MARCH 22, 2023: How to build a family office that lasts

Mar 20, 2023
1 year ago
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The key goal for family offices — creating a lasting legacy — can often be elusive. Though each is unique, families can do several things to set themselves up for multigenerational wealth, centered on treating the family office like a business, Bailey McCann reports.

Also in this issue, we talked with Carol Schleif, the chief investment officer at BMO Family Office, who describes the key issues for family offices to resolve when they show up at her doorstep. She also talked with us about mistakes that families make after a liquidity event, the dynamics of a business transition and how to plan investments for an entire family.

With winter in the rearview mirror — on the calendar, at least — if you have any insights into what family offices can expect in the months ahead, please pass them along. We’d love to use them to guide our reporting and are open to running op-eds or commentaries from readers.

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Creating a lasting legacy requires not just forward thinking but ongoing education.

Family offices are known for their high levels of customization, and their structure is designed to support that. Because each one is unique, it can often be hard to say definitively what it takes to build a family office that will stand the test of time. 

Data from the Global Family Office Report, written by UBS and Campden Wealth, shows that looking at existing family offices for indicators may also be tricky, as many are still relatively new. Sixty-eight percent of family offices in the report were founded in 2000 or later, and 35% started in 2010 or later.

Still, family-office practitioners agree that families can do several things to set themselves up for multigenerational wealth. But it means treating the family office like a business, which could require a culture shift within the family — at least initially.


Tips for creating a family office that lasts:

  • Identify a mission for the family office so that it has a purpose for existing.
  • Treat the family office like a business and become its client. Family offices that aren’t well-maintained rarely last.
  • Build flexibility into the structure of the family office to account for life changes along the way.
  • Invest in ongoing education for all family members so that everyone understands how to manage personal wealth over time and with a long-term view.


With a little planning, families can avoid a few common pitfalls, said Joseph Reilly, CEO and founder of the Circulus Group, a Greenwich, Connecticut-based advisory firm for family offices. “Often what we see is that the wealth creator is a single person,” he said. “Maybe they did it through an operating company or through their investments, but they create a structure where they are the leader, and they have the most control.” 

Sometimes the single-leader model can also embed instability into the family office because the office is managed as an afterthought and not as a standalone business. Eric Becker, co-founder and chairman of the $30 billion Cresset Capital multifamily office, said this was his experience. It made him realize the need to become a client of his family office. 

“We’ve worked with families that have lost assets or worse because of incompetence or not fully resourcing the family office,” Becker said. “It’s way too common, and it makes it less likely the family office will last through the next generation.”

Reilly said that sometimes with the single-leader model, that person will ask people affiliated with the operating company or investment company to manage business for the family — an approach that isn’t sustainable.

“I call it an embedded family office,” he said. “You’re asking the CFO or the corporate counsel to do other things, and what ends up happening is the family office is created on an ad-hoc basis.” 

Families can ask for this kind of help initially, Reilly said. But if it doesn’t lead to hiring a family-office staff in the future, families can run into trouble.

Families often want to rely on people they know and trust, Reilly said, but a corporate counsel or corporate CFO may not have the time or skills to manage a family office as well.

Agreeing with that assessment is Thomas Thiegs, a Minneapolis-based family wealth coach with Ascent Private Capital Management. If families bring everyone to the table early on to discuss the goals of the family, Thiegs said, then the experts required to set up the family office can do what they need to do to create a solid foundation. 

“It’s very hard to build a lasting organization if you don’t take the time to think through what that looks like and what your needs are,” he said.

The planning stage shouldn’t just look at setting aside wealth for future generations, Thiegs said. Many families are surprised to learn what is actually involved in setting up and maintaining a single-family office, including hiring staff and guiding the organization over several years. Best-in-class professionals don’t come cheap and may be hard to find as they are usually already in high demand.

“When I am working with families,” Thiegs said, “I often start by asking whether it is important to them to be a single-family office at all. In many cases, it may make more sense to join a multifamily office that already has the advisers and experts in place.”

This can be especially true if an operating company isn’t at the center of the family office, he said. A multifamily office has the advantage of providing an established platform “with investment expertise already in-house,” Thiegs said.

Cresset’s Becker said identifying the right structure and experts should involve more than just attorneys and accountants. Many multifamily offices have investment staff built in, but that will need to be acquired under the single-family model. Philanthropic work will also usually need additional staff who understand nonprofits. 


Finally, Becker said, setting up an advisory board might help. 

“We often talk to families about putting a board in place formally or semiformally,” he said. This is still somewhat rare within the family-office world, Becker said, but having outside advice can help families identify issues before they become problems and increase knowledge-sharing. 

“Often people think their issues are unique to them,” he said, “but they are actually quite common, and there are ways to work around them if you have the knowledge.”

Christopher Norwine, who leads business development at Two Ocean Trust, said that regardless of whether a family sets itself up as a single-family office or joins a multifamily-office platform, when families work with trust and estate professionals, they need to consider what they think the family will look like 10 or 20 years from now, not just today. Many trust and estate structures are flexible and can be adjusted as families change over time, Norwine said, but it is easier to make those changes if some preliminary discussions have occurred early on. 

This is especially true for succession planning. If the office was formed around a single leader or if the next generation is very young, the succession plan might not be immediately clear. However, thinking through what that might look like with an estate planner can help identify procedures and asset preservation plans ahead of time. Without it, spouses or other family members are often left to figure out accounts and systems on their own with limited information, and that can lead to failure.

“You almost want to bring an endowment-style mindset into the discussion,” Norwine said. “We’re looking at investments, assets and estate strategies with an intergenerational mindset. That could look like pairing near-term tax optimization strategies with longer-term trusts or other structures that are going to preserve and protect assets for the future.”

Once the basics are in place, families should invest in a chief learning officer, Thiegs said. Within the world of family offices, the learning officer provides information about managing wealth at all stages of their lives.

“This is a really crucial piece, especially when it comes to working with younger generations,” Thiegs said. Research indicates that families tend to allocate between 1% and 4% of their wealth to learning opportunities, he said, but experts say it should be much higher if the goal is to create and preserve multigenerational wealth. 

“The rate of change is accelerating,” Thiegs said, “and this is where families experience the most conflict. Having an expert in this role could be the difference between success or failure.”


Carol Schleif has been in the financial advisory space for more than 40 years. Before her current role as chief investment officer at BMO Family Office, she spent more than 27 years at Wells Fargo & Co., where she rose to deputy chief investment officer of their multifamily-office business.

What is a key issue to resolve for families when they arrive at your doorstep?

I think the key issue to solve when families arrive is what it is they’re looking to do. And quite frequently, there’s not necessarily one macro thing you might have as a primary focus.

We're going to talk about generational issues. We're going to talk about his-and-her issues. We're going to talk about types of accounts, locations of accounts and where they need to be held.

Do you need loans for specific things? We arrange everything from aircraft loans to art loans.

So the key thing when we get started is going to be sussing out what it is that the client is looking to do.Carol_Schleif

What is a common area where families delay important planning?

A lot of times, people will get to the point where they're so focused on selling a business that they don't necessarily think about what happens once that liquidity event occurs.

There's a lot of pre-planning that can go on for years ahead of time before there's a letter of intent out there, whether it's forming a family-limited partnership and putting discounted-valued shares in there, or creating some different charitable accounts early and up front, or having those discussions about what that sale looks like and what after the sale looks like.

Quite frequently, spouses have differing opinions about what their post-sale life looks like. They'll neglect to understand how integral a company or a company title is in their psyche and in their self-identification. Going through that process of understanding what the back side is going to look like is important.

The wisest thing we can do early on in a conversation is ask good, open-ended questions to try to identify both joy points and pain points that clients have in terms of the way their current situation is structured so that we might help offer different alternatives. Our real goal isn't to be prescriptive about it as much as it is to lay out, "Here's the situation, and with this path, here are the potential strengths and potential drawbacks of Path A versus path B versus path C."

What else aren't families expecting when they sell a business, and how do they need to adjust?

When they've just sold a business, they're going through a grief process that many entrepreneurs and executives go through when they go through a business transition. And quite frequently what we'll talk about is they've spent a lifetime building and managing a business, and now they're building and managing wealth. And while there are a lot of parallels, there are also different advisory services that need to come into play. You might need a different suite of accountants and lawyers to help manage some of the liquid assets in and around managing taxes, planning and cash flow.

What comes into play when planning investments for an entire family?

We work with each generation to understand their hopes and dreams and goals, their lifestyles and what it takes to sustain those lifestyles.

Then, we talk about what kinds of asset allocation they're comfortable with — how they may or may not want it tilted. We talk about impact or environmental, social and governance issues.

Someone might come to us with an existing portfolio, and that brings us to other questions: Are there certain assets, certain allocations, certain things in this portfolio that are sacrosanct, where you don't want them disturbed? Are there outside assets that we need to accommodate, such as real estate that's generating cash flow in one area of the portfolio, that we're not going to want to double up with in other parts of the portfolio. It's a very bespoke business.

Interview conducted by Steven Weiss


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