Younger generations of family offices are looking to use their money for more good in the world. Also known as impact investing, this new generation of wealth is functioning differently than their parents and even grandparents before them: They’re more mindful about how their investments impact the environment, small businesses and even future generations. They’re looking to not only fund businesses and philanthropic ventures, but to find the value of investing their time and emotional energy in addition to the actual financial funding of a project.
The following should be of particular interest to banks:
1. Changing Investment Strategies
2. Strategic Priorities Are Evolving
3. Innovation Is Being Embraced
It’s time to get on board because the most prominent Single Family Offices have become serious players in the investment arena, capable of competing with global banks and private-equity firms on significant transactions.
In December, a half-dozen of some of the richest families in the U.S., from agriculture to beverages, gathered in a conference room on the 10th floor of an office building in Miami.
This was not some cabal to rule the world. Instead, for an hour over coffee and bagels they listened to a dealmaker for billionaire brothers J.B. and Tony Pritzker talk about how to buy companies.
Wealthy families are embracing their inner Warren Buffett, albeit on a smaller scale. They used to hand most of their assets to managers to invest. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees.
When it comes to nailing a pitch with a Family Office, you have to be both confident and calm. It may feel like you need to be perfect, but progress is a more achievable goal. You’ll want to have the entire interaction feel natural, plus allow the Family Office to feel in control the entire time, where they’re the decision-makers and you’re simply guiding them through the process.
With this in mind, here are the key steps to attracting a Family Office:
Step #1: Send a thoughtful connection email
Cold emails to a potential Family Office can still work, but what’s better is getting an introduction from a mutual colleague. Then, you can take a more human approach, mentioning your mutual connection and a time to talk. Note: This is not the moment to make a hard sell. Your only goal is to get a phone or in-person meeting where you can lay out your offering.
Step #2: Do your research before the meeting
You’ve probably already done some of your research before the initial email, but once you have the actual meeting, you’ll want to drill down to what this Family Office is about: Where have they made their fortunes, what business principles they practice, and what are their core values?
To best prepare for questions, make sure you understand your competition and what you are doing in relation to others in your field. It’s crucial to convey what makes your opportunity unique and valuable in a way that’s relevant to their background and interests. In addition, knowing their personal and professional belief systems and pain points will help you better pitch your potential partnership.
Step #3: Be unique
Family Offices receive exorbitant deal flow, so try to stand out in a way that really connects with the specific type of investor you’re trying to attract. Find methods to stay ahead of the trends and present opportunities in a new light.
Your ability to summarize your position in the marketplace, unique value and benefits as to why someone should work with you into a single sentence is an indicator of your value and intention in your space.
Step #4: Build trust before, during and after the meeting
If the Family Office wants to be an investor, then walk them through the steps of that option. If they want to be more involved and have a seat on the board, illustrate what that would look like through examples and data.
Be thorough and transparent with each road, and be as helpful as you can. Once trust is established, solidify your relationship with a solid private placement memorandum (PPM) that discloses the legal liabilities, explains the risk of losses and details the investment opportunity. These disclosure documents will show you’re serious and have nothing to hide.
Step #5: Remember to keep confident and cool
While it can feel like there’s a lot on the line in your meeting with a Family Office, thinking that way will not guarantee you’ll close with them; in fact, it can make you feel nervous and even appear desperate, which can transfer onto the Family Office representative you’re meeting with. Nothing kills a potential business relationship more than sensing desperation in the air.
Preparing a clear pitch deck can keep you focused and on target. The pitch deck should include visual elements such as marketing slides, financial predictions and elaboration on who makes up your team. Having visual cues will help organize your presentation and keep you on target.
Step #6: After the meeting, follow up with the appropriate next steps
Stay in the driver’s seat with this potential transaction by being proactive. If you weren’t able to close at the meeting or at least get on track to closing, consider the objections in your way and how you can overcome them.
This may include providing more data, being available by phone for questions at certain hours and introductions to experts on your team. Always be willing and available to travel, with face-to-face meetings acting as a crucial element of high-level transactions. There’s a good deal of back and forth in closing a deal, which takes persistence, so don’t get frustrated if the timeline goes slower than anticipated.
Building successful relationships with Family Offices takes time and persistence. Remain open to different approaches and don’t get discouraged if you don’t get an immediate response. The right relationship will come from your efforts, as long as you follow these guidelines.
Today’s family offices are looking to invest in opportunities they believe in. This is happening more often than with previous generations of wealthy families who focused more on the profitability of their investments. Some modern family offices are using a different set of criteria than their parents and grandparents, investing in projects that are of personal concern to them. And it’s not always clear cut how they’re making those investment decisions.
Family offices are seeking direct investment opportunities that offer better returns than the public market and, therefore, investing in startup companies through longer-term private equity deals.
Spurred by continued wealth creation, globalization of businesses and investments and continued concentration of wealth, family offices have continued to proliferate worldwide. In 2017, Handler Thayer attorneys attended and conducted presentations at thirty tax, estate, family office and wealth management conferences in addition to conferences and lectures sponsored by professional associations, private companies and television and radio programs. Handler Thayer also hosted its own Third Annual Family Office Private Capital Forum on June 21, 2017 that examined how family offices approach the world of private capital investing. Based on these educational conferences, industry research, direct client experience and other observations, here are the firm’s predictions of top trends for family offices in 2018:
What do family offices do? Who has them? How are they regulated? What’s next for family offices?
Single-family offices (SFOs), the ultra-private organizations that help the world’s wealthiest families oversee their financial affairs, are often viewed as leading indicators for the broader HNW and UHNW markets. Reportedly more UHNW Investors are looking to make direct and alternative investments.
To give you a practical, real life example of what a family office is and why they matter, you need to look no further than Steve Jobs, the American founder of Apple Computer and Pixar, who created a “first generation family office” based on his genius, drive, and creativity.
When Steve Jobs died in 2011 due to complications from a relapse of his previously treated islet-cell neuroendocrine pancreatic cancer, his wife, Laurene Powell Jobs, inherited $17.6 billion from the Stephen P. Jobs Trust to become the fourth-richest woman in the world and the 49th wealthiest person on the 2016 Forbes annual list of world billionaires.
Jony Ivy’s short seven minute eulogy in which he describes the “bold, crazy and magnificent” ideas that Steve Jobs inspired embodies the vision and mission that we hold dear at our firm. You can view the eulogy by clicking here.