Wealth usually originates from an entrepreneur taking exceptional risks for great ultimate reward, a kind of ‘hunter gatherer’. Once made, fortunes generally need stewardship, diversification of risk and ambitious but careful management. In other words, financial farming.
Whether it’s looking after a real farm or investment assets (or both!), you will need a plan; and you will probably want strategic and structural advice on what to buy and how to manage it. With financial assets, you may first require strategic advice, investment research, brokerage, and custody services, etc. Whatever your requirements, the main implementation approaches are similar.
There are essentially three choices:
1. Do It Yourself (DIY)
In other words, you get up at 3.00am when the pigs escape.
You make the investments yourself, choose your asset allocation, make tactical adjustments, trade the markets in specific equities, bonds, currencies, derivatives, or invest in funds, buy property or stakes in private companies (private equity) and choose from the thousands of financial products and services available to suit your selected purpose of wealth.
The advantage of the DIY approach is that you will have complete control over, and a singular overview of, your assets and investments. You won’t have to rely on others or worry about their capabilities and trustworthiness.
The downside is that decision-making will rest solely with you and making objective choices can be hard without a team with whom to consult. It is also unlikely, however broad and complex your experience, that you will have sufficient breadth and depth of knowledge in all aspects of wealth and financial management to expertly manage your wealth and assets. No-one does. Collective expertise always offers more experience and perspective, and therefore more informed decision making.
The risk here is not knowing what you don’t know.
2. Employ someone to do the tasks you don’t want or know how to do
Someone else gets up at 3.00a.m to deal with the pigs, freeing you up to focus on more appealing activities.
Who you employ and in what capacity will depend on how involved you want to be and your areas of expertise. For example, you could hire a Chief Investment Officer (CIO), and perhaps a team, to look at investment opportunities and pick assets, while you remain involved in other aspects of wealth management, such as managing accounts and paying bills. Alternatively, you could create a family office by employing one person, who operates in-house and manages the day-to-day management of your wealth, while you remain involved in investment decisions.
Either way, you’ll want to choose a trustworthy person with the right expertise and motivation.
The key advantage here is you can delegate the parts of your wealth management you don’t want to do, or don’t have capacity or necessary expertise to do. This gives you oversight and enables you to be involved – to the degree you want – in the aspects you enjoy, while also giving you peace of mind that lesser known or more challenging aspects are being managed expertly.
The drawback is that outsourcing aspects of your wealth management requires you to find the right person (or team). They’ll need to be trustworthy and have the right experience and motivation to carry out their role to a high standard, while also finding it interesting enough to stick around. Finding, overseeing, and retaining such people can be a challenge in itself.
3. Contract out everything to a multi-family office
A professional firm should have anticipated and avoided the risk of the pigs escaping in the first place!
A third option is to delegate all aspects of your wealth management by appointing a multi-family office (MFO), or by selecting one or more suitable managers (banks, brokers, etc.) either on an advisory or fully delegated (‘discretionary’) basis. As above, this can be done to the degree that suits you, meaning you can stay involved on a broad or granular level depending on where your interests and expertise lie.
A multi-family office will offer a wide breadth of expertise and experience in all aspects of wealth management. While your personal experience may be broad, there will always be aspects you’re not familiar with, as well as products, services, trends, and insights you’re not aware of. A professional family office will also be able to bring in other experts from their established network as needed, knowing who is reliable and is excellent in the required tasks.
Wren is an international multi-family office, in a partnership with two other multi-family offices, one in the EU and the other in the USA. Our clients benefit from our team’s wealth of experience working with HNW individuals and families, plus our partners’ experience with international markets and clients operating across multiple jurisdictions.
If your wealth was a farm, this would be the equivalent of belonging to a network of not just farmers, but grain suppliers, supermarkets, and farming equipment manufacturers, from whom you can get advice and support.
For some, the disadvantage of using a family office will be the transfer of control of, or at least insight into, the day-to-day management of their wealth. This is why having trust in your multi-family office or other appointed managers of your wealth is key.
Our job is to help you protect, grow and enjoy your wealth
At Wren, we explain the pros and cons of each of the choices above to help our clients decide on the best course of action for them. We provide support, implement investment and wealth management strategies and/or oversee the fulfillment of any of the aspects above (except farm management!) making sure all decisions are in line with our clients’ chosen purpose of wealth.
At the end of the day, our job is to help you protect, grow, and enjoy your wealth.
Questions to ask yourself
To answer the question: Do I need a family office? It might be helpful to first ask yourself the following questions:
- What is the purpose of my wealth? Now, and in 5, 10, 25 years’ time, and for future generations?
- How involved do I want to be?
- How much time do I want to spend managing my wealth?
- What aspects am I good at/enjoy?
- Do I have the right knowledge and technical skills to manage my chosen areas?
- Do I have the right team around me to fill the gaps in my knowledge and skills?
- Do I have the right contacts if not?