Family Office Excellence: Why do some Family Offices kick A and others get the A

Introduction:

Australian wealth is often attributed to its rich natural resources, but this overlooks a key asset: our entrepreneurial spirit. Australian entrepreneurs have quietly built empires, their acumen rivalling global counterparts. In today’s accelerated world, the essence of wealth-building lies in harnessing the proper knowledge, connections, and deals.

The Evolution of Wealth:

I’ve had the unique opportunity to witness the ascent of a new entrepreneurial class adept in prudent capital allocation and team building. Modern wealth creation transcends traditional paradigms, necessitating a fresh mindset and access to mentors with battle-tested wisdom.

The elite in wealth have consistently demonstrated vision and execution. Yet, after achieving success, many opt to diversify and safeguard their wealth — a natural progression from risk-taking to risk mitigation. But the real question is, can these entrepreneurs leverage each other’s strengths for mutual growth?

The Right Team for Multiplying Wealth:

‘Family Office’ traditionally conjured up images of collective investment and governance. The efficacy of such arrangements could be better. In my experience, poor choices to hire a head of Family Offices have been based on cognitive biases. Conversely, success favours those family offices that build adept, informed teams capable of navigating the complexities of modern investment landscapes. Would you hire an Accountant or Lawyer to head up a Family Office, or what knowledge do you think gives you an edge?

The Unspoken Truth:

Accurate advisory requires knowledge. This is too often mistakenly assumed through experience. Have you ever heard of ‘Ground Hog Day’? Worst still is surrounding yourself with those who know wealth management in theory. To truly thrive, you need advisors who have firsthand experience in wealth creation and understand the nuances of today’s tools and tactics.

The New Investment Philosophy:

Look Beyond EBITDA: Success isn’t just about current profits and potential growth and innovation.

Strategic Capital Allocation: Savvy investors secure funding pre-emptively and invest with discernment.

Quality Over Quantity: Investment success comes from knowledge and strategic selection rather than the volume of bets.

Redefine Diversification: Genuine diversification means new approaches, not just spreading investments thinly.

Revitalise Established Businesses: Injecting fresh perspectives into mature businesses is critical to enduring success.

Overcoming Challenges:

Conduct Yield Reviews: Evaluate assets not just for their present yields but for their potential growth.

Assess Resources Rigorously: Differentiate between performing and underperforming assets without falling prey to biases.

Fact-Check Recommendations: Align investment decisions with objective data.

Analyse Overheads: Understand the actual cost and value creation of your overheads.

A Personal Reflection:

In my quest to build a model that could guide family offices in wealth multiplication without undue risk, I’ve found that the difference between thriving and surviving lies in leadership, better data, and, with such data, better questions being asked to get to the truth.

Conclusion:

While financial metrics are essential, a company’s ability to innovate and adapt is the accurate barometer of success. It’s not just about diversification to cover losses but about making informed, bold choices. It’s time for family offices to evolve from wanting to appear successful to achieving profound, real-world success. This is the essence of proper wealth management in the modern era.

I invite family offices to consider: Do you have the right people to navigate this journey?