At any one time, I may advise anywhere from a few to ten families, each with a net worth above USD1billion. They are mostly based in London because anyone who lives here knows that the city simply attracts a lot of money, is far more international than most other gateway cities, is geographically central, has an undeniable prestige about it and so on and so forth. Having said that, some of these families also have bases abroad, depending on where they are from or spend a lot of their time.
The sheer amount of wealth these families possess is flabbergasting. Few people actually know who they are and what they own exactly. They not only have drivers, private jets, yachts and other goodies the rest of us only come close to via music videos, magazines and movies, but also an army of specialists ready to serve them such as private bankers, security companies (to look after their personal safety and that of their assets), house staff and more.
Often, their money is managed through what’s called a Family Office, an organization that manages the wealth of an ulta-high net worth individual or a family. A Family Office can be comprised of less than a handful of people, including the individual or family to whom the wealth belongs, up to twenty or more individuals. It varies on a case by case basis.
Different families different cultures
Family Offices allow very few people into their circle for obvious reasons.
Those I presently work with are a colourful bunch. They include: a secretive English family with its hands in multiple sectors in the UK and Europe; an Indian family which owns some of the most luxurious hotel assets in India; a funny Swiss individual whose significant wealth came from technology investments; the Family Office of one of Saudi Arabia’s wealthiest merchant families; a powerful Azeri family with billions in assets; a Mongolian ultra high net worth individual with, amongst other things, mining, hospitality and banking assets; an American family that is one of the largest real estate owners in the nation; and more.
Through my work, and affiliation to one of the largest Family Office platforms in the world, I have come to know many more Family Offices from all over the world. Some I interact with regularly, in person either in London or another international city, while others I see once in a while and tend to speak to over the phone mostly.
These groups differ from larger, more institutionalised organizations in so many ways that it would be far too difficult for me to show it one post. However, one important area I could quickly touch on is how they go about investing their money. Let’s set aside the type (debt or equity), sector (Oil & Gas or Technology), size (USD5m or 50m) and structure of investments they make, and touch on the process they go through in order to arrive at a decision to proceed ahead.
Let me provide two examples:
1) One French Family Office I know is so hierarchical that the decision whether to dig deeper into an investment proposition, from the moment the opportunity is introduced to the organisation, goes through a series of predetermined steps which could last anywhere from two to three weeks. From there it can be a month before anything moves forward. They’re generally very cautious and conservative and there’s nothing wrong with that.
2) On the other hand, one English Family Office I worked with very closely several years ago was the exact opposite. Let me illustrate below.
One morning a call came in to the office and a member of the family answered. It was regarding an investment opportunity. The call went on for ten or so minutes, after which a meeting was called. Five family members and I went into a conference room to hear what was up. In short, a Scandinavian tycoon was facing financial difficulties, needed money and was willing to sell his private jet at a discount. We discussed it for ten minutes before dialling in the person who had called earlier (the ‘introducer’). He was advising the Scandinavian business man. The call went on for 45 minutes. Afterwards, we stepped out and grabbed a bite, after which we returned to the conference room to continue discussing the opportunity amongst ourselves. We returned to our seats. An hour later, the introducer sent us documentation on the private jet. Another hour later we regrouped in the conference room. Within half an hour we made a decision to move forward and exactly two days later we all flew in a private jet (belonging to the Family Office) to assess the purchase of an additional private jet.
The chosen few
Over the last three years I’ve met a handful of multi-millionaires, and even a billionaire, whose source of income were almost solely tied to the strength of their relationships to one very powerful individual or family. Now ‘millionaire’ may not sound like much in light of the fact that there are now so many around the world. But I speak not of entrepreneurs running USD50m, USD100m or multi-billion dollar companies. The people I refer to work as employees, advisors or consultants – let’s call them special advisors – to Family Offices and as a result of the trust they have developed over many years they have achieved unimaginable success.
These special advisors are not on the kind of payroll most people are used to whereby a monthly salary comes in; rather a payment may come in once or more per year and include the equivalent of 6 zeroes. What they share in common with one another is their ability to develop, over years and years, solid relationships with the right parties.
Family Offices meet new people regularly in the course of business. They’re always meeting someone new. How then do the special few get close enough to earn their trust, get invited into their circle and go on to build lasting relationships?
Amongst other things, they cultivate and maintain the relationship. Whereas most people who enter the picture quickly plant a seed but fail to water and nurture it to health.
Anything worthwhile takes work and effort
People in positions of privilege, be they rich and otherwise, tend to attract a lot of people. Particularly the sycophantic types. I have seen it countless times when working with my clients. An individual will come to meet a member of the family, through an introduction, at a conference or some other source. For a very short while that new face will keep in touch and propose a few projects but then quickly disappear because they expect the Family Office to simply write a 10, 50 or 100 million dollar cheque quickly, through which, of course, the wishful newbie would make a handsome commission or fee. But that rarely happens.
A family with hundreds of millions or billions of pounds is not going to throw money around based on the opinion of a stranger they’ve just met. Especially one who does not have anything – especially money – to lose.
99.9% of wannabe dealmaker types fall into this category. You’ll hear from them one day and then nothing. Then, six months later, they’ll touch base again this time with another alleged once-in-a-lifetime proposition and urge you to invest, take action, etc. When they’re failed to be taken seriously they’ll become impatient and disappear once again. In time, they develop a reputation for themselves and fail to realise that many Family Offices know one another and in fact work and co-invest together. They talk to each other.
Why, then, don’t people work to develop solid relationships if that’s the key?
One simple and universal reason is that it takes time and effort to do so (not to mention of course there needs to be alignment of interest). Usually, they meet a very rich person and think, “How can I get rich off them very quickly?” Rather than to build a healthy, long-term relationship and to realise that after gaining access to a Family Office they will need to prove themselves first. And that means giving and adding value before expecting anything in return.
The reality of the situation is that they bring little to the table on Day 1 when on the other side sits an established organisation with lots of resources at their command. It’s clear where the balance of power lies.
More than just brains
Most special advisors I know don’t have stellar academic credentials and only some of them are former investment bankers. Yet each of them has cultivated long term relationships.
Often people think they’re developing proper relationships because they’re ticking boxes (e.g. send an e-mail, put in a call, go for coffee) but that’s not what it’s about. Also, the majority of people are unsuccessful in relationship building because they go about it the wrong way.
In nearly all successful cases I’ve witnessed trust was a critical factor in getting there. If a Family Office is to let you in on confidential matters such as the various companies they own, the list of real estate assets across big cities like London, New York, Paris and Rome they possess, and also share with you personal family matters then you almost have to become an extension of the family. You won’t become part of the family. That rarely happens.
One of my friends, Jack, advises the most senior member of an English family office with a net worth of around USD2bn. An all-around nice and cheerful guy, Jack was ambitious and hard-working and spent a great deal of time running around Mayfair trying to put together deals. Early on he only earned money from the odd advisory and consulting gig. One of the deals he – unsuccessfully – tried closing caught the eye of a member of that English family. They met and over the course of five years the relationship grew stronger and stronger. Jack and that family office member have become very good friends. Let me just say that Jack does quite well for himself now. He owns several large homes in multiple cities around the world; owns stakes in various medium-sized profitable companies; and more.
Don’t be like the rest when it comes to relationships
To what extent the relationships you hold will help you achieve particular goals is difficult to say with accuracy. But there is no doubt that relationships matter very much. And the more history you have the better.
You must accept that with relationship-building, like much in life, what matters is the long-term. And the people you work with have to see and believe that you’re not a one-night stand kind of person.
Remember that rewarding relationships take time to build and require maintaining.