Part of what the word “virtual” means in virtual family office is that the model can operate with family members all over the country. Firms that are ahead of the curve on technology have already built ways to run family meetings electronically and coordinate with clients’ professionals even when everyone is several states apart.
Key Takeaways
- The central benefit is a single point of contact who coordinates your entire team of professionals.
- Coordinated advice keeps decisions in one discipline from creating problems in another, such as an insurance move that triggers unnecessary estate tax.
- You get family office depth without the cost of dedicated in-house staff.
- The model provides continuity across generations, which matters most when a spouse or parent passes.
A Single Point of Contact
Think of yourself as the owner of a major league sports team and your advisor as the general manager. An effective GM creates an environment where they can be the single touchpoint for the owner on any team matter. A valuable GM identifies both strengths and weaknesses in the team’s structure and pinpoints the resources that can fix those weaknesses. The GM may not coach, play, or train the team, but it is their responsibility to identify, evaluate, and hire the qualified people who put the owner’s team in a position to win.
Coordinated Advice Across Every Discipline
Here is a concrete illustration of the coordination I am talking about. Many of my clients are Illinois residents, and they frequently look for ways to mitigate Illinois estate tax when they pass. When they mention putting life insurance in place, I may tell them about an Irrevocable Life Insurance Trust (ILIT) that can help exclude insurance proceeds from their estate. Without coordination, here is where things can go wrong:
- The advisor does not inform the insurance broker that the client has estate tax exposure, so the concept of an ILIT never comes up.
- The attorney drafts the ILIT but does not provide it to the insurance broker, and the policy is not titled in the name of the ILIT.
- When the client passes, the proceeds are included in the estate and exposed to Illinois estate tax.
Most firms expect you to relay information to your other professionals. I do not, and I think there is tremendous value in that.
Lower Cost Than a Full Family Office
Traditional family offices typically keep their own accountants, attorneys, bankers, and personal secretaries on staff to serve extremely wealthy families. That full-service approach is reflected in their cost structure, which can raise the price of working with them.
A virtual family office structure often offers more flexibility by giving you one main point of contact and the ability to move outside professionals in and out of your plan as your needs evolve over the decades.
Objective, Fiduciary-Aligned Guidance
As most people know today, a fiduciary is someone required to act in the best interest of the client at all times. I try to go one step further. I have documented my Plank-by-Plank Process™ and built the Interactive Wealth Bridge so people know exactly what I do before they hire me. That creates more accountability than most firms are willing to take on.
A Vetted Network Without Building It Yourself
Many families already have trusted attorneys and accountants before they start working with me. My structure lets you keep those professionals in place while I enhance the communication between them. For families who do not yet have those professionals, I have spent the time and resources to identify and vet experts who strengthen my clients’ planning, without having to hire them in-house.
Continuity and Support Across Generations
When your financial advisor is familiar with all of your other professionals, your family does not have to be. Whether you lose a spouse or a parent passes away, wealth can get lost when the person who passed never left a clear roadmap of who to contact and how each professional fits into the plan.
Having a key point person familiar with every aspect of your plan means that when you are gone, they can communicate that plan to the rest of your family. It also means they can prepare your spouse or your children for the transition of that wealth long before a death occurs.
Time and Stress Saved
Take tax time as an example. The average person collects the 1099 tax information for their investment accounts and provides it to their accountant. I collect these items on behalf of my clients, send them to the accountant, and answer any questions about the documents. That takes a tremendous amount of time and stress off my clients’ plate every year.
Frequently Asked Questions
Is a VFO worth it?
If your main pain point is a lack of coordination between your professionals, a VFO can be very valuable. When you no longer have to relay information between your accountant, attorney, and advisor, many people find the structure is more than worth the cost. If you’re still weighing the decision, this post on whether you need a virtual family office can help you think it through.
Are there downsides to a VFO model?
In a perfect world, all of your professionals would operate under one roof. I think it is nearly impossible for one firm to be the best at everything, so a VFO relies on excellent coordination with professionals from different firms to do its job well.
How is a VFO different from a financial advisor?
A VFO differentiates itself through strong coordination with your outside professionals. That means sitting in on meetings with them, providing the information they need throughout the year, and reviewing their work.
What planning areas does a VFO address that a typical firm does not?
Items like property and casualty insurance, cybersecurity, and bill pay are areas VFO clients need but that a typical wealth management firm seldom addresses.
See If the Model Fits
If you are ready to work with a professional who takes coordination and communication off your shoulders, please reach out. I would welcome the chance to show you how my virtual family office gives your family the enhanced planning it deserves.
