Aug. 21, 2023: How family offices can navigate DEI
In this week’s issue, we’ve curated a high-level road map for family offices that want to be intentional about diversity, equity and inclusion (DEI). Writer Erin Chan Ding talks with experts about how to practically implement DEI within a single-family or multi-family office structure. Hint: It’s all about constantly learning, being deliberate about allocation of capital and staying committed to the process.
Marcus Baram also previews what the family office conference landscape looks like this fall and winter. He has identified several key events throughout the U.S., Europe and Asia to have on your radar. Crain Currency plans to take this concept a step further with the creation of our events page, which will take shape later this year, so we can help industry professionals navigate their options.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: Navigating DEI: A road map for purposeful family offices
By ERIN CHAN DING
As the focus on diversity, equity and inclusion (DEI) has expanded, approaching the family office sector with a diverse lens isn’t just a nice-to-have but also an imperative to representation — and to good business.
The impact on the bottom line, as well as the increasing recognition of the importance of representation, has led corporations to accelerate their engagement with DEI. And family offices have similar opportunities to act with intention.
Dirk Hall, a former head of investments for a private family office and COO of Charleston, South Carolina-based Ballast Rock Private Wealth, calls diversity the new cross-functional team.
“We have already accepted that cross-functional teams produce better outcomes than homogeneous ones,” Hall said. “The rationale is that when you bring people together from different backgrounds and with a range of personal and professional lived experiences, they will uncover challenges and opportunities that more homogenous teams might overlook.”
Said Drew McMorrow, a partner, president and CEO of the Waltham, Massachusetts-based wealth management firm Ballentine Partners: “Diverse teams drive stronger business results. As fiduciaries, we simply cannot ignore this important, actionable area of bringing the best solutions to our clients.”
Family offices, Hall said, “have first and foremost a fiduciary responsibility to their families. Therefore, family offices should care about how DEI strategies can produce stronger returns.”
But how do family offices, which can be small and homogenous by their very nature, do this? Financial experts such as Hall — who have spent years not only implementing DEI efforts but also have lived experiences that speak to the challenges and the payoffs of such efforts — share these recommendations:
START WITH YOUR ADVISERS, BOARD MEMBERS AND PARTNERS
Jasmine Richards, head of diverse manager research at Boston-based Cambridge Associates, said family offices that lack internally diverse teams can start by assessing their advisers.
“Ensuring that you are hiring advisers who have intentionally built a diverse team themselves will begin the domino effect,” Richards said. “Those advisers are more likely to have diverse networks themselves and bring diverse fund managers to the table. Those diverse fund managers will also be more likely to invest in a broader, more inclusive set of founders and investment opportunities.”
James Seth Thompson, head of the diverse and multicultural wealth segment for Chicago-based Bernstein Private Wealth Management; and Chelsea Smith, senior national director of family office services for Bernstein, wrote in a joint email that family offices should also have diverse and nonfamily members on their boards and be intentional about investment and wealth management firms they choose as partners.
“They should be direct and ask their investment advisers to bring forward diverse investment opportunities,” they said. “ ‘Intentional’ is the key word here. There has been a rise in the number of funds that prioritize investing with women-led companies or people of color, so we believe solid opportunities exist, and they will continue to grow.”
Creating a family doctrine and investment policy statement are ways to formally articulate how family offices want their assets and resources to influence communities, causes and social-sector concerns, the duo wrote.
“Let’s stop making diversity and inclusion this big, bad scary monster under the bed,” said Clara Sierra, senior director at New York-based Moody’s Analytics. For family offices and advisers who are dealing with generational wealth and “may not be exposed to where to invest the money or how to bring in these clients or how to address multicultural families and multicultural generational wealth, I say: Educate yourselves. Just because you don’t see it, doesn’t mean it’s not out there.”
Sierra recommends looking into industry groups with DEI programming, such as the Money Management Institute, Morgan Stanley’s The Equity Collective or SER, which holds a summit for Latino financial advisers.
BE DELIBERATE ABOUT ALLOCATION OF CAPITAL
Seek out investment funds and businesses that have diverse leadership, particularly underrepresented groups such as women and people of color, Hall said. Family offices should prioritize investment opportunities that generate optimal risk-adjusted returns while also making a sustainable impact, he said. Qualified opportunity zones, for example, extend opportunities for tax advantages and ROI by investing in distressed areas.
And then, Hall said, “When family offices generate better returns as a result of a more strategic approach to diversity and sustainability, they need to spread the word to all their other family office friends, just like how they share great deals.”
It’s important to “evaluate and promote diversity within the family office’s supply chain by working with diverse suppliers and vendors,” said Nanditha Vijayaraghavan, chief of staff and marketing for Trusted Family, a Brussels-based governance solution company for families, boards and shareholders.
Family offices are already trying to stay up to date with compliance, human resources and other regulatory obligations,Vijayaraghavan said, so it’s likely that all but the wealthiest of them would work with outsourced agencies to help with building and implementing DEI efforts.
Tina Byles Williams, CEO and founder of Xponance, a Philadelphia-based investment company that’s majority women and people of color, said that “if I were a family office, I would look for the players that really know the (DEI) space.”
Family offices should set diversity and inclusion goals for their operations and investments, then regularly report progress on the goals to stakeholders, Vijayaraghavan said.
McMorrow said taking the time to review internal processes with a lens toward equity and inclusion is “a critical part” of an organization’s intentional DEI practice and said “real, lasting and meaningful change cannot happen without intentional and consistent efforts.”
Williams underscores the importance of a family office’s knowing why it has prioritized DEI.
“My experience is when people do something because it’s nice to do, they don’t get it done,” she said. “If they think it's necessary because it changes their performance, they get it done.
“I know it's an obvious and simple point, but it really is the differentiator between people that get it done or who just talk about it.
What to expect at family office conferences this fall
It’s almost time to pack up the beach blankets, leave the summer house and get back to work — as well as prepare for a full lineup of family office conferences this fall and winter. The best conferences give family office members and ultra-high-net-worth individuals a chance to attend content-rich panels and have global networking opportunities. From Laguna Beach and Miami to Wiesbaden and Dubai, we’ve rounded up the ones that matter throughout the rest of 2023.
Vitaminwater founder Mike Repole buys stake in sneaker company: The sports drink entrepreneur’s family office, Impact Capital, bought a majority stake in Nobull, a training brand that sells sneakers and apparel online.
Citadel’s Griffin reshaped law banning Chinese real estate deals in Florida: The proposed law would have reportedly complicated Griffin’s plan to relocate hundreds of employees to Miami, where he plans to build a headquarters costing at least $1 billion.
Holiday House Hamptons teams up with artists to raise funds for breast cancer research: The showcase house held its “Get on Board” event, featuring over 20 surfboards designed by local artists, to help raise funds for The Ellen Hermanson Foundation to fund the Breast Center at Southampton Hospital.
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