Join Jeff Malec as he sits down with Brian Adams, partner at Mack International, for an illuminating conversation about the intricate world of family offices. Brian shares his unique journey from real estate entrepreneurship to talent search, offering insider insights into how ultra-high-net-worth families manage their wealth, navigate generational challenges, and recruit top talent. From the complexities of multi-generational wealth transfer to the evolving landscape of family office management, this episode provides a rare behind-the-scenes look at a typically opaque industry. Discover the strategies, challenges, and human dynamics that drive some of the most sophisticated wealth management operations in the United States. SEND IT!
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From the episode:
Check out the complete Transcript from this week’s podcast below:
Family Offices: an inside look on who runs them and how you get that seat, with Brian Adams of Mack International
Brian C Adams 00:08
One of the trends we’re seeing is geographic dispersion and Co Location of family offices, because the dispersion geographically of a lot of these families has increased dramatically, where people are in the Sun Belt, even though the mother ships in Chicago.
Jeff Malec 00:22
Welcome to The Derivative by our RCM Alternatives. Send it!
Brian C Adams 00:27
Hey everyone. Bryan Adams here, partner at Mack International, here to talk about all things family office, talent and search on The Derivative.
Jeff Malec 00:42
You Hey, Brian, how are you? I’m good. How are you good? Where are you? Little, nice family, family home office.
Brian C Adams 00:56
Yeah, I’m home in Nashville, where I live on a quasi creepy family compound with my in laws and sisters in law. So we have a unique setup down here in Middle Tennessee. But yeah, home today.
Jeff Malec 01:11
So what part of Nashville
Brian C Adams 01:15
we live in, a part of town called Oak Hill, which is kind of the southwest corner of Davidson County, before you tick over to Brentwood, near green hills, Belle Meade area. So it’s a little quiet, sleepy residential area, but it’s become kind of healthcare mansion world over the last 20 years, since I’ve been down here, used to be horse country. It’s changed quite a bit like, like the rest of Nashville.
Jeff Malec 01:41
I know you guys sick of all US Chicago folk moving down there, clogging up your roads.
Brian C Adams 01:47
There’s a lot of California tag G WAGs rolling around these days. But I, you know, I think it’s 90% positive. I spend a lot of time in cities that would kill for our problems and our growth, so I’m thankful to be part of a dynamic, growing city. We do have kind of big city challenges, but it’s better than the alternative.
Jeff Malec 02:10
This is for a whole nother podcast, but my pet theory is you can’t have a no state tax state for very long, because you’ll have these problems, and you’ll need to tax in some way or the other, or it comes around in one form or the other, right? So what form is that? In Tennessee or what do you think that’s a problem?
Brian C Adams 02:27
You know, the income tax, the state income tax, is really the third rail of politics down here. You cannot touch it. It’s inviolable. So it’s kind of a non issue, frankly, because nobody will go near it. But, yeah, listen, we suffer from poor infrastructure, really poor schooling. You know, the saying down here is thank God for Mississippi and Arkansas. Otherwise we’d be last in a lot of nationwide rankings. Healthcare is a real challenge. So it’s not without its drawbacks, but it’s just a non non starter from a political perspective. And you know, Nashville is a very liberal city amongst a very conservative state, which I think works relatively well because not much can get done, which is a good thing. I think government functions well when it doesn’t do too much. And so I think we’ve hit a nice sweet spot. We have problems like everybody else, but I spend I’m on the road pretty much every week, and I get the chance to go to almost every city in America, and on the kind of top 10 checkbox, I think we hit almost everything. You know, no state income tax. We have a balanced budget, triple A credit rating. Bonds really pro business, four seasons, no imminent natural disaster challenges, no state income tax.
Jeff Malec 04:02
Chicago argument, without the state income tax, like we have no natural disasters, it’s perfect place to live, only human created disasters in Chicago.
Brian C Adams 04:12
Yeah, yeah. So,
Jeff Malec 04:15
so are you born and raised down there? How’d you get started?
Brian C Adams 04:19
I’m from New York originally, I married a local. So my wife is a native nashvillian. We met in school up in New England, and I’ve been here about 20 years, so an adopted son, and my wife’s whole family is still here.
Jeff Malec 04:34
So it’s a weird compound
Brian C Adams 04:36
on the quasi odd 90% of the time it’s great. 10% things get weird. So
Jeff Malec 04:46
where was school?
Brian C Adams 04:48
I went to a small all boys military prep school in New York, and then I went to Wesleyan University, small liberal arts school in Connecticut, where I met my wife. So I
Jeff Malec 04:59
know I was senior. In college, small liberal arts in Schenectady in New York. So,
Brian C Adams 05:03
yeah, I’m from Albany, so I’ve skated at the Union rink many times. Beautiful rank of a big ECAC hockey fan grown up. You had a good buddy, Chris DiStefano, that played defense there. And big deal when they won the national championship couple years ago. It’s
Jeff Malec 05:21
great. Yeah, what was that? Oh, five ish, maybe, gosh, they’re just putting in a new rink, actually. Oh,
Brian C Adams 05:27
nice. Yeah, I had some. We had a pretty competitive hockey program, and I think I had one or two guys played there, certainly at RPI and Clarkson and some of those schools. And, yeah, I don’t get home that much, but Schenectady, it used to be an incredible place, and union is an incredible like in 1930 you mean, yeah, yeah, when GE was a big presence there and the Tri Cities were a were different place than they are today. My family’s been in that part of the world since 1640
Jeff Malec 05:58
so a lot of history in the Hudson Valley and upstate area. Love it, yeah, and then where, what’s the work background before you got into working at working with Mac,
Brian C Adams 06:11
was an attorney, so practiced for a couple years, then spent a lot of time as a real estate entrepreneur. So I was a fundless sponsor, syndicating capital, doing industrial value add core, plus did us some retail, some medical COVID office. But that was a that was a big part of my career, before joining Linda as a partner couple years ago.
Jeff Malec 06:34
And that was that led into you were calling a lot of on, a lot of family offices for syndicating, for getting capital together,
Brian C Adams 06:43
unsuccessfully trying, yeah, as getting a lot of no’s from people. Yeah, it was just kind of a odd circumstance, certain like serendipitous connections that got me I actually knew Linda. My wife’s family has a family office here in Nashville. I knew Linda through through the community, and you know that just she was everywhere. People just know Linda, but I never thought about search. I never really spent much time talking to her directly, but through an odd series of connections and conversations led back to her and she was looking for a junior partner. Timing was really good on my part, and it’s worked out really well. So with the business, is a terrific business, and we’re, we’re very busy these days.
Jeff Malec 07:33
We’ll dig into that in a sec. But I it’s funny to hear you say unsuccessfully calling on the family offices, because to me, going in there to sell hedge funds, and you have your nice monthly table, and that would their eyes would gloss over, and they like, no, just show me the multi unit and tell me the right IRR, and what I’m going to make on this thing. Like, don’t show me these sharp ratios and all that. Yeah, so you, in my opinion, you had the better seat going in there with just, hey, we’re putting up this multi unit in Franklin, Tennessee, it’s going to be great,
Brian C Adams 08:03
yeah, you know, I think that the challenge is, you know, I think again, my my efforts are at this point five plus years dated. You know, so many of these families already had allocations to real estate. And many of them are vertically integrated themselves, or have really trusted sponsor partnerships they work with for a long time, and they become quite savvy. And so, you know, my pitch for many of them was just a that was a friction cost for them that they could execute on their own. And so it was, it was, it was very hard to differentiate. It’s a very crowded marketplace, or it was at the time. It’s probably even more so now, and so it’s very difficult to differentiate my flavor of ice cream versus others. What was your flavor like? I said it was mostly kind of value add Core Plus light industrial in the southeast,
Jeff Malec 09:01
which was a good one to say, like strawberry or something, yeah,
Brian C Adams 09:04
oh no, no, no.
Jeff Malec 09:12
So little unique. I don’t think we’ve ever had a search firm on here. There’s not many of us in the family office world. So, yeah, there’s tons that are right. Usually it’s kind of spammy, right? When you’re dealing with a search group in the executive space, or I get all these emails of, like, seasoned real estate vet looking to run a portfolio, blah, blah, blah. So tell us, yeah, tell us why you took that jump. What’s different about you guys?
Brian C Adams 09:41
Like, I referenced, I, you know, I’ve been doing real estate for a long time. Had a great run. I just, I thought, heading into so this would have been 2022 23 I thought, structurally, in a world where we were entering into a. A persistently high interest rate environment with sticky inflation. I just had a lot of trouble structurally in a world where the 10 year is going to hang around a five handle to make real estate work, unless you were doing development, I just didn’t see how you could put together a cap stack that made sense as a common equity holder in that world. And, you know, I thought there also be a lot of pain on a lot of these refi and sales. And I’d seen two turns before, and I didn’t want to stick around for a third and to sell into that market, or that would be really challenging. When I turned 40, I also got sober, and it changed a lot of how I just thought about the world, and a lot of different conversations that had been happening that I just didn’t really pay attention to. Suddenly I was paying attention to and had a lot of people, especially my YPO forum, that recommended I go on a listening tour, and I did, and one coffee meeting in Nashville turned to this meeting with Linda within six months, and it just really clicked right away. And a lot of people in my world said this makes a ton of sense for you, given your background in terms of your age, sales, business development, content marketing experience and just this growing world of family offices that have this huge need, and Linda has built this unbelievable business. So I was very fortunate to be able to kind of step alongside of her in that
Jeff Malec 11:35
now, You’ve piqued my interest. I haven’t heard of a listening tour before, so what’s what’s a listening tour.
Brian C Adams 11:41
So there’s the concept called informational interviewing, where most people, when they have coffee with somebody, they kind of you, you know, use the usual, you know, tell me about yourself. What do you do? Are you from blah, blah? And it’s just kind of a very kind of preliminary conversation, a listening tour. Informational interviews are where, instead of, you know, just doing the high level, you really dig into the pivot points, what we would refer to as a lifeline, why you made the three big decisions of your life, professionally, the pros and cons of those decisions, if you were to autopsy them, what you think you got right and wrong, and then really digging into what the person does today, what they like about it, what they don’t like about it, how much they get paid, what comp looks like, and if their tail winds or headwinds in the industry. And so I just spent a lot of time, and I had the fortune because of YPO and some other organizations, I had the opportunity to learn about a lot of different business models. And real estate is great from some perspectives. Others, it has real challenges, but search was pretty much everything. Real Estate wasn’t really asset light, no debt, no capex. You know, larger margins, bigger kind of pass through deductions, and again, pros and cons, but it just really, given where I was, was very appealing to me, given what everything that I had learned, and so had the chance to speak with some really high end search professionals to understand the industry, and it just all signs pointed to, to, you know, taking a taking a chance and moving forward with it.
Jeff Malec 13:29
Uh, I’m trying to talk. My son is going into junior year to he’s going to start a club at his high school that will be a podcast, hopefully, where they bring it. It’s basically a listening tour podcast, bring in these alums. Other write ins, like, hey, what’s it really like to be a surgeon? How long were you in debt when? Like, what do you regret about it? What? What’s it like to be a policeman? What’s it like to all these and hopefully get 50 different careers on there? Yeah, that will help him personally, but then also all his classmates. So, similar, top, similar concept,
Brian C Adams 13:58
yeah. Yeah. I think, you know, many of us, especially when we’re young, you know, we don’t even know how much our parents make. We don’t know how much it costs to live our lifestyle. And so I, you know, in my 40s, had a pretty good sense of what I was good at or what I wasn’t good at, where I thought I could create real value, what would allow me to sleep really well at night, knowing I created value for others, and that exchange of time versus dollar, right? Like what the market would bear. And so it was really helpful for me to be able to talk to all these people and understand, I mean, there’s no perfect business, right, but to know kind of what I type of business I wanted to be in, versus not, and the more on the not side, was hugely beneficial, just from a time saving perspective, right? I think for your son, knowing like 90% of the market that you don’t want to go into is more valuable than knowing maybe what you do want to do. Mm.
Jeff Malec 15:01
Uh, the My dad used to say the perfect business is a PO Box people send money to Yeah, gotta do something to get them to send the money. Yeah, yeah.
Jeff Malec 15:17
Why? Family office search. Talk a little bit about that.
Brian C Adams 15:25
I did a market mapping and talked to some people in the industry who I really respected, some people that work with really big single family offices or work within a really large single family office. And I said, What are your biggest challenges, like, what keeps you up at night? Where would you allocate resources? Where would you impart your value time and money in return for a solution? And it was really talent and technology were the two themes that kept coming, recurring over and over again. So I thought, well, I don’t really know much on the tech side, and I feel like I’d be pretty far behind trying to be a tech person. But talent, you know, I know how funnels work. I know how CRMs work. I’ve been a networker for 20 years, doing what I was doing on the syndication side. I built a platform for 5000 accredited investors, and so I felt pretty good about that side of the world and and then it just became a function of who’s really good in the space, like who’s the best? And Linda’s name was everybody I asked. She was on everyone’s list, and she was first on everyone’s list. So it’s pretty much a no brainer from that
Jeff Malec 16:42
perspective. Yeah, you’re making that. I don’t have Linda on.
Brian C Adams 16:47
You should, and if you can get her, she’s tough to she, uh, tough to nail down. She’s still working really hard, yeah,
Jeff Malec 16:55
um, so let’s back up a hair. What does family office mean to you? Or how do you guys define it? How big are they? What give us some kind of the guardrails? What do you view as family office space?
Brian C Adams 17:07
Yeah, so it’s a term that gets thrown around a ton. It’s become a marketing gimmick for a lot of people. So you know, the way that I typically define it as a corpus of assets meant to maintain a certain quality of life over a long term, multi generational time horizon for the benefit of a set of lineal descendants, basically a private wealth management firm for one family for the benefit and the clients are only family members. Beyond that, you can see all different structures and iterations on that, but that’s kind of legally definitionally where you start from there the variations are kind of unending. So that’s usually how I define it.
Jeff Malec 17:56
What about assets? It’s like, All right, I’ve got 250k I’m not thinking about starting a family office. Yeah. So where do you see them? Start to think about it.
Brian C Adams 18:08
I think today it’s a two or $3 million run rate, annual overhead and about the same on a startup cost basis. So if you just kind of do you know if you’re paying a I don’t think anyone pays 2% anymore, but 200 basis point asset management fee, the numbers start to make sense, depending on what you’re solving for. At 250 to 500 million, I think to really have a full blown professional institutional setup is probably closer to a billion. Most of our families are north of a billion. Just that’s the world that we live in, but it’s definitely become more expensive. Yeah,
Jeff Malec 18:47
like, but into that, what am I getting from my two to 3 million a year? Just staff, or what else is there? So
Brian C Adams 18:56
the rationale and the why behind you know, folks forming these entities is typically customization, privacy, discretion and control, and so you know, you can have a lesser amount of assets and still want to achieve those goals, and if You want the entity to be like a net loss proposition. That’s totally fine. If those are what your overarching goals are going to be. If you want it to be net neutral or revenue positive, it’s going to be very challenging to do that, unless you’re really allocating pretty significant resources to it, and you have a large amount of kind of liquid assets, in my opinion. What was the second question?
Jeff Malec 19:49
Yeah, like, what do I get for that, that spend, that annual spend?
Brian C Adams 19:54
Yeah, so most It depends, you know, the three big pillars for. This in terms of the startup is, or the reevaluation one would be who the clients are, defining the clients themselves, most of the time it’s the lineal descendants of a certain matriarch or patriarch. But there are many families that say significant others are included, or potentially key stakeholders or constituents within an operating company that had a liquidity event. So a group of GPS or a group of owners, they could all be considered clients. You need to define your client cohort. The second piece would be the scope of services. So you could have a holistic, full service family office that provides concierge, travel, executive administrative investments, accounting, tax, tax prep, tax filing, investments across the board. Or it could be limited. It could just be administrative back office, so just bill pay and taxes, or it could just be an investment firm. Again, it doesn’t really matter, but you need to define the client’s scope of services, and then that really dictates what needs to be in sourced versus outsourced. And that goes back to kind of what your value proposition is, if, if you really value taxes, then you should INSOURCE it. If you don’t really care that much and you just want, generally like, the taxes to be filed in timely fashion, outsource it. Once you have those three kind of big decisions, then you can put together a business plan for the family office with its own P L budget, and then you can kind of go from there, but those are the three big decisions you need to come to before you can determine, hey, what’s the why here, and what does success look like? And do you do you see that’s the patriarch or matriarch typically making that decision for the or it’s been starting to get passed down, and people are scrambling of like, Hey, this is too complex. We need to form a group to handle all this. See, usually for a de novo, newly created family office. The services are the acute pain points being addressed. So, you know, I have a ton of liquidity. I need to allocate capital quickly. Let’s start doing investments. I just had a liquidity event. I bought a bunch of houses and a plane and a boat. I need somebody to manage this stuff for me, because it’s overwhelming. My taxes are a mess. I just want somebody to take care of this. The operating company used to do all my bill pay. Now these people will do it. That’s usually how it starts. That’s where the reevaluation occurs. In a multi generational family, or with a new startup, you have the ability to blank, Slate it. But if I think for some of these things, they should be re evaluated on a pretty consistent, rolling RFP process. So bill pay, for instance, that technology changes pretty dramatically. That’s probably a 12 month RFP investments. You probably want to stick with a manager more than five years right for attributable track records, so that’s probably a seven to 10 year RFP. But these things should be re evaluated. You should go to market. You should know what fees are, and you should be looking at performance. Most people really struggle with doing that. If you’re a family member or a principal, that’s one of the benefits of having a third party Hired Gun professional manage this for you is they can have an impassionate view of this, and they don’t mind firing your uncle from your country club if they’re not doing a good job, right?
Jeff Malec 23:35
And so that’s, that’s the crux, right? Like, okay, we’re spending all this money to hire this person when we could do it ourselves. But it just becomes too much, and it helps at a billion plus, you’re like, hey, this is seven days of interest payments or whatever, like, of course, let’s hire this guy or girl. Yeah.
Brian C Adams 23:52
I mean, I think you’ve seen this overall trend of professionalization, institutionalization of family offices in general. And I think it will continue, and I think it’s twofold. One, the families are becoming much more complex with larger aum. They’ve had a great run the last 20 years, generally in the market. And so assets have increased pretty dramatically. But also the scope of services being requested by family clients has increased, and so it requires professional management. Meanwhile, on the candidate side, you’re seeing really sophisticated professionals now view families as a real industry onto itself, and it’s becoming attractive place for talent to go. So it’s kind of working in tandem in a lot
Jeff Malec 24:39
of ways, which seems, it would seem, that the Goldmans and wealth management firms of the world would would snap all these clients up and they would say, Oh, you don’t need to have in house. We can handle all this. What’s the what’s the balance there? Did they come out of those big shops and in house? Or they, they use a mixture from. Candidate side, where we find folks, no, not where you find them, of just the family office in general. Like, when do they When do they move in house, versus using, you know, big wealth management firms.
Brian C Adams 25:13
So, you know, the wealth management firm the whole industry, it’s become so cyclical in terms of where they’re allocating resources internally, and they’ve managed to blow themselves up pretty consistently every three to five years. And so it’s really hard to find long duration relationships at these banks nowadays, the shops that you and I used to know 20 years ago, a lot of them aren’t even around anymore. And the ones that are around, every three to five years, new management comes in and says, Hey, we’re not going to cater to these ultra high net worth individuals anymore. They don’t drive any revenue. Three to five years later, they say, Hey, this is a great cohort we should focus on, because we can cross sell and upsell into them. We’re going to launch a family office platform, I go over and over again, yeah. And so what mostly happens is families will have three relationships with some of the bigger platforms. And it depends, right? If you’re an operating company embedded family office that has a very active business, you probably need balance sheet capability and capacity, so you’re going to work with JP Morgan, like, it’s very tough, okay, if you need a corporate trustee and a custodian, you’re probably going to work with Northern Trust. If you want access to IPOs and you need kind of investment banking expertise, you’re going to work with Goldman. And so I think they pick and choose, and that’s where this person, or the team internally, is helping guide the family to know, okay, we need to work with this individual at this shop for this specific problem, but we’re not going to work with them on asset management, because they’re going to tear our faces off and the fees are ridiculous and performance is bad. And so we’re going to pick and choose who we work with, but some assets there to get access, basically, yeah, so I think it’s kind of a case by case for most families, but, um, and frankly, once you get to be a certain size, there’s only a handful of groups that have capacity, you know, and that’s one of the interesting things about the business. Is a, you know, you you look at a UBS, for instance, great platform. You know, they’re digesting the credit Swiss deal, but they don’t really have balance sheet capacity in the domestic US. And so, you know, they’re great for some things, not great for others. And having a professional that knows that space really well for all kind of outsource services is really helpful,
Jeff Malec 27:41
which is weird to hear you say the family offices are in need of balance sheet, when usually they are the balance sheet. So what? What are some examples of what they’re doing with where they’re needing some balance sheet?
Brian C Adams 27:51
Oh, gosh, no. I think they all have leverage needs, certainly if they have operating companies, huge need for for credit facilities and balance sheets. Many of them, if they’re de novo startup, they still have probably massive stock concentration, so they need to hedge that, but also be able to lever it to get further liquidity and diversification. So yeah, it just depends on the situation. But I think most of these folks got to where they are through concentration and leverage and risk, and the ones that want to continue on, because, from their perspective, it’s a tough job you’ve got, let’s call it 3% inflation, even though you and I know it’s more than that, especially for this cohort, when you’re looking at private Education, high end residential travel, it’s probably more like five or 6% maybe more $700 breakfast at the Four Seasons. Yeah, yeah. Well, spend rates different, right? So inflation, five or 6% spend rate. Call it 4% plus the exponential growth of the family, you’ve got to be clocking north of 10% annualized returns to keep that going. It’s down. It’s challenging.
Jeff Malec 29:09
You mentioned the candidates, so let’s get into that candidate side of Who are these people? Are they coming out of those big firms? Are they straight out of school? Like they need some experience, obviously. So where are you finding them and and why are they interested in this space?
Brian C Adams 29:24
Yeah, it’s a mix. I mean, we certainly recruit from kind of the groups that we just referenced, right? The JP Morgan’s, the world, the Northern Trust of the world, the banks, law firms, you know, most families, because at the end of the day, somewhere in the org chart, there’s the taxable warm body that’s filing a tax return. So tax drives a lot of the decisions and strategies. So somebody with a public accounting background in tax or a law background in tax law, with an LLM, those are really useful subject matter experts to bring in and. Um. So we certainly recruit from those kind of high end service providers that have private client teams. But then increasingly, families want folks who have single family office experience, not only because it helps them know what great looks like, but also they’re porting over their Rolodex with them. Increasingly, famous are looking to club up with others. You know, participate in syndicates, either lead or participate with other families to get access to the best deals. And so, you know, it takes a long time to build those LP relationships and to be able to have somebody return your phone call or be first on the list for strategic capital. And so increasingly, folks are looking to bring in people from other family offices. And that’s really we have the breadth and depth of reach into that world.
Jeff Malec 30:52
What’s your view? You just got me thinking on the right the I’m forgetting his name. Now, the famous endowment who run ran Yale Peter Swanson, yeah, but Right, the argument was, No, you weren’t all this brilliant. You were getting access to all these deals that the rest of the market didn’t get access to. But do you see that in family office returns like they’re getting better access and and thus better returns? I mean, it’s a difficult question, because they’re doing a million different things, but in general, do you see they’re getting they definitely do get better access, more access.
Brian C Adams 31:31
It’s a great question. You know, I don’t understand why families would adopt the endowment model, because they’re not endowments. So I never understood the attractiveness. I mean, these are non taxable entities that have a very small payout. They’re just different they’re different animals than families are. But I would say investment returns within families is, to put it kindly, highly variable. I think it’s really challenging. What you’ve seen most families pivot to is getting quote, unquote cheap beta in the public markets. They’ve really been hammered by active management the last 20 years. That really has not worked well for them, and so they’ve kind of pivoted towards outsourcing, or having an in house person to do their public equity exposure and then really picking and choosing high conviction private investments that they really want to go deep on, either because they have some kind of internal, idiosyncratic leverage that they can use, or they’ve just kind of built out an ecosystem where they feel like these GPS these sponsors, these other families know what they’re doing in the lower middle market, CBG space, we have high conviction there. We’re gonna allocate 20% of the portfolio, and that’s where we’re gonna enter alpha from. That’s how most families are thinking about it now. But it really depends on how much, how much assets you have to allocate, and how much liquidity you have. I think a big challenge for these families has been, if you don’t have an operating company giving you fresh dividends, it’s really hard to recycle capital, especially in today’s environment, and unless you give fresh capital to the deal team, they’re going to leave
Jeff Malec 33:13
all right and back to the candidate side. So you’re paying them out of those groups. What else? How are their new How did the new guys get into those groups, right? Like, how does it keep refreshing? It doesn’t seem there’s enough family offices in the I guess that’s a great let’s step back. How many family offices in the US? Do you guys do go global?
Brian C Adams 33:31
We don’t do really any global work. Linda did pre COVID. She did some work in mainland China, mostly Hong Kong, Singapore and then Western Europe. Since COVID, I haven’t done any of that work. I know she really hasn’t spent much time there. I have some connectivity to London, but I don’t spend any time abroad. And we can get into why that is, but it’s mostly domestic US. I think the number is higher than you think. You hear a lot of numbers thrown around. I think it’s, I think it’s well north of 5000 maybe near 8000
Jeff Malec 34:16
of the billion and over. Yeah, wow. Even still. So I guess that’s enough, but they’re so they need to get you got you’re pulling from all those 5000 how much turnover there’s there between all those because the family obviously wants someone for 20 years, right? They want that person in that seat forever?
Brian C Adams 34:35
Yeah. They want longevity, trusted member. Yeah, it’s a big, big focus for them, yeah, what we’ve seen is more of an alignment around compensation compensation. So more families are doing sophisticated structuring, much like private equity firms today, to have kind of aligned incentives, but also retention. Strategies, we always say it’s really hard for us to to poach a well compensated, happy professional from another family. It’s difficult to do because they could be incredible jobs. Now the challenges structurally within a lot of these family offices, even the big ones that have big org charts, just because of the because of the size and the nature, oftentimes you hit choke points. If the CEO is in his 50s and he’s really happy and he’s doing well, he might like to your point, he might stay 30 years. Yeah, so you’ve got to go out to go up.
Jeff Malec 35:44
And what do they typically need to relocate? Does family want them in your home?
Brian C Adams 35:51
Yes, yeah. I think that’s the biggest disconnect in the marketplace today, is candidates still think that they can work remotely or hybrid or commute, even super commute. And families for these type of roles that are big roles, big positions, families expect them to be in the office five days a week, if not seven. And they really want them to get ingrained in the community. And so they expect the whole family to move the kids to get into school, you to join the country club, participate in the local charities and nonprofits and the whole shebang. That’s a big focus for families. And given where comp is, I think it’s completely rational that families would want you to do that. And for these roles, they’re also expecting a leadership development. You can’t really do that remotely,
Jeff Malec 36:43
and that, right? We can get into some of the crazy. Like, do you hear about some of these families and like, that’s how they made their money? Unbelievable. Like, I remember a family down in Georgia, and the guy was taking the grease out of all the old fry shops and chicken shops, and then making candles and stuff out of it, sold it for 800 million or something, and created some so, like, the different types of companies, is just always astounds me.
Brian C Adams 37:09
Yeah, it’s incredible. I think one of the big realizations for me is I had an appreciation for, obviously, family entrepreneurship. My wife’s family has incredible history and lineage and goes back a million years, but the reality of private enterprise and entrepreneurship drives so much of the American economy. It’s It’s remarkable, and just the the ingenuity and creativity of how people created this wealth to your point. I mean, I remember talking to a family once, yeah, and I can’t go into details, but kind of talking about how they got started, and what they do, and so what, you know, what’s the story like? What happened? I said, Oh, well, you know, my grandfather invented the seat belt, you know, like, whoa. It’s pretty cool. It’s great, though. Good for society, good for
Jeff Malec 38:05
them. The flip side is, my grandfather invented the Harley Davidson. That’s cool. My great grandfather was a Davidson, but there was no family office. There was this. The company was going bankrupt 30 years later, yeah, made it to your need, like, the need for a family office for do you see, is there you have a chart of like, without a family office, the assets will evaporate in X years, X generations?
Brian C Adams 38:31
Yeah, I don’t have, obviously, this is a really opaque black box space in a lot of ways. I think, I think it’s becoming more transparent, and families are becoming more outward facing, and there’s much more literature and and data around it, but it’s still very tough. I would say one of the what I kind of was sometimes we get phone calls from folks that their advisor says, you do talk to these people and they’re first generation wealth creator, and they say, Hey, like, I don’t need this. I don’t need a family office, so that’s fine. And we kind of say, well, tell me the story, and tell the story. And they say the number, and my and I use a YPO modality where I don’t give advice, but I give experience share. I usually will say, Hey, listen in my experience, when you have this much money. This is enough money to screw up your grandkids. You have an obligation to either create structure and governance around it in the form of a family office, or you need to give it all away your choice. But that’s the responsible thing to do. The irresponsible thing to do is with this much, that much liquidity, that many assets, to just have a distribution policy based on nothing, or to have some kind of estate planning where, when your kids turn 2030, whatever, yeah, they get 50 million bucks. Yeah, it’s just, I think that’s irresponsible. You should either have structure and governance around it and take it seriously, like a small business, or you should give it away.
Jeff Malec 39:59
How many, how many. Up to give it away.
Brian C Adams 40:01
Increasingly, more and more we see a lot of wind downs and a lot of sunsets. Now, you know, there’s a lot, I mean, obviously buffet gates. There’s a lot of folks that have signed the giving pledge and, yeah, I mean, I that there’s no judgment associated with it, but I think you’re going to see more of it too. Yeah, moving forward,
Jeff Malec 40:22
is some of that just optics too, right? Like, buffet, I’m going to give it all away, except I’ve already created all these trusts and, right? He’s already created enough wealth for the generations where, yeah, that’s self sufficient. Now I can give the rest away, yeah, yeah. Like, versus just from, hey, all my my lineage, you’re going to have to work for every bit of it. You’re not going to get anything. I don’t think that’s realistic, but perhaps,
Jeff Malec 40:54
going back a few minutes, I was going to there’s so many crazy stories that these people must live in crazy places as well. So Right? It’s not just like all centered in New York, Chicago, LA or whatever. There’s got to be around the country, small towns, medium sized towns, and so that’s got to be hard for you guys to be like. You got to relocate to such and such Idaho or Arkansas
Brian C Adams 41:17
or something. Yeah, you know, to your question earlier about the number, I think that’s what’s misleading. Is there’s a lot of these bigger families that started a widget company a couple of generations ago, and they’re in, you know, Des Moines, and they’re still there, right? And they’re a big family. People don’t really think about them as much, but there’s a lot of those. That’s one the second part to your question, one of the trends we’re seeing is geographic dispersion and Co Location of family offices. So the mothership might be in Des Moines, where the operating company is or the assets are, but you might have your deal team, your investment team, be in New York or Miami or Dallas, because you’re getting better looks better. Networking more GPs and sponsors and fund managers will get in front of you, and so I think you’ll see that continue, where maybe the back office, administrative, from a cost saving perspective, will be one place, but maybe the investment team or the client customer relations team, because the dispersion geographically of a lot of these families has increased dramatically. Where people are in the Sun Belt, even though the mother ships in Chicago and they’re going to have satellite offices to help service them, I think you’ll see more and more of that estate management, lifestyle concierge that
Jeff Malec 42:38
makes sense to me, which to me, it seems like that all consolidates at some point, and they’re like, right? And then you outsource those pieces from a group, which is, talk about that for a minute, the multifamily office that space. Do you guys put people into those as well?
Brian C Adams 42:52
We do a little bit of MFO work, not a huge, not a huge amount. I think if it’s a boutique with kind of large, separately managed account relationships that are north of 200 million, we can probably be helpful, but, you know, the majority of the platforms, we’re not a great fit for considering kind of our expertise and the folks that we know, but we do a little bit of that work. Yeah, it’s a growing space, I think, to our conversation earlier about the cost associated with these things, you’re going to see more and more offerings and platforms and a lot of families that don’t have the ability to continue to economically run their own family office pivoting to a multifamily Office platform to defray their costs makes a lot of sense. You’ll see more and more of that as well, especially these big multi gens, where I mean the linear growth of your investment portfolio relative to the geometric expansion of your family is very difficult dynamic to maintain over 567, generations.
Jeff Malec 44:00
That’s a fascinating piece there, right? The geometric growth of the family, right? The family tree, the what does that look like? What are some of these families? How many family members? Yeah, we
Brian C Adams 44:10
just did a search for a family that was on their eighth generation, and they have 254, households. They service, so over 500 family clients. Wow, pretty wild. Yeah, big family.
Jeff Malec 44:22
So at that stage this, like you’re running a mid cap 400 company or something, right? Like you’re running almost a fortune 500
Brian C Adams 44:32
Yeah? I mean it, it’s a very, very different search, relative to, like, a de novo startup, first gen entrepreneur. Obviously, they’re legitimately institutional, just from a governance structure, legal entity, organization, I mean, very much a private wealth management firm for the benefit of a select cohort of clients. But yeah, I mean, it gets into all kinds of interesting complications in terms of having investment offerings for people. Range from unaccredited to qualified purchaser. Like, how do you do that? How do you how do you for one flat fee for service help a family that you know has a pretty simple household level complexity versus one that has massive estate liability challenges. And just because, you know, three generations before, one family had five kids and one had one, right? It’s just the way these things work, right? Fascinating to figure out how they solve for that.
Jeff Malec 45:37
And you mentioned the comp. So can you talk through the comp? What are some of the levers? What are these guys and gals making, looking to make?
Brian C Adams 45:47
Yeah, I’d say, you know, traditionally, it’s kind of a base and bonus business, right? So you’ve got a base salary plus some type of cash discretionary bonus. Most of the time, discretionary bonus in this world is pretty much guaranteed, and then increasingly, you’ve got a lot more of the other bucket, which would be deferred, long term incentive participation and CO investment, carried interest and potentially Profit sharing. A lot of families are now providing leverage to executives to allow them to participate in some of these offerings, and they’re all tying into some type of overall kind of strategic retention scheme and an alignment of incentives. So you’re seeing a lot more CO investment, less, carry profit sharing, not as much, but it’s becoming pretty consistent. And
Jeff Malec 46:50
what’s it look like from a total comp level? If you’re allowed to say
Brian C Adams 46:55
such a scary question with with all kinds of caveats associated with it. But listen, I think it’s tough to get a professional with, you know, 20 years of experience, it’s tough to get those folks for under 750 these days. Yeah, you know, I think all in you’re looking at a million for somebody who’s really, really good, and they really know what they’re doing. But it depends, obviously. But yeah, and that would include all the deferred and, yeah, co investment participation. But yeah. I mean, if you just look at what the professional services firms, what those partners are making. It’s pretty. It’s pretty on par.
Jeff Malec 47:51
What’s, what’s the future look like for this spin? Like, more tech AI, like, what, where’s it gonna go? Or no more hand holding. I think the more tech that gets into it, the more human touch we need.
Brian C Adams 48:06
Yeah, I mean, I think the family office space is growing dramatically and will continue to grow.
Brian C Adams 48:18
Tech is interesting. You know, most families are pretty slow adopters, but it’s coming, kind of just like on the wealth management side, it’s all coming, and we’re going to need it, frankly, because there aren’t enough people. So, you know, there’s a lot of Doomsday, and I don’t know if we’re all going to end up in kind of Terminator two style or not, I have no idea, but I will say, in the near term, there’s just a real dearth of talent that has the technical skills so and the work just keeps going up. You know, I think the way I’ve experienced it myself is kind of and I’m old enough now where I remember when computers and email were going to save us all, and it was going to make things much more efficient, to give us time back, and all it did was just increase our capacity for work, and so now we just work more all the time. No vacation, yeah? Like you and I are in a hotel room, yeah, yeah. Like, I’m going to the beach on Wednesday, and I’ll be cranking it out evenings, mornings, on walks, you know, like there’s no getting away from it. So I just think that’s the world that will continue to be in.
Jeff Malec 49:30
I did want to ask the cliche family office, right? The drugged out, bratty kid who shouldn’t deserve the money, and the exec, the family, pushes that onto the exec to handle. Is that a real thing? Is that? Is that a downturn? If people are like, you’re trying to put them into this role, and they’re like, I don’t want to have to deal
Brian C Adams 49:53
with those bratty kids or whatnot, yeah. I mean, there’s some. It certainly happens. I think, you know, I. Uh, families are, it’s kind of like, the equivalent would be like the military. It’s a snapshot of our society. And you’ve got some folks that are, you know, coming out of the Naval Academy of West Point. You’ve got folks that are enlisted coming from really hard conversations and challenging situations. It’s it’s reflective of our overall society. I will say that you certainly hear some pretty bad stories, and I’ve seen some some pretty sad stories. I think to understand it better would be to say fundamentally, if you’re a first generation wealth creator, and you work incredibly hard, you take massive risk, and you have huge success, and then you create dividend policies and estate planning structures to provide for your next generation, so that they don’t have to go through that suffering, the next generation then oftentimes looks to you and says, You robbed me of that opportunity to self actualize and self identify and to actually know who I am Because of that suffering. And that’s pretty much the dynamic, and that can be a really tough thing to navigate, which from the
Jeff Malec 51:28
head of the family, that’s going to be so frustrating. Like, hey, I’m just trying to
Brian C Adams 51:32
help you. Yeah, it’s two people talking past each other, because the first gen saying, I did all this for you, and the second generation is, like, You did all this for me. Yeah, they’re saying the same thing that they’re speaking past each other. That’s why the most effective, highly functioning families, I know, they create some type of culture where there’s the opportunity for self actualization the next generation. And it doesn’t have to be being an entrepreneur, making money, but could be through nonprofit or giving or of service. But that’s that’s typically what you see for really high functioning families, is some type of mechanism to unlock that, because if it’s not there, it’s very it’s very challenging place.
Jeff Malec 52:21
I who you have your own podcast? What’s that called? And what do you guys talk about on there?
Brian C Adams 52:27
Yeah, so it’s, it’s a very creative it’s called the Mac podcast. So I’ve been doing it for 400 plus episodes. I ported it over from my old platform, and we, you know, we talk about, I tell people, it’s, it’s any subject matter or topic that you want, as long as it’s oriented towards the ultra high net worth or family office world. So I’ve done everything from esoteric, private alternative investing to drug addiction in families and everything in between. It’s really fun. I enjoy it. Great way to meet people. I crowdsource new relationships. That’s how we met. Yeah. And so there’s just a real paucity of decent content in the family office world. That’s not a marketing ploy. Just trying to give people some some actionable value,
Jeff Malec 53:21
right? That’s such a mismatch, right? There’s too many. 98% of the content is like retail, how to trade options, how to do like, yeah, for probably not even 1% of what the assets of of these families that that actually need this content.
Brian C Adams 53:38
And it’s tricky, because even though these families are becoming more outward facing and external, it’s still you can’t really bring a CEO of a family office onto the show, so I’ve got to kind of be creative about how I address certain issues. But it’s fun. I get to meet all kinds of cool people, so I enjoy that for
Jeff Malec 54:01
a little bit of fun. If you could travel back in time to any big market event in your 88 DeLorean, back to future style. What? What would it be? And what would you why would you choose that one?
Brian C Adams 54:18
Yeah, so I think I’d go back to kind of the start of World War One, you know, Gorilla print ship and the black hand and the assassination and everything that unfolded from that, because that was really the birth of the nation state, in a lot of ways. And that 100 years caught 100 years from where we are today, we’re kind of seeing the nation state almost devolve in many ways. And so it’s been fascinating to see the last like 100 year development of what, what were these big consortium, consolidated governing bodies to these kinds. Of micro states in the nation state, and people define themselves by who they weren’t and who they hated. And now we’re kind of almost going full circle where we’re having like us versus them, and these big blocks of countries that are having these loose affiliations and all of these structures that we built up over the last 100 years to prevent these bad things from occurring are all going away. It’s like, what happens next
Jeff Malec 55:26
big one? I thought you’re gonna go to you? Could you’re trading it, or you’re getting a someone in the family office of the who have their Rothschilds to make sure that flow out during World War One,
Brian C Adams 55:37
help them find a new CEO. Yeah,
Jeff Malec 55:40
there’s a cool story of Napoleon. The was it the Rob Jones? I think it was. They was basically the first high frequency trade, and they had a carrier pigeon that had reported that napoint had lost, and flew over to England, and they were trading, and they knew I had this, and he faked it like napoint had won. The market sold out. Then he bought everything. And then by the time the ships had come over in the horse to deliver the actual news, and the market rallied, which is the urban legend of how lots of money was made there.
Brian C Adams 56:11
Oh, wow, that’s cool. Yeah. I tried watching the Napoleon movie, the new one, and I couldn’t do it
Jeff Malec 56:18
too slow walking, too slow. I
Brian C Adams 56:21
got I had a flight to Seattle last week, and I was like, Okay, I’m gonna do this 20 minutes in. I said, I’m out. Can’t do it. Try. I tried. You’re
Jeff Malec 56:31
more the F, new f1, movie Speed.
Brian C Adams 56:35
I forgot. I mean, I got a lot of screen time my life in terms of flying. So I’m always looking for new content.
Jeff Malec 56:41
So if someone’s listening and wants to run a family office, what what they should give you a call, or what’s their background gotta be? Yeah, no. I mean, do you care where they went to school? Do you care? I mean, is it all the experience that matters? Ultra
Brian C Adams 56:56
fit biggest thing, what’s your why? How do you spend your evenings and your weekends? I care more about that than what you do. What your pedigree is. That tells me a lot more about who you are as person,
Jeff Malec 57:09
which is unique, right? Like most of the times, it’s where you go to school, where’d you what’s your background, what’s your
Brian C Adams 57:15
I don’t think that matters as much. Tell me about how you spent your Saturday when you didn’t have to work, or maybe you did work. But that, I think, is much more telling. It’s kind of like the Ring of Gyges. You know, you can tell someone’s true character when they’re invisible and what they do. It’s like, I like to know what people do on their off time,
Jeff Malec 57:35
what? What’s the answer you’re looking for that they were, oh, I’ve listened this podcast on how to set up estates to save taxes, or is it like I went to my daughter’s softball game and watched her win, and it
Brian C Adams 57:46
was great. I think family is important, because people with families understand families something that does make a difference. We certainly don’t screen for that, but I do think it makes a difference people who come from big families, complex families. I think that’s a helpful experience for people. But what I’m really looking for folks that spend their time doing activities with continuous improvement, immediate negative feedback and no real there’s no final boss. So like golf, tennis, golf, martial arts, music, theater, singing, things that you do that have iterative, negative feedback, that you basically just get kicked in the teeth all the time, and you still love to do it, but there’s no end game. That’s basically what working for a family is like
Jeff Malec 58:41
sailing, skiing. I like that one, but thanks so much, Brian. Well, yeah, it was great. We’ll put links to your podcast and the website in the show notes, and then be talking to you later. Okay,
Brian C Adams 58:56
thanks again for having me on. It’s great.
Jeff Malec 58:58
All right, Brian, thanks so much.
This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.
