“Yes, there are two paths but in the long run, there’s still time to change the road you’re on” – lyrics from Stairway to Heaven by Led Zeppelin
While they have been around for years, family offices are gaining in popularity as a new generation of entrepreneurs that are coming into wealth are finding this vehicle an excellent way to carry on their legacy. There are now a number of family office organizations and education sessions as well as a growing group of service providers dedicated to this industry. But, what is a family office, why form one and how can it work for me?
I have had the chance to talk with many clients and contacts that have formed or work at a family office. Many are founded by a patriarch or matriarch who has a successful exit from a business but still wants the family business team to work together. They pool resources to share the costs of administration of their activities but also find that longer term goals are more easily accomplished working from a larger asset base. The old strength in numbers adage seems to ring true here. So, just some notes on my observations about family offices:
- The successful ones do have structure and in many cases, that structure resembles what the previously owned family business had in place
- A family office requires a discipline regarding decisions such as investment vehicles, seeking another operating company opportunity or perhaps a more structured approach to philanthropic endeavors
- This vehicle can provide opportunities to enhance the lives of the next generation. The atmosphere is usually less hectic than the day to day crisis environment of a family run operating company so there is more time for educating and exploring alternatives.
- Some have told me their family office provides the opportunity to do it right. Whether it is investment strategy or philanthropy, having some resources and time allow them to develop a more successful and effective approach to their goals.
Please keep in mind, a family office is not for everyone. Many family run businesses are full of discord, are somewhat dysfunctional and a family office will not solve those issues. If that is the reality of your situation, everyone going their separate way may be the best solution. There is also the concept of multi-family offices. Some families and groups are just more organized than others and they have used these skills to offer family office services to other families. So, if you believe you could deliver this type of service to others or you want to consider your own family office, the best place to start is to talk to some of the professionals who work in this space. Many entrepreneurs have seller’s remorse brought on in part, I believe, by not having something to go to. After a long career usually at one place, they have a certain emptiness when they exit a business. Many seek a meaningful place as the next phase in their journey and while not a “be all and end all,” a family office may be an alternative to fill that void. You might just find it is not too late to “change the road you are on.”