance. They are accustomed to purchasing unique products that are typically unavailable to most buyers. The good news is that life insurance is a much needed and used vehicle by many family offices.