A centuries-old approach to wealth management, dubbed the family office, is gaining traction once again due to a growing concentration of highly affluent families, according to some Spokane County-based financial advisers.

Bret Michael Wheeler, CEO of Spokane Valley-based Packard Wheeler Succession, says family offices simply "are what high net-worth families are doing to preserve their wealth to get to the next generation."

A family office is a wealth management entity structured similar to a privately held company in which a team of professionals works to meet the needs of families that have a net worth of at least $30 million, but often up to $100 million or more.

Loran Graham, president and CEO of Spokane-based wealth management company Loran Graham Co., says such entities are managed by experts who provide a range of specialized services that go beyond standard wealth management to include asset management, investment advice, estate planning, succession planning, tax strategies, lifestyle planning, philanthropy, legacy planning, and at times, attorneys.

Dave Gordon, director of advanced planning at Spokane-based Ten Capital Wealth Advisors LLC, says wealthy families often have complex financial situations that require specialized expertise, so they use family offices to centralize and streamline the management of family assets, activities, and relationships to ensure the family's wealth is preserved.

The comprehensive approach to wealth management also helps families minimize tax liabilities, such as state and federal estate taxes, and helps families plan for the transfer of wealth from one generation to the next.

The founder of a family's wealth would establish a family office as a way to execute a lasting legacy and align the family's resources with the founder's values and principles.

Graham says there's growing interest in the industry for two types of family offices: single-family offices and multifamily offices.

A single-family office serves only one family, while a multifamily office serves more than one family. A group of families can form a multifamily office by pooling together their resources to meet the financial thresholds in place for these services and to share the costs, explains Graham.

"Typical costs to run a family office might be north of $1 million a year just to cover all the expenses associated with it," says Graham. 

Family offices are costly due to the highly personalized and comprehensive nature of the services provided. Expenses cover the salaries and benefits of a team of dedicated professionals who offer a concierge level of service and support the family's charitable contributions.

Ultra high net-worth families are the target market for family-office services, as they have the means to create and fund trusts, private foundations, or donor-advised funds in support of their favorite causes, explains Graham.

Demand is already strong for personalized financial services that cater to affluent families in the Inland Northwest, which is a region that supports a type of "sneaky wealth," Gordon says, referring to wealth that isn't outwardly on display or readily apparent. 

Many high net-worth clients here have generated their wealth through various means and industries. Some have operated or sold multigenerational family businesses, while others are tech entrepreneurs who relocated to the region to work remotely during the pandemic. Regardless of where their fortune came from, family-office clients typically are interested in preserving their wealth for future generations, says Gordon.

Family offices aren't a new concept in wealth management, Graham explains, adding that the Rockefeller family is a historical example of one that used a family-office structure as a vehicle to ensure lasting wealth.

"It's an old concept that goes back to the 1800s," says Graham.

In addition to the expertise offered by financial providers, those who work for a family office also need a high degree of client trust and the people skills necessary to navigate complex interpersonal dynamics to get all family members on the same page and working toward the same goal, says Wheeler. 

"The social aspect is the reason I'm in the business and is by far and away the most interesting part," says Wheeler. 

Wheeler notes that the transfer of wealth from one generation to the next can be challenging and complex for those without a family office. 

"As people grow their family, it's not necessarily a given that all the children are the heirs in the future," Wheeler says, adding that a perceived lack of preparation and work ethic can be points of contention among some affluent clients.

However, family-office support helps facilitate communication, understanding, and collaboration among the family through the guidance of experts, and the creation of a family mission statement that will inform future financial decisions, and help clarify other decisions such as inheritance, explains Wheeler.

Legacy planning is another important aspect of family-office support, as a family's wealth can be exhausted by the third generation without the guidance and direction a family office provides, Graham asserts.

Individuals familiar with traditional wealth management services likely will notice that a family office sounds similar to the function of a trust, as it sets specific rules and restrictions regarding assets after death. However, family offices are a more flexible option than trusts and can adapt to a family's evolving needs, says Graham.

A trust is a tool used for the preservation of wealth, and family offices use this tool and others to ensure charitable donations continue after the death of the founder, adds Gordon.

To stay competitive in the industry going forward, expect to see wealth management companies open up family-office services to be priced separately for clients with complex financial needs that meet lower financial thresholds, or those who would be considered mass affluent rather than ultra high net-worth, Gordon says.

Mass affluent describes a level of wealth that's lower than the amount of wealth held by high net-worth individuals. The mass-affluent demographic includes more than one-quarter of 32.3 million U.S. households, according to a report by Yahoo Finance.

"Is your adviser just managing a bucket of money for you, or are there additional services that even mass-affluent folks (can access) when they walk through the door?" asks Gordon.

As awareness grows regarding the benefits a family office can provide, Gordon says renewed interest is prompting more financial advisers to go beyond providing typical wealth management services. 

Ten Capital, for example, is on a path to cater to all levels of client wealth by offering a tiered approach to family-office services in which different services are available to clients depending on the level of complexity, Gordon says.

"You're starting to see a lot of those services are coming down the stream," he says.