Why this next-gen thought it urgent to set up a family office

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Some next-generation members of enterprising families, who find themselves setting up family offices for their patriarch or matriarch in their 40s, 50s or 60s, can find the process daunting.

Sometimes, next-gens just don’t know where to begin.

Sometimes the process of setting up a family office has been delayed due to the tense or difficult conversations that can entail.

Sometimes, it can be confusing whether to join a multi-family office, or set up their own, and how to integrate or separate the family business from the family office.

But those who do approach setting up a family office can find it critical to creating a roadmap for their family.

Here, Shannon Gorski, who is the daughter of Canadian businessman Gary Averbach and founded their family office, and family office advisor Gerry Meyer share their experiences and expertise on how to make the process of setting up a family office for the first time as smooth and as drama-free as possible.

Shannon Gorski, founder and managing director of the Averbach family office and managing director of the Vancouver-based Betty Averbach Foundation

How did you become interested in the idea of a family office?

“Our family and family business was going through a number of unexpected events that were creating a lot of trauma and discord in the family and creating a high level of uncertainty in the business.

I saw first-hand how one event, or a series of events, can disrupt, even potentially sever, a family business. We managed to keep the family business intact through this series of challenges, but what if, in the future, we weren’t? What then? I knew we needed a plan.

It became very clear that my family didn’t have an organized hub to manage change. I saw that what impacts the family can impact the business adversely, and vice versa.

I knew we needed to put something in place, and I was prepared to champion this. The problem was, I wasn’t sure where to begin. I needed the support of an advisor to help guide me to put a plan in place, and to get our house in order.

I knew what I wanted to accomplish, but I didn’t know about the concept of a family office. As I became aware of what a family office was, and the role it could play in encapsulating and addressing all the challenges that I was feeling, I began to realize it was the perfect vehicle to manage the business and personal challenges a family business faces.”

What has been your role within the family business?

“My father, who is in his 80th year, had been talking about stepping away from daily involvement in the business, but he hadn’t felt confident in doing so, considering the last few years’ events.

When my father first encouraged me to become active in the family business, I was unsure of what value I could bring. I had never considered going into the family business. My life’s work has been in a completely different arena. I essentially worked in the non-profit sector with a focus on community development. I had been successfully managing the Betty Averbach Foundation and have been heavily immersed in community volunteerism, sitting on several boards and committees.

We discovered the concept of family office and agreed to contract a family office advisor, Carolyn Cole. It was determined that I would champion this role and became the founder and managing director of the Averbach Family Office.

There are two aspects in our family: one is the family business, and one is the family office.

My role is to create structure in the family office, which is highly integrated into our family operations. We have a family business, Belmont Properties, but for the family business to be successful, we recognised the need for a family office, which runs separately from the family business. They are connected, but I am not actually running the business. I am not buying, selling, or managing properties.

We as a family consciously made the decision to separate the way we interact as future co-owners of this business. As future co-owners, the family office is setting us up to be successful in the family business.

Although there had been an incredible amount of time and effort and energy invested in shareholder agreements and succession documents, we recognised we needed to prepare as a family and a rising generation and create a roadmap for all family members who may or may not work in the business. That is where the role of a family office comes into play. The focus and scope of work is very different from the operational side of the family business.”

Gerry Meyer, founder and CEO, Vancouver-based Meyer Advisory Group

You have mentioned that you prefer the word “continuity” over the word “succession.” Can you explain that further?

“Succession can infer ‘replacement’ in that the need is to replace the patriarch in terms of skills, attributes, etc. That may not always be the case, as how and what was accomplished to date may not be the base for continued growth going forward.

And while it’s a great soap opera, the show Succession does not reflect the actual dynamics of the vast majority of family businesses or enterprises. ‘Continuity’ reflects the desire for the family and its wealth and legacy to continue and recognizes that the current active generation are stewards of the wealth for the subsequent and rising generation.”

How do you advise families, based on your expertise?

“My comments here are more strategic and conceptual, and based on my experience in working with families where one of the considerations is establishing a family office. Families would still need to engage the appropriate experts in those areas to assist with putting the corporate, legal, tax and funding requirements in place to establish a family office.”

What are the types of family offices next-gens need to consider?

“There are two types of family offices – a single family office (SFO) and a multi family office (MFO).

While there’s no hard and fast rule on what total asset value is needed to justify a family office, a general perspective is that families with investible assets of $100 million or more would benefit from and be able to fund a single family office.

Families wishing to have family office services that are below that threshold may want to consider contracting with an MFO (which, as the name suggests, provides family office services to multiple families).”

Why might a next-gen take on the responsibility of setting up a family office?

“There are a number of reasons for the next generation to identify and drive the need for a family office:

• The family wealth has grown beyond the founding business and includes other investments and assets (financial and non-financial).
• The complexity of tax, estate and trust, insurance and legal issues is such that no single family member can effectively manage the full portfolio.
• The next-gens feel it is time for them to have a voice in managing the family wealth.
• The next-gens realize that managing the wealth and running the business are two very different functions, requiring unique skillsets that may not exist in the family.
• The next-gens feel a need for a more formal process of developing themselves as future shareholders.
• [There may be] reluctance on the part of the parents, lack of estate planning, a parent’s belief that the next-gen are not ready (which may or may not be correct). [It may also be that] a parent’s focus [has been] on the business first, family second, especially for founding, or Gen-1, parents.”

What are your top tips for setting up a family office for the first time?

“Having a discussion around the family vision: Where do we see ourselves, individually and collectively as a family, in five, 10 or 15 years? (You’ll note I did not ask where the business will be.) What do we need to do now to commence that journey, and be successful? What might challenge that process, or hold us back?

While self-serving, I strongly recommend families engage an advisor with experience in facilitating these conversations – having an independent and impartial third party to manage this process can mitigate some of the emotion that could arise.

Start small, start simple, do the research on family offices in terms of scope, funding and resourcing. Make sure everyone is on board with the concept and direction, which may take several conversations. Allow for diversity of perspective and work from a principle of collaboration.

You want cooperation and engagement, not cooptation and compliance.”

What are some resources you recommend for further research?

“Some resources to consider:

• Family Offices in Canada: Current Trends and Applications for Multigenerational Wealth; Nicole Garton, 2020
• The Complete Family Office Handbook: A guide for affluent families and the Advisors who serve them; Kirby Rosplock, 2021
• Family Offices: The STEP Handbook for Advisers, Second Edition; Barbara Hauser, Editor, 2019.”

Responses have been lightly edited for clarity and length.

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