The Our Family Office Podcast

Adam: 00:08

Welcome to the pilot episode of the pilot season of the Our Family Office podcast. My name is Adam Fisch. I'm a client adviser at Our Family Office. Over the course of this season, we're exploring the areas of focus for a purpose built family office and the ways in which a family office can improve the lives and relationships of Canada's wealthiest families. On today's episode, we're gonna be asking the question, what is a family office?

Adam: 00:35

And to help me answer it, I'm joined by our chief executive officer and cofounder, Tim Cestnick. Tim, thanks for being here.

Tim: 00:42

Adam, it is great to be here, and this is my favorite topic. So glad to talk about this stuff.

Adam: 00:46

So let's jump right in. So in your view, what is, and that may lead to what is not, a family office?

Tim: 00:55

Yeah. It's a good question. You'll get a lot of different definitions depending on who you speak to. But if you wanna really break it down into what truly a family office is, it really is a a group of professionals coming together under a single roof, professionals with different backgrounds, all possessing, you know, collectively, competencies that an affluent family needs. So they're working together under 1 roof to service a family or maybe more than 1 family depending on the group.

Adam: 01:24

Yeah. And I think when you when you look at the services that a family office provides, it's nothing that you can't get elsewhere.

Tim: 01:34

Mhmm.

Adam: 01:34

But what is unique about a family office is the way in which these services are integrated. So if we think about, you know, we talk internally about the our our 6 areas of service. Right? So there's investment management, risk management, which is, you know, looking after insurance needs, asset protection, integrated planning, so tax and estate planning, that kind of thing, family continuity, family governance, and, family constitutions, the you know, family education for the next generation, strategic philanthropy, which is a a real area of focus with us. Right?

Adam: 02:12

How do you give with purpose? And family administration, tax preparation, bookkeeping, all those things.

Tim: 02:17

The paper shuffling.

Adam: 02:18

Right. All of those services, all those areas, an affluent family is gonna they're gonna have those things anyway.

Tim: 02:25

They're yeah. Every family needs these things addressed. Now whether they hire people internally to look after this for themselves or they outsource some of these things is another question, and that really depends on the family and what their interests are, how much do they really want to, you know, manage a staff of people, what's the cost of all of that. So there are a lot of questions that come up when you decide or trying to decide, should I hire these people internally, or should I outsource all of this? But, you know, typically, what you'll find in a family office setting are, investment managers or portfolio managers.

Tim: 03:00

You'll find accountants with accounting tax expertise. You'll find lawyers, and you may actually find, depending on the family, people with, a psychology or communications background where they're able to coach families around, family dynamics issues. So those are really a lot of the core competencies you'll find. And generally speaking, those areas you talked about can probably be look be looked after by a group like that.

Adam: 03:28

Yeah. And and where I think a family office adds a lot of value is having all of those professionals that are serving a family Under 1 roof.

Tim: 03:39

Yeah. Absolutely. We call that integration, and the the reason it's beneficial is that you you can have really good advisers in all of those areas. So you can have a really good lawyer, good tax accountant. You can have a good, investment adviser, good insurance adviser, you know, a good good coach or counselor for the family.

Tim: 03:59

But if those people aren't all getting together in 1 room at the same time regularly and asking the question, you know, what are the issues that this family has to deal with? And then discussing that and coming up with, a single set of solutions that they all can agree upon and to bring that back to the family with 1 voice. If they're not doing that, then there are there are gaps. There will be gaps in the planning, and that almost never happens. You you never get all these people at 1 time sitting together in a single room because, number 1, they could be geographically dispersed.

Tim: 04:30

Their schedules all are very different.

Adam: 04:32

And they just don't they don't work together. Like, that's just that's not part of their routine. They they work in their silos, and they may be excellent at at what they do within that silo, but they're still in this 1 area. You know, I can think of a client family that has had trusted advisors for decades and, you know, in tax, with their lawyers, and and those professionals are excellent, But they've created, or they had created a corporate structure and an estate plan that didn't account for the fact that 1 of the family's children doesn't live in Canada anymore.

Tim: 05:09

Right.

Adam: 05:09

So there are all of these tax implications to that would impact the estate plan, but nobody thought to ask that question because it wasn't anyone specific job to ask it.

Tim: 05:21

Right. Right. And what you'll also find that is that if even if you did get those professionals altogether in 1 room at 1 time and you you talked about the issues, it would be very difficult quite often for them to come up with a set of solutions that they can all agree on because, you know, everybody, thinks differently, but they also are all compensated differently. So, for example, you have a tax liability and you wanna deal with that. Well, the insurance advisor might say, well, buy life insurance to cover the tax bill, whereas the accountant might say, well, let's eliminate the tax through a couple of strategies we can implement.

Tim: 05:54

So you get this, there's some conflicts of interest a little bit there. So that's another issue. But these are hurdles that are hard to get over. Now imagine that same group employed by the same owners in the same firm. So everyone has a vested interest to work together.

Tim: 06:11

They're all compensated the same way. They they,

Adam: 06:14

And they're in they're in constant communication.

Tim: 06:16

Right. They're actually physically sitting beside each other every day and probably on a weekly at least a weekly basis getting together and talking about your family.

Adam: 06:25

Right.

Tim: 06:25

This multidisciplinary group, you can imagine how that's gonna close gaps in the planning.

Adam: 06:30

It's it's really the way I think about it is it really is the best example of the sum is greater than the parts. Right? Is when you have it all together, you end up with better ideas, better solutions, better execution than when you have disparate parts even if each of those parts has a lot of value and is really experienced and has a lot of expertise in their area.

Tim: 06:55

That's exactly right. And and the interesting thing is that, you know, the concept of the family office has evolved over a number of years. And depending on the country you're in, it may be more evolved or less. You know? And when you talk about Europe, you talk about the US, there are a lot of firms that are call themselves family office firms and many legitimate firms that do many of the things we've been talking about.

Tim: 07:17

In other countries, like Canada, for example, it's a newer concept. And so it's I remember even up until probably 5 years ago, I spent a lot of my time just explaining to people what a family office is and what the advantages of it are because they would say, well, I have advisors. I don't need any more help. But now what we're seeing is, finally, you know, a few years later, we have people actually calling who are looking for a family office because they now understand that this is the way that the most affluent families globally are choosing to have their get to choosing to get their advice this way.

Adam: 07:55

And I think it's also important to understand as a client, as someone who's interested in the family office, that for most family offices, they're not gonna tell you, hey. You have to get rid of all the professionals that you've built up . Your relationships with over 30 years because it's us or them. Right? Yeah.

Adam: 08:16

No. No. I mean, a family office should be able to adapt and work alongside your existing professional relationships, but augment those, ask questions that those professionals it may be outside their purview to ask and have that wider perspective.

Tim: 08:33

And actually help those other advisers to be the best version of themselves . For example, if you're talking about a family office firm that deals with multiple families, that kind of firm will actually see a lot of different ideas coming from many different places. You know, I think about, the law firms, the accounting firms that we know around the country because of our clients, because of who they deal with. So, you know, you become a central repository of good ideas and those ideas can be shared among family members, of different families. So there's actually this great cross fertilization of ideas that takes place when you have different families served by this single team.

Tim: 09:12

So there's a lot of value in that as well. And that gets lost sometimes when people think, you know, I'm well looked after. But like you said, this is not about replacing or displacing existing advisers. In fact, what we're finding is we've actually, you know, received referrals from some of the lawyers and accounting firms of the clients we work with because it's important that we work collegially. If you're a family office firm, you have to work collegially with everybody.

Tim: 09:39

And also, you need a method for figuring out who is doing what and who should get paid for doing what because you don't wanna pay more than 1 person to do the same thing.

Adam: 09:49

Right.

Tim: 09:49

So that's really important, and there are ways to do that. Every family office needs to figure that out. And, of course, we have something called a services summary, which is a list of everything that needs to happen in the life of a family from a wealth management perspective.

Adam: 10:04

And that's a document that identifies who's doing what, and then, you know, a firm should only charge for what they're doing. And when there is that preexisting outside relationship that our our client family wants to continue though often we can make their job easier because we can set very clear parameters around what their responsibilities are and what their responsibilities aren't, and they can have the comfort, especially if they've worked with us for a while, to know that the things that are outside of their purview, they're gonna be looked after properly. So they can focus on just the the tasks that are, you know, under their responsibility.

Tim: 10:45

Yeah. Absolutely. And the family office team will see all areas of the client's life. So, for example, the accountant may not understand what's going on with the portfolio because it's not their job to really look at that, whereas the family office will see both the portfolio as well as the tax issues. And when it's multidisciplinary, you can raise issues for the accountants that the client works with or the lawyers, and make their jobs actually more efficient and keep them in the loop on what's actually going on with the family because they don't necessarily have the time or resources to actually be that tied into every area of the family's wealth.

Adam: 11:22

Right. There's less obligation on them to be proactive with their client families about what's going on because we're the ones reaching out to keep them in the loop.

Tim: 11:31

And we're the ones giving them information. So , you know, even when it comes down to, for example, preparing tax returns, if we're not doing that and someone's got an accountant doing that, you know, we're like that central place where all the information is gathered and and hen we can then pass it out to who needs it, with the client's approval, of course, and it just makes their lives a lot easier.

Adam: 11:53

So, you talked a bit about ideas flowing in as, you know, as a multifamily office because we deal with other families. We see other ideas. Let's talk a little about kind of what the advantages are to what we would call a multifamily office. So that would be a family office that is shared among some number of families, because I think that there's still a preconception a little bit that when someone thinks of a family office, they think of, you know, a billionaire family that has a family office that manages everything for that 1 family, and, you know, and it costs, you know, a 1, 000, 000, 2, 000, 000, $3, 000, 000 a year to run. And so if I have $50, 000, 000 or a $100, 000, 000, you know, that well, that's not me.

Adam: 12:39

That's way outside of my area. But with the way that our office is built and the services that we offer, the economies of scale actually allow for a much broader range of client families to benefit from it.

Tim: 12:53

Yeah. That's for sure. I think, you know, there are some families who will hire their own teams of people. The the ollar threshold where that starts to make sense is probably about half a billion dollars of total, net worth because the cost of running a team like that is not inexpensive. It's not uncommon to spend 2 to 3000000 a year on a, you you know, not even the biggest team, but a relatively you know, a good team that's gonna have the resources it needs, including everything from money manager databases to software to, to, just, you know, the right competencies.

Tim: 13:28

So not inexpensive. And most families are gonna say, well, we're not gonna spend that much money on a single team. With a multifamily office, 1 of the advantages is that you are sharing the cost of the team. The families are really sharing that cost of that single team. The big concern for some families is that they're gonna feel like they may feel initially like they're not getting the same time and attention and control over what that team does and almost like a dedicated resource for the family.

Tim: 14:00

But a good multifamily office will look after that by making sure every family feels like they are the only family that they serve. And that's why, you know, in any multifamily office, the teams that serve clients cannot serve 20 families. You just can't do that because you're not gonna be able to pay attention to every family like you should. So, you know, realistically, our experience has been that a team of 3 or 4 people can probably serve somewhere between it depends on the complexity of the families and everything going on.

Tim: 14:33

Could be anywhere between, at the low end, maybe 5 or 6 families. At the higher end, maybe 12 to 13 families. So, but when you get that kind of that, you know, that sort of, team to client or staff staff to client ratios, families can start to feel like, yes, this is my dedicated team.

Adam: 14:52

Yeah. And and that's why we are very intentional about the pace at which we onboard new families where it is not, you know, an open door policy of, yeah, we wanna sign up as many families as we can. You know, we aim to sign up 1 client family a month so that we have the opportunity to give each client family the attention that they need, that they deserve to really understand them, understand their situation, figure out the best ways that we can serve them, and the ways in which, you know, each of our service offerings can be best used in their case.

Tim: 15:28

And you know, Adam, if there's if there's a family out there who's thinking of the, contemplating a family office model and maybe looking at hiring a family office, 1 thing they should be asking that group of professionals, that family office, they're thinking about, as they're interviewing people is how do you integrate the various disciplines, that you need to serve the family? Where are they geographically located? Because in some firms, you'll have the tax team in you know, Montreal, you'll have the investment people in Toronto, you'll have, you know, someone else in Vancouver. How integrated is that really going to be? Ask how do they bring together the various, people in the firm who are gonna serve them?

Tim: 16:11

How often do they meet to talk about the family? Those are important questions because, ultimately, that's where you gain the synergy and the and the benefits of having that team. So it's an important question.

Adam: 16:21

Yeah. I think it's it's a great point, Tim. And, you know, I know the the old joke in the industry is if you've seen 1 family office office, you've seen 1 family office. So Yeah. Yeah.

Adam: 16:30

You know, there are definitely differences between them, but I think it's reasonable to have an expectation of a certain level of expertise and a certain level of integration Yeah. When you're considering a family office.

Tim: 16:43

Absolutely. And here's another question to ask is or to figure out is how was that family office practice born? Were they born out of, say, the investment world where they're really all portfolio managers and they bolted on a couple of, you know, financial planners or maybe a tax person, because that's gonna change the culture of the firm and talk to really speak to what they are best at. And maybe it's investments in that case. Right?

Tim: 17:09

But in other cases, it may be an accounting firm that says, hey. We wanna create a family office practice, and many of them have done that. So, you know, they're strong in accounting and bookkeeping and tax, but they've bolted on a person or 2, a CFA here or there, where maybe they do some investment advice give some investment advice. What are they gonna be best at? So it's important to understand the genesis of the firm that you're talking to to understand where are they strongest.

Tim: 17:38

You know, obviously, when we built this firm, we didn't really wanna be sort of 2nd best in any area. So what we did was we brought together people with significant expertise in the various core competencies. And, really, the firm was born out of an equal, competency in all these areas, which is, I think, the right way to do it. But every firm is a little bit different, so you wanna ask the question.

Adam: 17:59

Yeah. And that's when we talk about being purpose built, we are, you know, the integration of these services and putting these services on an equal plane to each other in terms of importance is really built into our DNA.

Tim: 18:12

And to be honest with you, you know, this won't come as a surprise to anybody who's listening here, I think, but the most profitable side of the business for any family office practice is the investment side of the business because you can do the research on a money manager or an investment strategy, and once you've done that research, you can apply that knowledge to every single family the same, and so you can really leverage the time of that team that does the research. Whereas, when you're getting into accounting, bookkeeping, tax preparation, tax planning, estate planning, those kinds of things, it's very, very bespoke or accustomed to the individual family, and it's time consuming and it's, but what's really important is that whoever you work with, make sure that they don't sacrifice that stuff that is so important on the planning side, into what we call integrated planning, in favor of the investment management, because it's the more profitable side. You wanna make sure I mean, to be honest with you, I've often said to people, if all we cared about was making the most money we could, we would not even be doing any planning.

Tim: 19:17

We would just invest people's money. But, you know, come back to the mission. I think the mission or purpose of any family office firm is to make a positive, meaningful, lasting difference in the life of a family, and you can't do that by just focusing on the investment.

Adam: 19:33

There's too many there's too many moving parts outside of just managing the money. Right? The money is not the client. Governance structure in place to make sure that the next generation will be educated and emotionally mature inheritors of wealth and will be in a position to steward the wealth throughout, you know, multiple generations, you can't just manage the money and have that happen.

Tim: 20:03

That that's called what we call heir preparedness, and that's a really critical part of multi generational families where you've got enough resources where they could go on for multiple generations. It doesn't happen by accident. It takes very deliberate planning. You know, I've often said that money always transfers with a message. And whether you craft that message explicitly or you just let it be assumed, it's going to transfer with a message.

Tim: 20:30

And so we think it makes sense to actually craft the message, share it explicitly with the next generation, make sure they're prepared. But that's all part of what a family office really should be looking after. And so when you talk to family offices about what they're gonna be doing for your family, you wanna ask the questions about that area that we call family continuity. It has nothing to do really with technical investment management or technical tax planning. It's all about family dynamics, healthy families, transferring the right different types of capital, if you will, not just financial capital, to the next generation.

Adam: 21:12

And this is why it makes it very hard for us to craft an elevator pitch for what we do because there really are there's so many parts to it, and it's hard to just pick out 1 area that's important and say, yeah, that's what we do. It really is. It's all of these pieces together, and we really believe that they are all so critically important for wealthy families.

Tim: 21:34

And, you know, it's important that regardless of the reason that a family comes to you as a as a family office firm, you have to treat them all equally important importantly. It doesn't matter if their key issue are family dynamics issues, where they just need to communicate better, or whether their their tax planning has been not, you know, not very good, or their investment performance has been weak. And every family's got what we'll call a pebble in the shoe, if you will, as we call it. And we need to deal with those things, but, every family is valued. And whatever the need is, we need to meet that need.

Tim: 22:10

And we can't sort of say, well, we don't really wanna do that work. We don't wanna do that kinda work. We just wanna do this kinda work. It needs to be holistic to be to serve the family best.

Adam: 22:20

Tim, thanks so much. This was great.

Tim: 22:22

Thanks, Adam.

Adam: 22:23

I hope you enjoyed today's conversation. Thank you so much for listening. Our family office is Canada's 1st purpose built shared family office, and the Our Family Office podcast is produced by Henry Shew. Please visit ourfamilyoffice.ca for more information about our firm, and don't forget to like, comment, and subscribe so you don't miss an episode. See you next time.

Adam: 22:45

The information in this podcast is presented as a general educational and informational resource only. While certain participants in this podcast may be registered to provide investment advice as a representative of Our Family Office Inc, itself a registered firm in certain Canadian jurisdictions, this podcast does not provide individualized investment, financial planning, legal, tax, or insurance advice, nor is it meant as a recommendation to any listener to buy or sell any specific securities or otherwise take any other investment action. Any action you may take as a result of the information presented in this podcast is your own responsibility. Our Family Office Inc and each of its representatives that participate in any podcast disclaim that any listener should rely in any way on any of this content as investment, tax, legal, or insurance advice. Listeners are encouraged to consult with their individual investment adviser and other financial professionals prior to taking any potential investment actions or making any insurance or tax decisions.