Like in the movie, family offices often get the same questions over and over

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Happy Groundhog Day! In the movie of the same name, TV weatherman Phil Connors (played by Bill Murray) is somehow forced to relive everything that happens on February 2.

Some family office executives say this reminds them of how they often get asked the same questions again and again by high- and ultra-high net worth clients.

“The questions we get from families to families are definitely similar,” says Richa Arora, senior family enterprise advisor at KPMG Canada in Toronto.

Not that she minds. The common questions get repeated a lot because it may be the first time that family office client has asked.

Chris Clarke, chief executive officer of First Affiliated Family Office Group in Collingwood, Ont., says the common questions fall into two main categories — questions from prospective clients and those from existing ones.

“For prospective clients, the overall theme is the same. They want to know how a family office differs from a traditional wealth management firm, and if a family office is the right choice for them,” she says.

Arora says she gets similar questions. “One that we get a lot is: What have other families done in our situation? They want to know why families in similar circumstances as theirs decided to set up a family office, how it’s working out and whether it would be right for their own family,” she says.

Clarke says the answers depend on each family’s circumstances, but the general answer is to see if the family and the office are the right fit.

“The family office team will work closely with the family, often in touch on a monthly if not weekly basis, so they have to really like spending time with each other. The family themselves will need to decide if the services offered provide sufficient value for the fees charged, too,” she says.

“Families most often seek out a family office firm when they want to centralize their financial affairs to better coordinate their work with various advisors who otherwise work in disconnected silos. It’s like having a personal CFO,” she adds.

“Another big question that comes up is: Is there a secret sauce?” Arora says.

No, they’re not looking for tips on how to cook groundhog stew; families often do ask, though, if family offices have special tips based on how they have helped other families.

“A big question that comes up often is, ‘How are we doing? How are our returns compared to the market in the last year,’” says Patricia Saputo, chief operating officer at Placements Italcan Inc., a Montreal-based family office firm.

The answer: It depends. “It’s whether the family’s particular needs were met. It matters less how the returns compare to the market, more on whether the objectives the family set at the beginning of the year were reached,” Saputo explains.

“If they met their objectives, they did well. If they’re hoping for higher returns, then we’ll have a discussion about whether they’re willing to take on the higher risk to attain higher returns,” Saputo adds.

It’s human nature for people to ask about how their investments stack up because “people like to compare themselves to others,” Saputo notes.

“Other questions we get a lot are about whatever is out there that’s new and should we be investing in it,” Saputo says.

“Right now, it’s bitcoin, blockchain, and companies and industries that use blockchain. Before that it was the cannabis industry.” No matter how often such questions are asked, they are reasonable because it means that high-net-worth families want to keep up with the latest developments in the global economy, Saputo says.

The best general answers to such questions are to go through the risks as well as the rewards that can accompany investing in new industries and technologies. Clients can invest in such sectors with money they are not afraid to risk; they can also pick companies that are good at using technology rather than those that make the new products.

“Bluetooth is a good example. Rather than investing in companies that developed Bluetooth, you might consider investing in the companies whose products use it well,” Saputo says.

Advisors are asked a lot these days about ESG — environmental, social and governance factors in the companies they own or invest in. The questions are increasing and becoming more detailed as companies of all sizes strive to meet environmental, climate change and hiring diversity targets and as new generations become more involved in their own families’ businesses.

Advisors also say that always at the top of the family office FAQ hit parade are questions about how to pass on family wealth. Wealthy families are watching the hit TV series Succession just like everyone else; they have an interest in running their affairs in a more orderly and pleasant way than the fictional Roy dynasty does on screen.

“People want to be stewards of wealth. They want to know about issues such as, ‘When is it appropriate to tell younger family members about our net worth and how do we have this conversation?’” Arora says.

Clarke agrees. “Families ask, ‘How do we successfully transition wealth to the next generation, without ruining either it or them?’” she says.

Unlike asking whether the groundhog sees its shadow, the answer to whether there is a good or bad way to pass on wealth is more than a Yes or No.

Answers can vary; for example, some families might set up an intergenerational investment portfolio, others put their wealth into real estate and others still opt to go big into philanthropy.

“The goal in any case is to empower the next generation as they become involved in the decision making, so the next generation develops the skills to use the family resources wisely and thrive,” Clarke says.

“To us, asking about the next generation is a signal that our clients are feeling on top of their financial management,” she adds. Then it can be the next generation’s turn to ask the same questions all over again.

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