Marcia Nelson organizes tailored family office events as managing director at Freedom Capital Markets, an investment banking and equity capital markets firm. Nelson’s background includes working with family offices as well as connecting private investors to direct deal flow. She is also a founding partner of Triple C Advisory, helping early-stage companies prepare for institutional-grade investments.
How do you work with family offices in your current role?
I run conferences for families, meeting with family offices and bringing my relationships together to help them source co-investment opportunities and helping them get to know each other.
I organize curated peer-to-peer events to create a safe space for families, speakers and attendees. We try to make them fun and relevant, so we’re going to the Daytona Rolex 24-hour Racing Weekend with 30 family offices and sports, transport and mobility businesses. They’re just coming together to enjoy the weekend — no sales pitches. It’s about forming and deepening relationships.
I also host monthly curated lunches for family offices. We just started First Friday, where we invite different people to a Zoom networking session the first Friday of each month. We bring six to 12 people together who all share some kind of connection or common thread.
What trends or shifts are you seeing in family offices?
When I first started working in the family office world, it was a lot about wealth preservation and philanthropy. Everybody wanted to get their 6% a year. I saw this shift to families taking more control over their wealth. In addition, they also want to ensure that the entrepreneurial spirit that created the wealth in the first place is nurtured in the second and third generation.
What are families doing to cultivate entrepreneurship in the next generation?
More and more, family officers are saying: "I made my money. I'm an entrepreneur, and I don't want to take that experience away from the next generation." Sometimes money can take that experience away.
One of the ways families encourage independence and entrepreneurship is through a family bank, where members seeking to fund a business or investment have to come to the investment committee with due diligence and make a solid case. Due to the rigorous process, some may find it easier not to utilize the family bank, which cultivates independence.
How are family offices structuring internal educational programs to better prepare the next generation?
One family office created different board levels — one for the first and second generation and a junior board for the third generation. When members turn 14 years old, they join the junior board, which operates with guidance from a more senior family member. The junior board meets monthly, and members are given an allocation of capital for investment and philanthropy. It’s a way for the third generation to collaborate rather than compete with each other. There’s a lot of emotionality in wealth inheritance, so allowing everyone an equal role in the junior board creates an equal playing field.
Another family put the next generation on the board of the philanthropy arm as a training ground to then take over the family office board. I'm seeing more first and second generations being more specific and intentional about how to make sure the next generation moves forward.
What advice can you offer for effective networking?
There are a lot of events — so many that it can be overwhelming. So if you’re a first-gen wealth creator looking for places to go, try a couple of events and ask peers where they’re spending their time. That will help avoid conferences that may not be appropriate. It’s also a great icebreaker.
Who are high-value cybercrime targets? High-net-worth individuals
By RAHUL MAHNA
It is a safe assumption that most high-net-worth (HNW) individuals, regardless of the source of their wealth, pay careful attention to investing, managing and growing their assets. Many are far less diligent, however, at protecting those assets from cybercrime.
That’s a major oversight, given that cyber threats and related criminal activity are growing dramatically. The FBI’s Internet Crime Complaint Center (IC3) logged 800,944 complaints during the last full year for which data is available. The potential total loss from such incidents rose from an estimated $6.9 billion to over $10.2 billion over one year.
Not all of these incidents involved HNW individuals, of course. But the significant wealth concentrated in the hands of such individuals and their families, as well as their visibility in business and the community, make them high-value targets for cyber fraud. Furthermore, while many HNW individuals have enjoyed the benefits of robust cybersecurity protocols in their work environments, they often fail to invest in similar protections in their personal financial lives.
Family offices, which HNW individuals often use to invest and manage their wealth, are likewise exposed to cybersecurity risks. A survey by a private wealth management firm found that 26% of family offices have suffered a cyberattack.
Some key factors that can make HNW individuals or their family offices especially susceptible to cybercrime include:
- Multiple asset types. Most HNW investors own several types of assets, including public and private investments, real estate, art and collectibles, etc. Various documents related to these interests may be stored in different databases or computer systems that may not all be properly safeguarded and are more vulnerable to hacks. In some cases, technologies and methods have failed to keep pace with changes in the asset mix, such as investments in cryptocurrency. We know of one investor who kept a cryptocurrency wallet on a USB stick and lost millions when the device was stolen.
- Archaic technology. HNW investors who have amassed considerable wealth tend to skew older and may not be especially tech-savvy. They may be reluctant to switch from legacy technology systems (AOL email, for example). In some cases, they rely on younger family members instead of professional help in setting up their computers and email, so they lack proper security measures such as password protection and two-factor authentication.
- Relative risk. Often, HNW individuals who own and operate family businesses try to include family members in some capacity. Some of those relatives, especially if they have only tangential roles in the business, may be prone to behavior that puts the entire family business at risk, such as using the same passwords repeatedly or ignoring precautions about phishing. In fact, phishing is the most prevalent form of cybercrime, with over 300,000 complaints received by the IC3 in 2022.
- Social media. A person’s social media profile can inadvertently give away vital information that enables hackers to mount attacks. Examples include names of pets, children’s birthdates, vacation destinations, etc. We know of one wealthy individual whose spouse’s social media page included a photo of the family dog wearing an ID tag on its collar. Cyber thieves correctly guessed that the ID was the password on several bank accounts.
- Artificial intelligence. A new vulnerability arises from the growing use of artificial intelligence programs. HNW individuals are often public figures, such as CEOs and other top executives, celebrities and athletes. The advent of AI and voice recognition tools provides an opening for hackers to create “deep fakes” to access sensitive information.
Fortunately, HNW individuals and their family offices can take common-sense measures to reduce their exposure to cybercrime:
- Invest in professional-grade security. Many HNW individuals rely on free or low-cost solutions that are not designed for high-value targets; it pays to invest in professional-grade email, antivirus and other vital systems.
- Get an independent IT security assessment. Have an outside party assess the risk exposure that might otherwise go undetected in home and office networks, including personal and Internet of Things (IOT) devices. The insights of an expert who is current on trends in the industry can produce a high ROI in terms of wealth protection.
- Regularly update and patch systems. Pay attention to and install regular updates and patches to ensure systems are protected against known vulnerabilities.
- Enable multifactor authentication. Provide an extra layer of security by requiring multiple forms of verification before granting access to systems.
- Use strong, secure passwords. Passwords should be unique; use different character types and avoid common or familiar terms. Consider using a password manager for secure password storage.
- Train extended family and staff. Ensure that everyone who has access to your digital systems is aware of the risks and knows how to identify and avoid potential common cyber threats.