There is strength in numbers, as the saying goes. However, when it comes to personal finance, this collaboration is usually limited to couples. Nonetheless, extended families can also unite to gain access to higher-quality and lower-cost advisory services, which are typically reserved for affluent individuals.
In the personal financial services sector, this is often referred to as “private management” of personal wealth and assets, or even “private banking” services provided by certain financial institutions.
Who is the target audience? Individuals or immediate families (parents and children) whose total personal assets exceed $2 to $3 million in equity, investments in financial markets, real estate, retirement savings accounts, and so on. This threshold is challenging to reach individually, but becomes more attainable when combined with relatives or business partners.
These specialists focus on scenarios where asset management becomes more complex due to investments, tax optimization, business transfer, or estate planning.
The complexity that attracts interest
“The more complicated it is, the more we appreciate it. Especially when it allows us to bring together various specialized advisory services that these individuals used to consult separately,” explains Jean-Sébastien Lemieux, national director of the 1859 Private Management division at National Bank Financial.
At Desjardins Group, there is also an observable increase in the number of business people approaching retirement who wish to enhance the management of their assets by incorporating the assets of their loved ones.
For years, there has been a wave of entrepreneurs and business owners who, upon reaching retirement age, must transfer their businesses and assets to their family members.
“We are in the midst of this trend at present. We are witnessing an increasing number of personal asset consolidations into family wealth among relatives of successful business individuals or investors to obtain advisory services better tailored to their personal and family circumstances,” states Martin Bray, Vice President and General Manager of Private Management at Desjardins Wealth Management.
At IG Private Wealth Management, financial planner and tax specialist Hugo Lehoux, based in Beauce, emphasizes that integrated and personalized management of family assets is essential, especially with the growing number of business people who “find themselves with significant funds” following the sale of their companies.
“For most of them and their families, it’s the first time they feel like lottery winners,” says Hugo Lehoux.
“It may seem like a lot—several million dollars in a family estate. However, without proper preparation and management, it can vanish quickly!”
Benefits and prerequisites
What are the main advantages of qualifying for “private management” advisory services for personal or family assets?
According to the sources consulted by The Press, these advantages can be summarized as follows:
– Access to specialized and personalized advisory services tailored to the needs and objectives of each situation (financial planning, taxation, investment management, estate planning, etc.);
– Availability of more sophisticated and sometimes less expensive financial services and investment products (in terms of proportional fees) compared to those accessible to ordinary customers;
– Access to economies of scale on fees for specialist advisory services based on the complexity and scope of personal or family assets.
Moreover, beyond the asset value qualification threshold, what factors should be considered when establishing private wealth management for family reunification?
“It is crucial to understand the individual circumstances of family members who are pooling their asset management. This understanding allows us to establish sound planning and effective integrated management of what they wish to achieve, as well as what they want to avoid with their family assets,” summarizes Alan Desnoyers, regional vice-president for Quebec and Eastern Canada at the RBC Private Banking division of wealth management services at Royal Bank.
At Desjardins, Martin Bray asserts that, to effectively establish joint asset management among close family members, participants in this family heritage (parents and children, siblings) must be willing to overcome feelings of “embarrassment or discomfort” when confiding in external advisors.
“The human aspect can sometimes be the most complicated element in preparing a private management plan for family wealth. It often requires an external analyst-consultant to clarify the expectations, interests, and needs of each person and then assist them in reconciling these in family wealth management,” indicates the vice-president and general manager of private management at Desjardins.
Strength in Numbers: Unlocking Family Wealth Management
The New Era of Personal Finance
The often-repeated phrase “there is strength in numbers” resonates deeply when discussing personal finance. While many think of uniting resources primarily among couples, it’s time to broaden this perspective. Extended families can also collaborate to access superior and cost-effective financial advisory services, typically reserved for the affluent. This article explores the advantages and practical steps to maximize financial potential by pooling family resources.
Understanding Private Wealth Management
Within the realm of personal finance, private wealth management (PWM) merges various financial services tailored to individuals or families with considerable assets—often over $2 to $3 million. Such wealth includes equity, investments in financial markets, real estate holdings, and retirement savings. By joining forces with family or business partners, achieving this asset threshold becomes far more attainable.
Complexity in Asset Management
Financial experts emphasize that complexity attracts skilled advisors. “The more complicated it is, the more we like it,” notes Jean-Sébastien Lemieux, national director of the 1859 Private Management division at National Bank Financial. Optimal planning encompasses diverse advisory services often utilized separately by individuals. The collective structure allows families to simplify their wealth management processes and enhance effectiveness.
Trends in Family Asset Management
There is a noticeable uptick in business owners nearing retirement who wish to streamline asset management by involving relatives. Martin Bray, Vice President and General Manager of Private Management at Desjardins Wealth Management, observes a growing trend of such family configurations.
Lessons from Business Success and Transfer of Wealth
Entrepreneurs frequently find themselves navigating uncharted waters upon selling their businesses, leading to significant asset accumulation. Financial planner and tax specialist Hugo Lehoux highlights, “For most of them and their loved ones, it’s the first time they feel like lottery winners,” underscoring the need for sound financial guidance to prevent rapid depletion of newfound wealth.
Benefits of Pooling Family Resources
- Access to Expert Advisory Services: Families can benefit from specialized financial planners who understand unique familial dynamics.
- Cost Efficiency: By combining assets, families can access sophisticated financial products at reduced fees compared to individual clients.
- Scalability in Services: Economy of scale allows for valuable fee reductions based on the complexity and overall value of pooled assets.
Establishing Family Wealth Management
Setting up a successful family wealth management plan requires several elements beyond simply meeting the investment threshold:
Understanding Individual Circumstances
As highlighted by Alan Desnoyers, regional vice-president at RBC, gaining a comprehensive understanding of each family member’s financial situation is vital for effective management. This insight allows for tailored financial planning addressing individual objectives.
Overcoming Emotional Barriers
Establishing joint management necessitates navigating emotional complexities. Bray emphasizes the importance of overcoming discomfort among family members when discussing financial matters with outside advisors. A neutral third-party consultant can facilitate clarity among family needs and expectations.
Practical Tips for Effective Family Wealth Management
- Regular Family Meetings: Schedule consistent meetings to discuss financial goals and challenges, ensuring transparency.
- Set Clear Objectives: Define collective objectives for wealth management and individual expectations from the partnership.
- Establish Ground Rules: Develop transparent procedures regarding decision-making processes and resolving disputes.
Real-World Examples of Family Wealth Management Success
Case Study: The Johnson Family
The Johnsons, a family of entrepreneurs, opted for pooled financial management upon selling their successful chain of retail stores. Providing significant financial resources, their collaboration with a private wealth management firm led to strategic connectivity with tax advisors, investment specialists, and estate planners—resulting in optimized financial structures adjusted to mitigate taxes and enhance their overall wealth.
Case Study: The Ramirez Family
After an unexpected windfall from a property sale, the Ramirez family faced the daunting task of preserving their newfound wealth. By pooling resources and establishing a family trust, they secured not only financial advisory services but also created a structured environment for managing investments collectively, ensuring that future generations would reap the benefits of their careful planning.
Final Thoughts
Pooling financial resources among extended family members can yield myriad benefits, transforming complex individual situations into cohesive strategies that maximize financial potential. As highlighted, engaging expert advisory structures becomes more manageable and rewarding when families collaborate toward shared financial objectives.
