A More Flexible Family Office Solution

For families of substantial means, a “one-size-fits-all” approach may not adequately address all of the complexities of wealth. Utilizing a dedicated family office can help simplify the process. We sat down with Scott Fellmeth, Partner and Head of Family Office Services, to learn more:

WESTMOUNT: Scott, let’s start with the basics. What is a family office, and where did the concept come from?

SCOTT: Families with substantial wealth often face unique challenges that require a higher level of expertise than what is typically available from their conventional wealth advisor. Where most advisory firms cater to a diverse clientele, a family office focuses exclusively on the needs of a single family.

So, broadly speaking, a family office is an extended service offering for families who need a more customized approach to meet their financial goals.

Walk us through some of the benefits of a family office. What are some scenarios where a family office might be useful?

The main benefit of a family office is its highly personalized approach to managing family wealth and legacy concerns. When you reach a certain wealth point (which we define as starting around $20 million), you can start to run into some complicated issues, especially on the estate tax side. These are typically good problems to have, but they’re still problems and usually require a higher-touch level of service that incorporates more advanced strategies.

For example, if you’re planning to leave significant wealth to your heirs, you’ll not only need to consider what to do from a tax and estate perspective, but also how you’ll prepare those heirs to handle that wealth and understand what it really means. At Westmount, that’s usually where we start the conversation, and then it expands from there.

The kinds of families who would typically find a family office useful also tend to have very significant charitable goals, so a big part of setting up the family office includes establishing a mission for the wealth that the family has created, almost treating the family and the wealth like a business of its own.

In other words, having wealth creates opportunities, but it also creates some unique challenges. The more wealth there is, the more sophisticated the planning solutions to those challenges must be. And since not many families are in this position, there isn’t a pre-packaged approach for incorporating those solutions. Leveraging a family office, in most cases, can help you get there.

At what point should one consider establishing a family office?

It depends on the family. In simple terms, the moment usually arrives after discovering that a change is necessary.

For instance, business owners often face this moment after experiencing a liquidity event, such as selling their business or going public through an IPO. Most business owners have the majority of their wealth tied up in their business, so their financial situation and lifestyle usually change drastically after such an event. While the business may have provided a steady cash flow to cover living expenses, the owner likely wasn’t accessing the underlying capital before the sale.

After a liquidity event, that capital suddenly becomes liquid, and instead of relying on the cash flow generated by the business, the business owner may now find themselves living off of the investments in their portfolio, which can be a trigger for looking into family office services.

How much wealth do family office clients typically have?

Remember that a family office is essentially a dedicated team that works exclusively for you. Traditionally, that would have required a fairly significant amount of assets, typically in the billion-dollar range, to get up and running.

However, innovations in our industry have allowed us to offer very similar types of family office services at a more reasonable scale. At Westmount, we generally view any client with over $20 million of liquid net worth as someone who is likely to need these services either now or sometime in the future.

How does one establish a family office? What’s the process like?

It will generally depend on the size of the family’s wealth. Most families will wind up either hiring a team out of an existing firm or hiring an individual to build the team from scratch.

Regardless of the approach, the process does take a lot of time and can be very expensive if you try to do it yourself. Alternatively, you could go through a firm like Westmount, which offers family office services to clients at a much more reasonable wealth point.

I’m ready to take the next step. Who should be on my team?

First, it’s critical to have everybody be on the same page. You’ll need someone who can serve as the “quarterback” of the operation, usually your financial advisor.

The rest of the team will typically include your CPA, your estate attorney, possibly a transactional or personal attorney, and then, to some degree, your insurance professionals. It can really expand from there—some family office clients include their physicians, for example. But generally, the core group is going to consist of the heads of the family, their immediate offspring, the financial advisor, the accountant, and the family’s various attorneys.

What does the family office offering look like at Westmount?

We do things a bit differently here because of our philosophy, how we work with other professionals, and how we think clients should work with other professionals.

On the investment side, one of the things we do best is manager due diligence. We’ve been doing it for over 35 years—deciding which asset classes we want to invest in and then finding the best professionals to execute those strategies.

We apply the same diligence-focused framework to the family office side by creating our own network of vetted professionals, whom our clients have access to and can hand-pick for their team.

The professionals in our network go through a vetting process similar to the one we use with our outside investment professionals. That means, for example, that we’re running background checks and doing on-site visits to see that things are organized and running properly. It also means we’re checking in periodically to make sure that they’re still taking clients, that they’re still practicing, that they’re still able to service our clients effectively. Lastly, it means we’re checking in with our clients to ensure they continue receiving service at the highest level.

How does Westmount’s approach stand out from other offerings?

Within our industry, we’re seeing many advisory firms beginning to consolidate outside professionals in-house, usually as a revenue-generating measure. Very often, if somebody’s working in-house at a firm, that might be the only option a client has at that firm.

In our view, it’s better to have all your professionals—your estate attorney, your transactional attorney, your CPA, your wealth advisor—separate from each other but guided by a central organizing principle.

We understand that this kind of approach can create some friction in terms of putting the team together, which is how we came up with the curated network concept that I mentioned earlier.

That’s an important differentiator because, in our experience, when clients are disappointed with the professionals in their life, it’s usually because they picked someone arbitrarily, or because they didn’t know the right questions to ask. But we do know the right questions to ask, and we know the things that we need to verify, so we take care of that for our family office clients as part of the service.

We think our approach is ideal because it costs nothing for the client to access the network. We do the due diligence on their behalf, but then they get to choose the professional(s) who they feel fits best with their family. And that’s important because when you’re working with an entire family, everybody needs to be aligned and on the same page, and working toward the same goals.

Another differentiator is that this approach allows us to maintain our robust investment management process. In addition to getting best-in-class services from Westmount, you’re also getting what we think are best-in-class investments, like extensive access to niche alternative assets and private investments. We can give this access to our family office clients in a much more convenient package than what they might find elsewhere.

Finally, how can clients access the family office services offering at Westmount?

It’s as easy as emailing advice@westmount.com or calling 310-556-2502. The entire process is highly collaborative and consultative. We’ll schedule a meeting with you and our team, review your situation, and recommend how we would invest the family wealth and start the family office.