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Craig Allen: Customized Family Office Services Meet Needs of Wealthy

What you need to look for and consider when assessing choices in a smaller community

When I established Montecito Private Asset Management in 2004, my primary goal was to reduce the number of client relationships I serviced, to ensure I would always have enough time to meet the needs of the most sophisticated and complex client requirements.

Over the years, and throughout my 22-year career, I have learned that wealthy families need more than simple accounting, financial, legal and investment services. What most need is a family office approach, with a single-source relationship manager who coordinates all of their needs, and who is discreet, reliable and trustworthy.

One challenge faced by the very wealthy who live in smaller communities is the lack of local family office service providers. Larger firms that offer these services tend to focus their teams in larger markets such as Los Angeles, San Francisco, Chicago, New York City and Philadelphia. This leaves those who require these services with a dilemma: Do they work with a team that does not have ties, connections and knowledge of the local community, or do they select individual service providers and lose the benefits of coordinating with a single-source provider?

The services a true family office provides will include accounting, investment management, property management, financial planning, estate planning, tax planning, legal, travel planning, purchasing, styling/decorating and various administrative needs, including paying bills, logistics, pet care, etc. In essence, a true family office approach provides whatever services the family needs, period.

The larger family office firms tend to have a large team of experts in-house, from investment experts, to attorneys with estate-planning expertise, to CPAs, along with administrative professionals. The theory behind having the entire team in-house is that the client can meet with the team all at once and will know that all private, personal information is maintained and protected at a single location. As with any approach, there are problems with this structure.

First, the team, even if very large, will typically only have two or three experts in any given discipline. No matter how knowledgeable these individuals may be, they will never equal the expertise of multiple professionals from the best firms. Second, and most important to those living in smaller communities, these large teams will not typically be located in the client’s community. Third, due to the complexities faced by the wealthy today, no matter how deep the team, there will always be situations that call for outside expertise, negating the ability of the firm to keep all information in-house.

Having a team that is not local obviously places the client in a tough spot in terms of meeting with the team on a regular basis. This is especially challenging for larger families. Trying to coordinate trips to meet with the team, or having the team travel to meet with the family, and getting all of the family members together at one meeting, can be virtually impossible.

So what is the answer for wealthy families living in smaller communities?

To me, the most important challenge for any wealthy family is finding a service provider that they can trust. Over the years since I have been in the financial services business, many surveys have been completed with the ultra-wealthy. Each and every time, the No. 1, most important issue has always been trust — more important than investment performance. Wealthy families must know that the information they share with their advisors will be kept in the strictest of confidence. This is especially important in smaller towns.

For those who want to work with a local provider, the choices may be slim to none. Here is Santa Barbara, for example, there are some smaller, local firms that call themselves family offices. In my direct experience, however, I have not seen any demonstrate a reasonable level of expertise in the core disciplines necessary to effectively serve clients.

I have been in Santa Barbara since 2002, and during the past 10 years, I have developed a strong network of professionals in many key service categories that wealthy families need. My approach is to focus on what I do best, which is investment management, financial planning and administrative services, and outsource any other needs to qualified, professional, trustworthy local experts.

Wealthy families certainly have a lot of options when it comes to selecting advisors and services providers. Those in smaller communities must make some hard choices with regard to these services. A good approach to selecting the right advisor is to prioritize the needs of the family and decide which approach is best: A larger, nonlocal firm with a large team in-house, or a local, smaller provider that knows the local community, has deep relationships with other local experts, and is available to work hand in hand with family members on a regular basis to coordinate the needs of the entire family.

Craig Allen, CFA, CFP, CIMA, is president of Montecito Private Asset Management LLC and founder of Dump Your Debt. He has been managing assets for foundations, corporations and high-net worth individuals for more than 20 years and is a Chartered Financial Analyst (CFA charter holder), a Certified Financial Planner (CFP) and holds the Certified Investment Management Analyst (CIMA) certification. He blogs at Finance With Craig Allen and can be contacted at .(JavaScript must be enabled to view this email address) or 805.898.1400. Click here for previous Craig Allen columns. Follow Craig on Twitter: @MPAMCraig.

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