As the number of ultra-high net-worth families grows, there is increasing interest in family offices as a path to multigenerational wealth.
“A staggering number of families are acquiring larger amounts of wealth,” says David Herritt, senior vice president and head of Truist Wealth’s Center for Family Legacy. “And the thought leaders in the industry are telling families that if they want to transition their wealth over multiple generations, then putting together a framework can be helpful — just like you wouldn’t run your family business without a mission and a strategic plan.”
Increasingly, families understand the advantages of keeping their wealth together after a liquidity event.
“As families grow exponentially, there are many more households, so the impact of the wealth decreases if you don’t pool the money in some way,” Herritt says. “Families are recognizing that a lot of the reason people are unsuccessful in multigenerational transitions is the dispersion of that wealth.”
Creating a family office is seen as a path to having wealth creators in each generation and creating a structure that sustains wealth over multiple generations. While many identify the goal of having “responsible heirs,” Bill Lyons, one of the leaders of the Center’s family office and community impact effort, says it is much more than that: “By starting with what is most important to the family, including values and mission, the family can design a family office mindset that achieves what is most important to them.”
“People are starting to think beyond just the financial capital piece of this: How can I help my family communicate more effectively and manage conflicts? How are we educating the next generation around the roles and responsibilities of living with wealth?” Herritt says.
But many families don’t start out with a clear idea of what their family office should do. To help them see the range of possibilities, Herritt uses a 170-question assessment that outlines all the different types of tasks a family office can perform.
“Financial literacy is the base, but there’s a different education level for these families of wealth if the goal is to perpetuate it across generations. We call that wealth literacy,” Herritt says.
Drew Egan, the Center’s director of education, adds, “Many families see opportunities for learning across generations — from parenting skills, defining personal purpose, setting career and developmental goals, to community impact and philanthropy. We increasingly see education being viewed as more than preparing the next generation and shifting instead to lifelong learning.”
The assessment queries family member interest in topics such as women and wealth, starting a new chapter of life after selling a business, or providing learning opportunities to the whole family at regular family meetings or family retreats.
“The family learns an incredible amount in this process that informs the decision-making of each of the generations,” Lyons says.
The assessment’s questions are divided by function:
- Advisor coordination
- Family governance
- Family learning
- Fiduciary services
- Financial advisory
- Investment advisory
- Personal services
- Community impact
- Risk management
- Tax advisory
Within each of these broad areas, families answer specific questions — about what’s important to them and, if they already have a family office in place, what functions it currently performs.
“We look for the opportunity gap between what’s important and what they are doing,” Herritt says.
Importantly, the assessment identifies areas in which the family may want to outsource certain services, rather than build those capacities in a traditional family office structure. The answers — and any areas where family members appear to have different goals — form the basis for discussion.
For example: Very few of the families Herritt works with have a full-time employee providing personal services. But discussing personal services (also called concierge services) can lead families to a more nuanced view of what specific services they might find helpful. A few examples:
- Although most families do not have a dedicated employee helping with all family members’ travel arrangements, a travel consultant can be helpful when planning in-person family meetings.
- Engaging and managing household staff can be a complex task, especially when a family owns multiple homes. Household managers and estate managers are increasingly being professionalized and utilized by families to manage one or multiple residences.
- When resources such as a private plane or a vacation home are shared by more family members than just the matriarch and patriarch, tasks such as maintenance and scheduling family members’ use can become complicated, and hiring someone to coordinate can help. Personal or executive assistants may be managing multiple family members’ calendars, and others may be looking to use technology to coordinate the use of shared boats, planes, and properties.
- Expense management and some tax preparation fall under personal services. These are important for all family members, and some families find it easier to have one provider than to have each family member engaging their own services. Whether a family hires in-house expertise or becomes a family client of an accounting firm with expertise in family enterprise and family office is a decision that often depends on whether the family office grew out of an operating company or if the family is generations away from the business that created the bulk of the financial wealth.
- Art collections and or other personal assets like jewelry, automobiles, or a wine collection can be incredibly time consuming for family or staff to manage. It’s important to decide which services should be provided through the family office and what level of staffing is important based on the family’s values — before mission creep sets in and you end up with a highly paid CIO who is spending 70% of their time on pressing priorities for a small number of family members, and not the job they were hired for.
- Healthcare is becoming a more frequent part of personal services. While one family office hired a medical doctor full-time in-house to help coordinate the health care of the family, more families are looking to concierge medical providers or healthcare advocates who ca help research and get access to the best providers. “One of the things that has come up much more often in family mission statements is that families are much more focused on health – not just medical, but mental and spiritual – and making sure that everybody has an ability to try to stay healthy to really enjoy all the fruits of their labors,” Herritt says. “Just thinking about those kinds of things and making sure that everybody has a minimum level of healthcare – that seems to be much more of an emphasis in the families we’re working with than it has been historically.”
Starting with the assessment can lead to detailed conversations such as these.
“We’ve found that it’s very difficult to have these conversations out of thin air,” Herritt says. “The assessment is really a framework to have the conversation. The real magic happens when you’re in the room talking about it.”
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