Nearly two decades ago when Tom McCullough would tell people about his Toronto-based firm, Northwood Family Office, he was often met with perplexed expressions. The term “family office” wasn’t particularly well known, even among ultra-wealthy Canadians.
“People asked me if I was in birth control and family counselling,” laughs McCullough, who is Northwood’s chairman and chief executive officer.
Today, awareness is increasing as Canada’s burgeoning family-office industry grows alongside its more established brethren in the United States and Europe. As wealth balloons worldwide, and managing that wealth becomes increasingly complex, more multi-millionaires and billionaires are looking for the holistic and ultra-personalized services that family offices provide.
An entrepreneur who just sold his business for $70 million after years of fundraising and toil? A company founder looking to transfer a large, established business to adult children – in a way that doesn’t drive a wedge between siblings? A shell-shocked lottery winner in Moose Jaw, Sask., who quickly discovers that smart money management is a full-time job?
There’s a family office for that.
Today’s firms offer everything from investment management and tax strategy to business succession planning, philanthropic advice and even cyber-security consultation.
The services offered by family offices may be as unique as the elite clients they serve, but all firms fall into two categories: single family and multi-family.
Single-family firms are exactly what they sound like. They serve only one family, typically the world’s wealthiest with at least $100 million in investable assets or a net worth of $1 billion, the amount needed to justify keeping full-time staff on the payroll. Conversely, multi-family offices serve a number of unconnected families who have amassed at least $10 million each (at least, that’s the cut-off to get McCullough’s attention) looking to take advantage of economies of scale. Call them the mid-tier, ultra-high-net-worth set.
No conflicts of interest allowed
Certain firms serve a handful of these families. Others operate on behalf of a hundred-plus clients.
Regardless of these differences, all must feature one fundamental characteristic to be considered a true family office, says Bill Healy, chief investment and experience officer for Portfolio HiWay Inc., a digital investment platform in Richmond Hill, Ont.: There must be no working on commission of any kind, no kickbacks, no conflicts of interest.
“You have to be entirely independent, objective and unbiased,” says Healy, who is based in Montreal and has worked in the ultra-wealthy space for years. “You have to put yourself on the client’s side of the table. You’re making decisions just like you would for your own money.”
Money is an amplifier of all things, good and bad.Tom McCullough, Northwood Family Office
For that reason, true family offices may create comprehensive investment and money management plans but do not sell products. Some offices charge an annual flat fee as a retainer and all services are rolled in. Other firms bill by the hour.
“Just because you have wealth does not mean you are a family office client, though,” explains Marvin Schmidt, founder and first vice president at the Schmidt Investment Group at CIBC Wood Gundy in Edmonton. In some cases, a potential client’s situation isn’t complex enough to warrant the comprehensive services of a family office. At least not yet. They might grow into clients as their needs morph and change, however.
For example, those with new-found wealth may turn down offers for security consulting or reputational risk management – until an employee is caught siphoning money or an unflattering article about the family runs in the paper.
“All of a sudden these things start bubbling up, and three years later they’re a family office client,” he says.
Schmidt calls himself a “quarterback” for his clients and says he must be ready to address any question quickly. He refers to his company’s “48-hour rule” and prides himself on answering queries or connecting clients with the right professionals within two days.
Going the extra mile
His clients aren’t shy about reaching out, he says, and sometimes requests seem to border on scope creep. In one recent case, he was asked to find a doctor for the elderly in Edmonton for a client’s 87-year-old mother who was moving from B.C. Within 36 hours, his firm found the client’s parent an appointment with a chief gerontologist.
“A family office needs to be very, very well connected,” Schmidt says.
It’s important for family offices to find a balance between spreading themselves too thin and giving ultra-wealthy clients the services they’re looking for, Healy says. Is it worth advising a family about caterers for a daughter’s extravagant wedding when the main business is about handling financials?
“Yes, this might be appreciated by some people, but if the investments start suffering, that’s not going to help,” he says.
McCullough also has stories of going above and beyond for clients, whether it’s securing leases for private jets or purchasing yachts and vacation homes. His firm has also helped hire security staff. But generally, the most complex consultations and tasks revolve around family dynamics.
In one case, he became the intermediary between parents and adult children when discussing financial matters. Conflicts about money kept getting in the way, he says.
“Money is an amplifier of all things, good and bad,” he says. Now all the money talk (and any accompanied anguish) stops with him. Family holidays are peaceful again.
Ultimately, a family office is there to give expert advice based on a big-picture view of the client’s finances, business goals and relationships. But maybe its biggest draw is the most obvious: Busy people want the ability to make one phone call to solve complications that come with extreme wealth.
“More than money, more than return or anything, they want time,” says Schmidt. “Time is the most precious commodity.”