Do I Let My Company CFO Into My Family Office?

“Badges; we don’t need no stinkin’ badges.” – quote from “Blazing Saddles” by Mel Brooks. (Believe it or not, this is a “misquote” from a 1948 movie.)

There is no doubt that in any business a CFO can be a very valuable asset. The ability to translate the vast array of data into understandable, user-friendly and actionable information for both internal and external stakeholders is truly a highly-valued capability. In most cases, there is an unwavering trust in the CFO and having him or her in the Family Office just seems like an extension of their fiduciary responsibility. In addition, in many cases the CFO believes they have earned the right to take on this responsibility – that in fact they “don’t need no stinkin’ badge” to assume this role.

However, the position specification for a financial/operating leader in a Family Office is much broader than what is normally found for a CFO of an operating family business. When there is an operating entity, the focus is on the mechanics of that business – pricing, people, profitability and cash flow. This is a playing field where most CFOs are very comfortable and where they have gained the bulk of their life experience. But in the Family Office, the CFO has to deal at a much more personal level with individual family members. The CFO may be seen as the older generations’ “person” and may find themselves catering more to the needs of that older generation when the real needs may be those of the next generation. The CFO may have little patience for those with limited financial experience and may not be able to provide the guidance required to all family members. The requisite tasks also become much more “treasurer” based, investment performance, dividend yields, capital markets, etc., versus operating profits. This experience may not be in their “bailiwick,” and while they may be able to provide some guidance, they actually may be somewhat lost in that environment. The need to understand taxes; estate planning and wealth management may be foreign to them and simple tasks such as paying family members’ bills or providing appropriate financial education can become a bit of a challenge.

So, if you are going to consider allowing your company CFO into your Family Office, you or an advisor should assess the overall skillset, including the interpersonal capabilities and the trust and confidence that various family members have in that individual. It is not a standard “rite of passage” that you allow your Company CFO into your Family Office. I had the honor of working with several CFOs as the NY Managing Partner of Tatum and I can tell you not all would fit in with what I envision as the CFO in a Family Office. Make sure you consider the real DNA of your CFO before making this decision. In the end, if there is a match, he or she does not need a “stinkin’ badge” to be a valuable and integral part of your Family Office.