There are three themes that consistently challenge high-net-worth families and the people that advise them. The challenges arise from the evolution of the family’s wealth and the governance of that wealth such as growth, liquidity events, succession, inheritance, in trust, legacy, etc. Advisors must evolve with the family through these wealth stages, or they are at risk of becoming a cost-driven commodity instead of a valued partner. Finally, if the family’s legacy is the glue, why aren’t the themes  “community” and “transcendence” an extension of the family’s legacy?

By the way, FAMILY GOVERNANCE is how wealthy families make decisions together and take accountability for the decisions they make.

First Common Challenge: 90 % of  the advisor’s time and energy is typically spent on the 10 % piece – “the money”

• People (family and human capital)                = 60%
• Knowledge (intellectual capital)                   = 30%
• Financial Assets (money) is not # 1             = 10%
• In business, growth comes from innovation and marketing, everything else on the profit and loss statement is just costs. Profits come from risk.
• In a family office, growth comes from open communication, positive orderly change, community improvement and meaning (which means the 90% piece unrelated to financial assets must also contains risk).

Second Common Challenge: There are more effective strategies to build a legacy than simply giving away money

• If establishing a “legacy” is indeed the goal, then why is philanthropy almost always discussed in terms of giving away money?
• Again, 90% of most advisor’s time and efforts are spent on the 10% piece – “the money.”
• Participation in one’s community is an even better way to achieve “transcendence,” because the time, talents, knowledge, and networks the high-net-worth families have to offer are more scalable than money in terms of bringing about community improvement.
• Sub-challenge: many family members have been isolated from outside human interactions.

Third Common Challenge: The Advisors Themselves

• Advisors almost always focus on the expense or liability side. Examples are income taxes and estate taxes.
• Yet “money” is only the 10% piece, so who cares if after-tax it is 6% or 7% piece?
• This focus on “money” is expensive in terms of the value being provided by your Family Office advisor. Examples are fees for Assets Under Management (AUM) and hourly billing.
• “Savings” techniques are hard to understand and complicated, which drains time & energy from the 90% pieces. Examples are Employee Stock Ownership Plans (ESOPs); these days almost everything associated with life insurance.
• The catalyst is the marketplace, not the service provider. Gone are the days when high-net-worth families came to advisors for their superior technical knowledge.
• Thus an advisor’s service should be derived from the family’s wants NOT needs (aka benefits), NOT features (aka value). In other words, it should be low-cost to work with a Family Office advisor.
• It’s about you (the customer) and not me (the provider)

The Evolved Family Office

• Utilizes a network of knowledge, talent, and resources
• Connects resources together, for positive change, growth, increased intelligence, and meaning
• Transcends its influence into meaning by having a significant positive effect on one’s community, not just with money, but with time, talent, knowledge, networks, meaning, and maybe even achieving happiness
• Is “On the Money” with a mission statement, investment policy statement, and a due diligence process in place and in use