Family Capital: What’s the greatest challenge for single-family offices?
Angelo Robles: I see you start with the easy ones! There are many challenges. The most consistent issue I see is lack of institutional rigour, leadership and, most importantly, a succession plan. Most single-family offices come and go rather quickly – rarely continuing to the next generation. As my friends Dennis Jaffe and Jim Grubman say, there are three core stakeholders in a family office: the elders, the next generation and the non-family executives. Generally, there is poor alignment between the next generation, the family office executives and principals.
There are many other factors relative to all of this like lack of career track for many young professionals within a family office. Also, many family offices are overly tactical (acting on the immediate wishes of the founder) and don’t transition to becoming strategic. You can’t be long term if you’re not strategic.
Family Capital: Why do the wealthiest families need a family office?
Angelo Robles: A family office has the potential to provide the ultimate in privacy, control and customization. To be conflict free and avail themselves to the family 24/7 in an age when public institutions are questioned in that their loyalties must lie with their shareholders, the family office can be the ultimate choice for the wealth-creating family. Proper governance, stewardship, structures and continuing family commitment to the enterprise – effectively a new family business – a single family office, can help families meet challenges and tough times.
Family Capital: What services should families in-source in a family office and what to outsource?
Angelo Robles: This comes down to the goals of the family and the time and resources they’re willing to put into the office.
The services that a properly structured and staffed family office can provide are near endless. However, it might not be prudent to put everything in the family office. Families need to ask themselves what is the top goal, or maybe the top three goals. Then resources can be constructed around these goals. This takes the right leadership and the ability to also create the right culture. And this comes down to the quality of the people. People are the most important aspect in a family office.
Family Capital: So the best possible talent?
Angelo Robles: It’s more complicated than that. It’s not all about technical capability. Sometimes what we refer to as “star players” don’t fit well in a small family office environment. Leaders inspire and serve. They foster a culture of service and mentoring of the talent availed to them. Sometimes the best talent in a family office are people that are certainly technically capable, but are also excellent additions to the culture of the family office. This is what Adam Grant in his great book “Give and Take” defines as givers. That is talent dedicated to the success of the team and goals of that team.
Star players, meaning masters of a technical skill (often with big egos and not team oriented) may be outsourced as needed. Other services not essential to the family may be better served by outsourcing to an organization in which that specific service is everything to them. The family office can still monitor and benchmark these outsourced services.
I can’t emphasize enough the importance of clarity of the goals. The family office leader must check in frequently with the family, there may be a disconnect on what’s important to the family, or how they define great success and excellence on a goal. We say communicate, communicate, communicate.
Family Capital: How will technology and AI and machine learning impact single-family offices?
Angelo Robles: Great question. In time it will have a significant impact. Basic technologies are now available to assist a family office in communication, project management and productivity. However few family offices even know about these technologies, let alone use them to improve effectiveness and efficiencies.
Aggregation and reporting technologies can help the families make better risk management and investment decisions, however very few family offices use them.
AI, machine learning and even virtual reality are rarely used by family offices; it’s a bit early, so I’ll give them a pass on this one, for now. But some family offices with an eye towards the future are very aware that AI and these other technologies will dramatically change everything – investing, employment, you name it.
This then trickles down to issues with the ‘haves and have-nots’. Families and their family offices should be aware of all this, looking to invest as applicable to certain technologies and have the resources to understand them.
Family Capital: What do you mean by resources?
Angelo Robles: People. This relates a bit to what I mentioned earlier about family offices not being strategic. Often the family office would benefit from diversity in many ways. One being age diversity of the employees, age brings experience and that is wonderful and calming in times of stress, however, youth brings creativity, an open-minded approach, and more comfort with technology and AI. Both can benefit each other and contribute to the team and the goals.
Family Capital: What investment opportunities are most interesting to your members
Angelo Robles: Nice change of direction! I’ve always said that family offices are in the stay rich business. Concentration can bring great riches, but such a strategy may not be best for preserving wealth.
That said, I don’t think you want boring answers! One exciting topic that we do see increasing investment interest in is what we just discussed – AI, machine learning and VR. Also, and no surprise here, cryptocurrencies and blockchain.
Of course, families and their family offices are still active investors in private companies. In general, we find US families and their family offices to be more conservative than our international family members. The latter is much more likely to take a global investment approach.
About Angelo Robles
Angelo Robles is the founder and CEO of the Greenwich, Connecticut, based Family Office Association, an exclusive global membership organization that delivers proprietary thought leadership, research, best practices and global programming to multiple generations of exceptionally wealthy families and the professionals who run their single family offices (SFOs).
Angelo is also the founder of Effective Family Office a think tank and Masterclass Program Series for single-family offices and the analytical data-driven firm Family Office Statistics. He’s the author of the book, “Effective Family Office: Best Practices and Beyond,” which ran for several weeks as the number one book in Office Management on Amazon.com. Click here to purchase the book. Angelo is the host of the Effective Family Office Podcast on iTunes. Angelo personally advises a small number of global families and SFO executives on achieving maximum effectiveness.
Angelo’s expertise has been sought by media outlets such as Bloomberg Radio and Television, the Wall Street Journal, and Institutional Investor, among others.
Angelo continues to lead in the SFO community with creative proprietary thinking on the future of the family office including structures, organization, leadership, technology, AI, investing and philanthropy.
Connect Angelo for more information: 203-570-2898
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