To paraphrase a popular expression, with great wealth comes great complexity.
It’s not unusual for a family or an individual experiencing a significant windfall to be shocked at how complicated managing a large amount of money can be. They quickly discover that they cannot manage their new wealth by doing more of the same. 
They not only have more questions to answer, but the scale, complexity and time frames for their decisions have exploded. For example:
Previously, their primary focus may have been on funding their retirement. Now they’re thinking about complex questions around multi-generational wealth transfer, including:
• Qualitative questions about the best approach for their family, such as transferring wealth in stages or establishing controls that tie transfers to incentives around education, life goals, or business and professional achievements.
• Quantitative questions, such as managing potential estate taxes if their wealth grows beyond certain thresholds.
Even an avid investor may be overwhelmed by the challenge of effectively diversifying millions of dollars in assets or identifying opportunities with sufficient scale.
The challenges faced when artistic pursuits and charitable work go from being a passionate amateur interest to a sustained, organized undertaking.
Creating plans and appointing guardians for managing family wealth in case of incapacitation of the head of the family.
There’s no question that experiencing a windfall is enormously life-enhancing. But no one tells you how challenging the day-to-day complexity will be. Even individuals who have the skill set may not want to take on the full-time job of managing their family’s wealth and legacy.
An alternative may be hiring teams of specialized professionals for every aspect of family finances and then “managing the managers.” That’s the approach in creating a family office.
FAMILY OFFICE SOLUTIONS
Not many investors have heard of family offices and many of those who have do not understand how they function. In brief: they are teams of professionals who manage all the financial needs of a single ultra-wealthy individual or family across investments, taxes, estate planning, philanthropy, art, home purchases and more. A family office can manage everything from paying bills to facilitating discussions around how and where to live.
One potential benefit is that the family office establishes a holistic vision of the family’s aspirations and ensures that all financial activity is coordinated with that vision at the heart of every financial decision. For example, investment decisions are made fully cognizant of the family’s tax considerations and legacy objectives, and so on.
More important may be the potential investment advantages family offices pursue for their client families. Traditional thinking about stocks, bonds, and cash (not to mention mutual funds) may not be efficient enough or produce returns sufficient or predictable enough on their own for large-scale portfolios. Instead, they explore alternatives and non-traditional strategies similar to those used by large endowments or foundations.
Family offices typically manage investments on a long-term basis suitable for multi-generational wealth. This opens up possibilities for private equity or asset-based opportunities, many of which have extremely long investment horizons or are illiquid. Both endowment-style alternative strategies and private equity investments are typically beyond the reach of many investors due to the scale of the investment required.
Coordinated, holistic wealth management and specialized investment access offer attractive potential. All too often, separate professionals managing tax and estate guidance don’t work together in a highly aligned, communicative process. In a family office built around a coordinated, holistic vision and process, they do.
The drawback? Size. Opinions differ, but we believe that $250 million is a minimum to establish a family office. There are, however, alternatives.
MULTI-FAMILY AND FAMILY-OFFICE-STYLE EXPERIENCES
A case can be made for family office and family office style wealth management beyond holistic service and specialized investment access. Today’s markets are brutally efficient. Asset classes that once provided diversification frequently move in the same direction in response to the same economic trends. No one has consistent access to insights about stocks that are not available to everyone. To be successful managing wealth, a different set of research tools is needed along with a non-traditional lens to find returns through an opportunistic yet conservative approach.
Managing sudden wealth can be difficult, challenging, time-consuming and overwhelming. Today it may be more difficult than ever.