Family Offices: Fact vs. Fiction

It is surprising how often family offices and the ultra-wealthy are misrepresented in the media and how these misconceptions can lead to a negative view of the industry overall.

As part of my work with larger single family offices — our team runs a family office community with 77,000 global members, 2,000+ of which are single family offices — I recently traveled to London to discuss co-investment opportunities with a $2B and a $5B+ family, and while in town I recorded a BBC World News TV interview on $1B+ families and their single family offices.  Much of the interview focused on why these families are not spending more of their money to help the economy, the perceptions of the ultra-wealthy, and what it is like to work with them every day.

Below are some of the most common misperceptions:

These Families Didn’t Fall Into Their Money

None of the families that I have met to date have come into wealth through pure good fortune, such as winning the lottery, or finding gold on their horse ranch, etc. Instead, almost all of them have all started and grown successful businesses and worked long hours over a long period of time.

These families are largely savvy investors in their own right, they have earned their wealth through navigating their industry and often leading it.  This means that investment bankers and private equity funds approaching them should learn about where they made their wealth, how, and think of creative ways to work together instead of just pitching deals to these wealthy families.  Many times families can be a source of deal flow, domain expertise, and capital over a given period of time.

Secretive But Not Hiding

While family offices and $1B+ families are seen sometimes as secretive, hard-to-access, and under-the-radar, they are everywhere. They are behind the charities we hear about, backing the venture capital funds, owning the sports teams we cheer for, and refining the oil going into our cars. They are omnipresent yet secretive at the same time.

Many family offices are secretive because of a desire for the wealthy family to live a semblance of a normal life, without the scrutiny of journalists commenting on their every vacation or business stake. Also, the family office industry is so new that just now many organizations are starting to self-identify as a single family office instead of a holding company or loose team of professionals stewarding the wealth of an ultra-wealthy family.

As single family offices grow in number and maturity they should become less secretive and a segment of them will employ public relations consultants and team members to help grow their equity interests connected to the family office and increase deal flow.

Working with Large Family Offices

As I explained in a recent interview I have found these large family offices to be highly professional and respectful of time. While they are very busy, they do take time to identify high-quality partners and products – prioritizing recommendations from their peers as high quality resources. While these families have excess wealth, if you can provide genuine insight on your area of niche expertise, you will be seen as valuable for the unique knowledge-currency you posses.

Don’t Believe the Gossip Headlines

Most newspaper headlines on the ultra-wealthy focus on wasted money, crashed Ferrari’s, family disputes, or other negative aspects of being very wealthy. There are many family disputes, but what goes on with these families is far from what the media portrays and is not consistently negative. Some may disagree, and this is as political as I ever get, but I believe as a society we are playing the game of capitalism and with the exception of a few corrupt politically connected billionaires, the rest of these individuals are winners of this global game that we play. They should be studied, learned from, respected, and seen as such.