Protecting your wealth through a family office
NEW YORK – To rephrase disco-era singer Donna Summer: You work hard for your money, so you better treat it right. And there are lots of ways to do that. But if you’re a high-net worth physician – with assets of $5 million or more – you might want to consider a family office.
What is a family office? Traditional family offices are private corporations set up by a single family for the purpose of managing the family’s wealth. You need north of $100 million to get into a traditional family office.
In recent years, multifamily offices have become more popular. These offer the same services as a traditional, single family office but the services are shared by more than one family and you only need a minimum of $5 million to get into it.
You need a certain level of wealth – $5 to more than $100 million – in order to justify the costs of operating a family office, said Marvin Pollack, managing director, marketing and strategy, Family Office Exchange, a wealth management advisory firm.
The costs of operating a family office start at $1 million a year. Family offices manage a family’s investments, estate planning, philanthropy coordination, property management, legal affairs, taxes, bill paying and personal services such as managing household staff, said Pollack.
“Outside of their health, their financial assets are the most important asset that they have,” said Steven Abernathy, principal/manager of the Abernathy Group II, an investment firm that recently began offering family office services to high-net worth physicians. “It’s more important than their wife, than their kids. Wives or husbands cheat. Kids ignore you. Your assets are 100 percent loyal. They always do what you tell them to do. If you guard them, they’ll even do things for you after you die.”
Arranging a family office made a lot of sense to Bernard Morrey, MD, orthopedics professor at the Mayo Clinic and the University of Texas Health Science Center, San Antonio and member of Abernathy’s board of physicians. “I can’t commit to being a really, really good analyst because I’m trying to be a good doctor,” he said.
“Physicians usually have a reasonable income, but that comes about by devoting a lot of time to your profession, so they get in the awkward position of generating a fair amount of income but not having time to figure out what to do with it,” said Morrey.
What you do with the wealth you’ve earned working 17-hour days and missing out on family time is a pivotal decision, said Pollack, so make the time to interview several family office candidates. “It’s a critical decision because it affects the management of your wealth and the wealth of future generations of your family,” he said. “It’s got to be done in a financially sound way, but it also needs to be done sensitively so that your goals are fulfilled.”