Key Takeaways
- • Tom McCullough, who recently stepped down as CEO of Northwood Family Office (now part of Corient Private Wealth LLC), said in a CFA Institute webinar that "everybody claims to be a family office" as wealth managers adopt the model.
- • Advisors are increasingly acting as integrators of multiple providers, as wealth management becomes more commoditized, with ultra-high-net-worth families working with as many as 30 providers across public and private markets and hedge funds, according to Michael Zeuner of We Family Offices.
- • Helena Eaton of Corient said many family offices allocate 20 to 30 per cent of a client family's investment portfolio to private assets, but advisors must first understand all family members' goals and the family's total illiquidity exposure.
- • Advisors should coordinate a broader ecosystem of providers, including accountants, insurers, trust and estate lawyers, and private aviation crews, across investment, tax, governance and wealth-transfer decisions.
Summary
Tom McCullough, who founded Northwood Family Office more than 20 years ago and recently stepped down as its chief executive, said the family office label was once little understood. Speaking on a webinar hosted by the CFA Institute, he said that "now, everybody claims to be a family office." McCullough is now a partner at Corient Private Wealth LLC, which acquired Northwood, and heads thought leadership and strategy at the UHNW Institute.
According to the discussion, the key distinction between a family office and an advisory practice serving high-net-worth families lies in complexity and time horizon, since family offices deal with multiple individuals across generations with differing needs, objectives, values and levels of involvement. As wealth management becomes more commoditized, many advisors are adopting the family office playbook and taking on a coordinating role across professionals.
Michael Zeuner, managing partner at We Family Offices in Coral Gables, Fla., described the family office advisor as the integrator of investment managers. Ultra-high-net-worth families may work with around 30 providers spanning public and private markets and hedge funds, he said, raising the question of who makes sense of the overall portfolio. The role extends beyond investments to accountants, insurers, trust and estate lawyers and household staff, and advisors should coordinate these providers across investment, tax, governance and wealth-transfer decisions.
McCullough illustrated the risk of fragmented oversight with a family holding $200 million in total wealth: $80 million in an operating business, $30 million in real estate and $90 million in financial investments. An adviser looking only at the financial portion could build a heavily private-equity and illiquid portfolio without recognizing that the family's overall wealth is already largely illiquid.
Helena Eaton, head of investment advisory at Corient, said advisors must understand the goals of all family members before allocating to illiquid assets. She said many family offices put 20 to 30 per cent of a client's investment portfolio into private assets, but that the appropriate level depends on circumstances. A family with a founder still active in the business would likely avoid further illiquidity, while former owners who have exited may favour large private equity allocations, including co-investments.
McCullough said the key to effective advice is helping families clarify their needs, recommending questions such as what the best three things they did for themselves and their family in the past 12 months were, and how they want to answer that question 12 months from now.
According to the discussion, the key distinction between a family office and an advisory practice serving high-net-worth families lies in complexity and time horizon, since family offices deal with multiple individuals across generations with differing needs, objectives, values and levels of involvement. As wealth management becomes more commoditized, many advisors are adopting the family office playbook and taking on a coordinating role across professionals.
Michael Zeuner, managing partner at We Family Offices in Coral Gables, Fla., described the family office advisor as the integrator of investment managers. Ultra-high-net-worth families may work with around 30 providers spanning public and private markets and hedge funds, he said, raising the question of who makes sense of the overall portfolio. The role extends beyond investments to accountants, insurers, trust and estate lawyers and household staff, and advisors should coordinate these providers across investment, tax, governance and wealth-transfer decisions.
McCullough illustrated the risk of fragmented oversight with a family holding $200 million in total wealth: $80 million in an operating business, $30 million in real estate and $90 million in financial investments. An adviser looking only at the financial portion could build a heavily private-equity and illiquid portfolio without recognizing that the family's overall wealth is already largely illiquid.
Helena Eaton, head of investment advisory at Corient, said advisors must understand the goals of all family members before allocating to illiquid assets. She said many family offices put 20 to 30 per cent of a client's investment portfolio into private assets, but that the appropriate level depends on circumstances. A family with a founder still active in the business would likely avoid further illiquidity, while former owners who have exited may favour large private equity allocations, including co-investments.
McCullough said the key to effective advice is helping families clarify their needs, recommending questions such as what the best three things they did for themselves and their family in the past 12 months were, and how they want to answer that question 12 months from now.
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