Building a family office team? Go for a “generalist-specialist” at the top

This is an amended version of a TFOA whitepaper on team development. The full version is available at www.tfoatx.com

When you think about starting a family office or implementing a leadership change at your existing family office, the people you hire will determine to a large extent in what direction you go, and how successful you are. 

Lack of direction can impact the most talented and competent teams, and result in a sub-optimal outcome for everyone. And it’s easy to confuse activity for results when you lack key organizational objectives which determine your priorities. In such situations, mere survival is probably the most you can expect from your team.  

Preventing a sub-optimal outcome requires an understanding of your organization’s purpose and the team you’ve built to serve that purpose. The tools you have at your disposal are your existing relationships, your financial resources, and the lens you use to perceive the world. These tools will lead you down a path that may or may not be ideal for what you ultimately want your family office to achieve.  

When it comes to structuring your family office, broadly speaking, there are three common path dependencies that family offices typically follow: 

Trusted Informal Relationships: With any major decision, our close friends and family are often the first people we turn to for help. The decisions that surround the formation of a family office are no exception. Frequently, the first hire at a de novo family office is a “trusted-informal relationship”. Examples of such relationships include college roommates, in-laws, old friends,  and trusted former co-workers. These relationships are based on trust and have often been built over the course of a lifetime. They are precious and often deeply treasured. But are they truly the best people to build or run your family office? 

Trusted Formal Relationships: This category typically includes your trusted CPA, Trust & Estate attorney, or the company controller from your operating business, as an example, that has faithfully served you for many years in a professional capacity. These are people that have earned your professional trust, although perhaps not the same level of intimacy as those in the prior category. 

Professional Management: Most often, professional family office managers come from the world of wealth management, private banking, and private equity. In addition to a deep understanding of the investment landscape and financial world, the networks, and relationships these professionals bring are often their greatest asset.  

These three paths describe the most common genesis points for any family office; and they typically predict the set of outcomes, strengths, and weaknesses that will define your family office, determine the road you are on, and the direction you are heading. 

Managing Path Dependencies: The Generalist-Specialist Approach

As you consider how to build out or enhance your family office leadership team, consider the path dependencies that shape your current team’s capabilities. 

Instead of simply identifying what kind of experts you need to hire, consider cross-functional “generalist-specialists” that will both contribute to the current team and evolve with the myriad needs and desires of your organization going forward. This not only allows you to retain top talent for longer, but it is also often more cost-effective and organizationally efficient over time. 

The road is long, and great talent is hard to find, but identifying highly adaptive leaders that can grow alongside you is well worth the effort. 

Marc J. Sharpeis the founder and Chairman of TFOA, an organization formed in 2007 to provide a forum for education and networking and to serve as a resource for single-family office principals and professionals to share ideas and best practices, pool buying power, leverage talent and conduct due diligence: www.tfoatx.com

Seth Morton, who contributed to this article, has served family offices in areas of investment diligence, execution, and management; governance; research; communications; and multi-generational, sustainable legacy planning.