Coordinated wealth management is essential to bring together independent expertise to achieve your family’s goals
By Whittier Trust
As your career, family, and wealth grow throughout life, so too does your network of professional advisors. When taxes become complicated, you hire a CPA, who recommends an investment manager, who suggests an attorney and a new insurance carrier. But the advice of each of these specialists in their individual silos affects all the others. So who’s coordinating their various strategies?
“If the answer is only you, then you probably have too much responsibility on your hands,” says Lori Kenyon Farley, Senior Vice President and Client Advisor at Whittier Trust. “You may have some superstars working for you, but they need a dedicated advisor as well. Otherwise, they’re each running down the field without considering the others’ positions, and they’re unlikely to reach the goal.”
Whittier Trust has been coordinating that wealth management effort through our multifamily office services for more than 30 years. Before that, Whittier Trust was a single family office handling the same UHNW wealth management responsibilities for decades. When you become a Whittier client, your financial planning team takes the lead with a tailored strategy, guided by a network of experts—both internal and external—to meet your personal goals.
“A coordinated team is crucial for anyone with significant assets, particularly UHNW individuals, and especially if you might soon be selling a business, inheriting money, getting a divorce, or otherwise anticipating an event that will set money in motion,” Farley says. “Your Whittier Trust family office will monitor every aspect of these events to close up any gaps or holes you were unaware of and look for missed opportunities.”
When the Financial Planning Team is Most Vital
Clients who are looking to sell a family business offer a prime example of the importance of planning ahead with a team providing financial coordination. Ideally, you want to begin at least two years out, preparing your books to be scrutinized by an investment bank or a strategic buyer to secure the highest valuation possible. But you have to keep your eye on the ball to maintain that valuation, keeping your pipeline full until the sale goes through, while also getting your affairs in order. It’s a lot to juggle, at a time when the stakes are among the highest in your life.
If you’re working with an investment bank on the sale, you expect them to pursue the highest possible valuation. But the headline sale price is only part of the equation. Taxes, transaction costs, the structure of the deal, and how the proceeds are ultimately invested will determine what the owner actually receives—and whether it can support the lifestyle previously funded by the business.
“Consider a business owner receiving $10 million a year in total economic benefit from the company—not only salary and distributions, but also expenses and benefits paid through the business,” Farley says. “A $100 million offer may sound compelling, but the owner will receive considerably less after taxes and transaction costs. Once the remaining proceeds are invested, they may generate only $3 million to $4 million annually without meaningfully drawing down principal. Selling the business can therefore create a significant gap between the lifestyle the company supported and the income the investment portfolio can sustainably provide. The planning needs to begin well before the sale so the owner understands the number required, evaluates the structure of the transaction, and prepares the proceeds to support the next stage of life.”
A strategic advisor is essential to modeling these scenarios and coordinating the tax, estate, investment, and cash-flow decisions surrounding the transaction.
Planning for a Major Liquidity Event
To ensure the best net result from the transaction, Whittier Trust brings advisors together to predict and mitigate any aspect that could go awry. Those superstars who have helped you build your assets thus far in life may become part of that transition team, because Whittier understands that your trusted confidantes can be vital for continuity. Then the Whittier “team captain” provides the playbook and long-term strategy that turns their piecemeal plans into a unified vision.
Thanks to the relationships Whittier Trust advisors build with clients, personal concerns are factored into every step the team takes. Having assisted hundreds of UHNW families through major liquidity events, we know that such a momentous change in life has emotional ramifications, as well as financial and legal ones.
Often, clients look up after the dust has settled and think, “What now?” Some just want to retire and relax, while others want to start another business, mentor the next generation, or serve on boards. Many want to move into philanthropy and structure their gifts to provide an income stream. Whatever path appeals, Whittier has the multifamily office services to get you there.
The Danger of Delaying Planning
“One of our clients is a highly successful business owner in his late 40s whose wife is now expecting their first baby,” says Farley. “The anticipation of their child made him realize he has no cohesive plan for the wealth he’s built with his company and no estate plan for his family. He has a great CPA, as well as a broker who is an old college friend, and a patchwork of disparate investments. But with his focus on growing the business, he’d never prioritized estate planning until now.”
For a man who has spent a lot of time thinking about risk in his line of work, he had rarely considered the risk he was taking in his personal financial life or how to prepare his business for when he’s ready to retire. Without a solid estate plan, he could potentially leave his family facing legal complications and cash flow constraints for years, especially given how many illiquid assets are tied up in the business.
“Chaos is what occurs with a major life event when there is no unifying plan or leader at the helm,” Farley says. “And it can so easily be avoided. Taking a day or two to explore a multifamily office solution could save you months or years of stress and obstacles later.”
Benjamin Franklin may have said it best: By failing to prepare, you are preparing to fail. “While Franklin didn’t mention teamwork,” says Farley, “after working with multiple generations of UHNW families who set high goals and achieved them, I’ve found that a good team is the key to good preparation.”`
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Lori Kenyon Farley is a Senior Vice President and Client Advisor in Whittier Trust’s Newport Beach office. Lori brings more than 30 years of experience advising ultra-high-net-worth individuals, families, founders, and business owners on complex wealth management, estate planning, tax strategy, trust and fiduciary matters, business succession planning, and multigenerational legacy planning.