As more wealth management firms are emphasizing non-financial services to target high- and ultra high-net-worth clients, a new report recommends the benefits of family foundations.

“You’re seeing greater awareness among financial advisors on how important it is to focus on qualitative issues around family wealth management,” said Scott Winget, senior managing director of wealth impact planning for the report's author, Ascent Private Capital Management -- the wealth division of US Bank, focused on clients with at least $50 million in investable assets or net worth.

The report comes as a number of top players in the ultra high-net-worth market -- including Abbot Downing and Wilmington Trust -- have made moves in the last 18 months to strengthen their credentials in areas that go well beyond traditional asset management.


Wells Fargo launched Abbot Downing, its rebranded UHNW division targeting clients with $50 million or more in investable assets, last spring, and made Pat Armstrong, a well-known industry advocate for these “soft side” services, head of its Family Dynamics unit.

“We believe that the focus on the impact of wealth is as important as focusing on the technical management of wealth,” Armstrong said at the time.

And in 2011, Wilmington Trust brought in Tom Rogerson, another prominent specialist in family dynamics who spent nine years heading Family Wealth Services for BNY Mellon Wealth Management.

According to Rogerson, the current growth trajectory of non-financial and governance services for wealthy families is similar to the rise of estate tax planning as a key wealth management offering.


Setting up a family foundation, for example, can help families work more closely together, be more directly involved in their favorite charitable work and help family members develop business skills, according to this week's Ascent report. They also give wealthy families flexibility when it comes to tax planning, the report found.

And for advisors and wealth managers, expertise in family foundations can be a valuable value-added service and selling point, Winget said.

“Foundations are appealing to families because they can enhance a family’s continuity and cohesiveness and can be important to the family’s long-term success,” he pointed out. “For advisors who can facilitate the process, that’s a great selling point. In addition, families who set up a family foundation will need investment management expertise for the foundation, and that’s another avenue where advisors can help.”

Wealth management firms and family offices are seeing a clear payoff from developing expertise in areas like foundations, according to a report issued last year by the Optima Group.

“These offerings are increasingly becoming a market differentiator for appealing to new clients and retaining and deepening relationships with additional clients,” said Dennis Dolego, director of research for Optima.


Families should have at least $5 million in cash to endow the foundation, Winget said.

But families and advisors also need to understand the challenges a family foundation can present, Winget warned.

“Some families assume foundations will be a solution to help with family continuity, relationships and dynamics,” he said. “A foundation is a tool, not a magic bullet. There has to be additional work, communication and trust around a family’s common vision and mission.”

Before becoming involved, advisors need to aware that foundations can be very complex, Winget cautioned. Advisors must also be on guard against improper or “jeopardizing” investments by family members, as well as self-dealing attempts by family members to use the foundation to enrich their personal interests.

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