Wealth Effect: Identifying Unique Leaders to Run a Family Office

December 9, 2016 – A traditional family office is a business run by, and for, a single family. Its sole function is to centralize the management of a significant family fortune. Typically, these organizations employ staff to manage investments, taxes, philanthropic activities, trusts, and legal matters. The purpose of a family office is to invest the family’s money, manage its assets, and disburse payments to family members as required, effectively transferring established wealth across generations.

With millions and sometimes billions of dollars at stake and multiple generations involved, finding just the right leader to oversee a family office can be challenging. Trust and culture fit are at the top of the specification sheet of any recruiter tasked with searching for a family office head.

Just a handful of executive recruiters serve the family office environment. Linda Mack, founder and president of Chicago-based Mack International, is one. With an expertise in asset and wealth management, she and her colleagues have helped to staff some of the more prominent family offices over the last 15 years. With that in mind, Mack International was inducted into the inaugural ‘Hunt Scanlon Financial Fifty‘ ranking earlier this year, a list of top financial services search specialists. In the following interview, she discusses the nuances of recruiting in this highly specialized sector.

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Linda, provide us with a general overview of your firm and your wealth management and family office recruiting expertise. 

We are a small, highly specialized boutique firm comprised of only a few people and we all work collaboratively and approach our search work as one team. Family office, wealth management and the investment management markets comprise our niche. On the buy side, we work with families, their family offices and family business enterprises, family investment companies and family foundations. But the common thread is it’s all family. On the advisor side we work with the firms that serve the ultra high net worth family office market. These include everything from the large broker dealers to private banks,  boutique wealth management firms, and niche investment consulting and asset managers, trust tax estate specialists, and so forth. With all of these constituencies in play, culture fit and trust are paramount to what we do and how we approach our assignments. And our team structure is important and serves this market well. When it comes to searches on the family office side, we will put a team of two to three very experienced people on those assignments. They will typically have at least 15 to 20 years of experience specializing in the minutiae of family office work. So that’s how we operate and everyone here who works on family office assignments alsoworks on wealth and investment management searches. We also have several independent consultants who work with us and they typically come in when we are engaged in highly specialized assignments. For example, we have a colleague in New York who is specialized in the investment management. She will work with us on assignments for CIOs and other investment-oriented types of assignments.

What are the nuances in dealing with a family office environment and what is unique about it from the recruiter-client relationship?

First and foremost, it is a very personal relationship when you are working with a family. When we conduct a search, we start with a 360 degree assessment process where we interface with all of the people with whom the candidate will need to work or collaborate so that person will be instantly effective when they begin in the role. This almost always involve the principals of the family and, in some cases multiple generations or multiple branches of families, their staffs and advisors. So this is unlike searching for any other client; it is a highly personal process where we communicate very closely with families. And of course when you layer in private discussions about their wealth, it can and does become very personal, very quickly. But from my perspective as a recruiter what is most distinct about a family office is the type of professional they seek. Each family has unique needs, a unique culture, and like any family a family office is made up of many individuals and they span in some cases multiple generations. So, from our perspective and before we can even begin to profile what the family office leader will look like, we step back and look at things like family dynamics and, most importantly, what the family is trying to accomplish over the next 15 to 20 years and then we make certain that everybody is in sync and aligned around that vision and the objectives set forth. This, then, enables us to profile the position and to figure out who best will fit.

Talk more about culture fit and family offices.

Working with families is loaded with nuance. Every family as I say is unique. So we typically open with discussions around family and we look at long-term horizons. It is a very personal conversation which touches on business objectives certainly, but the discussion about family objectives figure more prominently at least in the beginning. I would say culture fit is just so crucial. It is important in any search for a family that the culture is right in the bullseye or it won’t work. So, philosophies, values, communication style, decision making — these all have to be spot on. Again, because we approach this as a 360 degree assessment process at the beginning, we are digging very deeply into family culture. So culture fit is extraordinarily important. As we always say, getting someone who has the requisite skills and experience to perform the job is just the first cut in the search work we do. Ninety five percent of every search we conduct is about culture fit. And that is for the incoming family office leader as well. So it works both ways. In terms of potential candidates, the market is surprisingly limited and it can be a challenge to identify qualified individuals who can work in what is a highly specialized environment and culture for what can sometimes be at least a generation in time. So what’s that, 20 years. Benchmarking positions is very challenging as well because title nomenclature can be very misleading in the family office world.

So what type of talent are you typically recruiting into a family office situation?

There is an old saying in the business that when you have seen one family office, you’ve seen one family office. Each one is that unique — they are like snowflakes. Typically, for the head of family office we are looking for the ‘expert generalist.’ This is the person who needs to possess an understanding of all of the functional areas of wealth management and the family on a horizontal basis but who also maintains a keen knowledge across the whole continuum of finance, accounting, tax, estate planning, investments, philanthropy and so forth. It’s complicated. The family requires that the professional they hire to manage the family office understands what the family’s requirements are, how they are staffed, and what their objectives are. That person also has to have tremendous peripheral vision because they need to understand that when something happens 180 degrees to the right there might be three things that will be effected 180 degrees to the left. Family office leaders need to be very smart and highly resourceful. They can’t anticipate everything that will come up in the family office world and they might not have all the answers, but they should know all of the questions to ask and they should have the network and resources to be able to tap into to get the information that the family needs to make a good decision. So that is the classic head of office or what we call the ‘expert generalist.’ They are also responsible for coordinating among and between the external advisors and the internal staff, making sure nothing falls through the cracks between all of the functional areas. When we recruit CIOs or CFOs for a family office, we are looking for all of the technical skills and competencies so they are able to perform the job at hand. But even in these positions, it’s extremely important to get that culture fit right. In these instances we might be getting into investment philosophy or even compensation philosophies. That’s where culture fit comes into play in big ways.

Do the tenures and expectations differ from that of more traditional senior level searches?

As I touched on earlier we are typically looking for someone who can take on a 15 to 20 year assignment. And when it’s for that long, it becomes a very personal relationship. After all, family office leaders will be with one family for what can be at least an entire generation. When we are doing search work for an institution, certainly it’s a personal relationship between us and their team and between the institution and the leader they ultimately choose, but it’s still an institution. When working with a family, it’s just so much more of a private, personal relationship, and it’s a confidential family relationship. I think that’s what sets this apart so much. So, to that end, we help families define performance expectations and metrics to define and evaluate what success might look like and that becomes something unique to each family given the cultural differences that exist. So, yes, the tenures tend to be longer as opposed to a traditional assignment with a senior-level professional being recruited into a corporate position and we have to plan accordingly for that. This is why the identification and vetting process is so critical. When you couple that with what is already a narrow field of candidates who are the best qualified for these types of head of family office positions, it truly requires a skilled recruiter to bring all of this together.

Contributed by Scott A. Scanlon, Editor-in-Chief and Christopher W. Hunt, Publisher — Hunt Scanlon Media

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