Is Your Family Office Built for the Future?

by Josh Baron and Rob Lachenauer

Two years after their father died, Paul and Hank knew the time had come when they should break-up their family office. At their father’s insistence, the family’s substantial financial assets had been invested together. As their father’s business was the source of the family wealth, the brothers felt an obligation to build a single-family office together. But investing decisions soon became a source of conflict. Decision-making authority was murky; each brother lacked transparency into what the other brother was investing in and why. How aggressive to be on tax strategies became a matter of great disharmony.

Seeing the discord, the brothers’ siblings, spouses, and children tried to steer clear of the family office completely. Their father’s well-intentioned goal of keeping the family close after his death ended up backfiring. The family office was disbanded, and the brothers and the entire extended family drifted apart.

Family offices can provide a number of benefits, including privacy, customization, and having your own team to handle a wide range of services, such as guiding family philanthropy, managing shared properties or even managing household help. Successful principals in hedge funds, private equity, real estate, and tech entrepreneurs, and even family businesses owners selling their firms, have created an explosion in the number of family offices. A 2019 study by Campden Research put the number of family offices at 7,300 (up 38% from two years prior), managing a total of almost six trillion dollars. What was once the province of a select few, like the Rockefellers and Vanderbilts, has become central to the investment world. Both Single-Family Offices (SFOs) and Multi-Family Offices (MFOs) have been created to meet the investment and support needs of an ever-growing number of families.

Building a Resilient Family Business

Most of these family offices are in their relative infancy. A global survey by UBS and Campden Wealth showed that 68% were founded in 2000 or later, with 35% starting since 2010. That means most family offices are navigating or approaching a critical generational transition for the first time.

Without further attention to the challenges these transitions will bring, we are skeptical of how long many single-family offices will endure. As we’ve advised leading family enterprises over the past 15 years on how to create long-term success, we’ve seen that family offices are even harder to sustain than family businesses. The forces that hold a family business together are not always present in family offices. But that doesn’t mean they’re doomed to failure. Here’s what you need to know to build and sustain your family office so it will last.

The Built-In Tensions of Family Offices

Family offices are often established in a wave of enthusiasm. An individual or family has been successful enough to generate an excess of $100 million in wealth (a rough guideline for assets under management that justify the expenses of a single family office) and the family chooses to invest that together through a family office. But family offices face some unique built-in tensions that family businesses don’t that leave them vulnerable in the long-term:

Lack of an emotional connection

As family business advisors, we have seen first-hand how difficult it is to keep families united when owning shared assets. A necessary condition for business families to stay together is for the owners to have a shared purpose beyond financial performance. Family offices often start in an emotional-connection deficit. We’ve heard clients express the difficulty this way: “Dad sold our family’s purpose when he sold our family business.”

Protection versus agency

Ask most founders “why did you establish your family office?” and they will say something akin to “to preserve our family’s wealth and protect our children from the destructive power of that wealth.” This protective response is reasonable, yet in the process it can undermine long-term viability. If a family office ends up handling everything from investing money to making travel reservations for family members, this can unintentionally create an infantilizing environment for the next generation. They may start to resent the role of the family office in their lives and choose to close it to recover their autonomy.

Credible alternatives

Families have ready-made alternatives to keeping their wealth combined in a single-family office. Family members can move their assets to a multi-family office (MFO), such as Bessemer Trust or BBH, which have decades of successful service to such families. Not only do they invest your money (for a fee), but they also have excellent estate planners and family governance experts. Or you can out-source many of the tasks of a single-family office to a wealth manager, such as JP Morgan or Goldman Sachs. If your family doesn’t want to keep its assets together, you can each select different providers and go your separate ways.

So, while most single-family offices are set up with good intentions of continuing to keep the family (and its wealth) close, the centrifugal forces of diverging interests may tear them apart over time. But the family office doesn’t have to suffer that fate, if the owners are prepared to make a few key decisions together to set it up for long-term success.

The Key Decisions Family Offices Need to Make

As we’ve advised leading family enterprises, we’ve seen that the power that comes with ownership can make or break a family enterprise. The owners of an enterprise have the right to make decisions in five key areas (we refer to them as the 5 Rights of Owners) that no one else can without their permission. How the owners of a family office make these choices will shape long-term success of both the office and the family. Here are the key questions to consider:

Design: How will you own your assets together?

When establishing a family office, the opening proposition is often that by staying together, families can achieve scale and efficiencies in investments and services. But get under the hood of great family offices and you find that the family owners don’t require such a uniform approach. Family offices that endure offer a world of trade-offs, value flexibility, and build in the right to exit. Designing an all-or-nothing-office risks nothing being together in the next generation.

That’s because as families grow across generations, the interests of individuals will diverge — what investments to own, services to receive, and charities to support, etc. As you design your family office, it’s important to consider how much flexibility to build in. We see many successful family offices operate what we call a “federal system” in which all family owners use some investments and a few core services, such as tax and estate planning, while people can opt in or out of the rest of what the office offers.

Another key design choice is whether to allow family members the right to exit their family office. This right can be difficult to design because, at least in the U.S., most family office assets are owned in trust structures. Like being able to see the exit sign in a crowded theater, an exit policy enhances a feeling of psychological autonomy — I can leave if I want to. Moreover, knowing family members have an exit right, family office management and board will likely be more responsive to their needs.

Decide: How will you structure governance?

Family owners have the right to determine how decisions are made in their family office. When family offices are established, often one (or a few) founders become the decision makers on all matters. As offices mature, having no clear decision governance beyond the founders’ statement of intent can be a recipe for disaster, as Paul and Hank in our example above found. To avoid this fate, family owners should decide how decisions will be made in their family office. For example: What decisions will the family owners reserve for themselves? What decisions will they delegate to a board or management? Will they make investment decisions themselves or hire an investment team or outside firm to do so? How and when will they involve their next generation in making decisions? What processes and policies will the family establish to unify the family?

One helpful framework is what we call the Four-Room Model, in which the work of a family enterprise is distributed in four metaphorical “rooms” (an owner room, a board room, a management room, and a family room). Each “room” has distinct decisions to make, expertise to bring to bear, and explicitly set up structures, policies, and processes to guide their work. Decision policies, structures, and processes may not sound as sexy, but they’re key to long-term success. They also provide family members pathways to positively engage in important decisions, rather than being passive beneficiaries. With the right standards and development, some family members can even find rewarding careers in their family office.

Value: How will you define success for your family office?

Paul and Hank approached their investment portfolio as a purely financial task, which will rarely bring family members closer together. In fact, pure financial investments are easy to outsource. Lasting family offices design a portfolio of assets, services, and charitable giving that, collectively, mirror what the family values.

Family offices that are built to last design both financially sophisticated portfolios and emotionally relevant ones. Beyond hiring top investment managers and investing in leading funds, they find investments that are meaningful to their family. Return on investment is not the only important measure of success. There’s a reason so many sports teams are owned by families. Some family offices are leaders in impact investing. Family offices that co-invest in entrepreneurial efforts of next generation family members are becoming more common. Family wealth does not need to be defined solely in financial terms. It can be broadly defined as professional, social, and relational as well.

Inform: What will — and won’t — you communicate with your family?

Privacy is one of the great benefits of a family office, as you have the right to keep information contained to a small circle, namely the family owners. Family owners, however, face a core dilemma as to what information to share with the next generation and when. Worrying about the destructive power of knowledge of their wealth on the next generation, families face the balance between waiting to share and eventually “dropping the bomb” and by sharing too much information too early and causing the next generation to “lose their spark.”

We’ve seen two practices that manage this dilemma well:

  • Share beyond spreadsheets. We’ve seen families in which the next generation learns about their family’s wealth in the opulent Wall Street offices of their wealth manager, with white-gloved waiters serving coffee. Wealth managers explained in spreadsheet after spreadsheet about how the family’s assets were allocated across their mind-bendingly complex set of trusts. The unstated message was: “This is what was set up for you. Don’t break it.” That does not inspire the next generation to understand and connect with their wealth. By contrast, we know a family office which owns a minor league sports club and invites their next generation to attend games, work in the concession stands, and interact with the players. While the team is not their best financial return, they emphasize that they own things with meaning, with people, with connections.
  • Create an “ages and stages” discussion plan. Top family offices plan thoughtfully about what to share with their next generation and when. For example, one family office we know reveals very little about the financials of the family until family members turn 30. Then they start revealing more and more each year until family members reach 35, when the entire picture of the family’s wealth is shared.

Transfer: How will you handle the transition to the next generation?

Family owners in all enterprises must decide on how to transfer ownership to the next generation, including the assets, roles, and capabilities. Family offices face special transfer issues.

The assets a family office oversees should be in service of its purpose and goals. It’s wise to assume that the purpose and goals of a family office will change across a generational transition. We have seen many of our clients have thoughtful discussions of the purpose of the current generation and then ask the next generation how they see the purpose and goals for their generation, without judgment. The assets owned should eventually reflect the engagement of the new generation.

A generational transition is often a good time to reassess overall governance including how to engage the next generation in the family office. Many family offices opt to hire a professional CEO, but there are important roles for family members, too. For example, you can build a family board to oversee the CEO. Having a blueprint of your governance structure will clarify what capabilities will be necessary to build in the next generation.

One of the biggest questions families with investable wealth face is how much to transfer to the next generation. Rather than picking a number out of thin air, start by setting goals for it. Wealth can be used for spending, investing, giving, and collaborating. Think through what outcomes you want to achieve and avoid across each of these areas. And then align your approaches to sharing wealth with those desired outcomes.

Will your family office beat the odds and last for the long-term?  It depends on how well you address these five critical topics.

What is Crypto Staking?

What is staking? Image Credit Motley Fools

If you’re a crypto investor, or just starting out in crypto, staking is a concept you’ll hear about often. Staking is the way many cryptocurrencies verify their transactions, and it also allows participants to earn rewards on their holdings.

But what is crypto staking? Staking cryptocurrencies is a process that involves committing your crypto assets to support a blockchain network and confirm transactions.

It’s available with cryptocurrencies that use the proof-of-stake model to process payments. This is a more energy-efficient alternative to the original proof-of-work model. Proof of work requires mining devices that use computing power to solve mathematical equations.

Staking can be a great way to use your crypto to generate passive income, especially because some cryptocurrencies offer high interest rates for staking. Before you get started, it’s important to fully understand how crypto staking works.

With cryptocurrencies that use the proof-of-stake model, staking is how new transactions are added to the blockchain.

First, participants pledge their coins to the cryptocurrency protocol. From those participants, the protocol chooses validators to confirm blocks of transactions. The more coins you pledge, the more likely you are to be chosen as a validator.

Every time a block is added to the blockchain, new cryptocurrency coins are minted and distributed as staking rewards to that block’s validator. In most cases, the rewards are the same type of cryptocurrency that participants are staking. However, some blockchains use a different type of cryptocurrency for rewards.

If you want to stake crypto, you need to own a cryptocurrency that uses the proof-of-stake model. Then you can choose the amount you want to stake. You can do this through many popular cryptocurrency exchanges.

Your coins are still in your possession when you stake them. You’re essentially putting those staked coins to work, and you’re free to unstake them later if you want to trade them. The unstaking process may not be immediate; with some cryptocurrencies, you’re required to stake coins for a minimum amount of time.

Staking isn’t an option with all types of cryptocurrency. It’s only available with cryptocurrencies that use the proof-of-stake model.

Many cryptos use the proof-of-work model to add blocks to their blockchains. The problem with proof of work is that it requires considerable computing power. That has led to significant energy usage from cryptocurrencies that use proof of work. Bitcoin in particular has been criticized over environmental concerns.

Proof of stake, on the other hand, doesn’t require nearly as much energy. This also makes it a more scalable option that can handle greater numbers of transactions.

How to Stake

As previously noted, not all cryptocurrencies offer staking. You need a cryptocurrency that validates transactions with proof of stake. Here are a few of the major cryptocurrencies you can stake and a little bit about each one:

  • Ethereum was the first cryptocurrency with a programmable blockchain that developers can use to create apps. Ethereum started out using proof of work, but it’s transitioning to a proof-of-stake model.
  • Cardano is an eco-friendly cryptocurrency. It was founded on peer-reviewed research and developed through evidence-based methods.
  • Polkadot is a protocol that allows different blockchains to connect and work with one another.

Start by learning more about any proof-of-stake cryptos that catch your eye, including how they work, their staking rewards, and the staking process with each one. Next, you can look for the crypto you want and buy it on cryptocurrency apps and exchanges. More on that topic will be coming soon!

Where to Stake?

Many of the cryptocurrency websites support staking directly through their site. You can also conduct research online, and find the most reputable sites and staking opportunities with the least amount of risk compared to the reward you are seeking. One example is a site called Looks Rare. Looks Rare is an NFT trading platform that, as of the time of this article, provides over 200% interest paid in WETH (Wrapped Ethereum) and their own tokens called LOOKS. (This is NOT an endorsement of Looks Rare*)

Maine – The Way Life Should Be

As you drive north on I-95 heading up from Boston’s Logan airport (there are not a lot of non-stop flights into Portland), you start to notice the scenery changing. More trees, less cars, fewer buildings…and a subtle serenity begins to slowly take over. Regardless of the temperature outside, I always like to roll the windows down and take a big, deep breath of fresh air. And then the sign – Maine The Way Life Should Be. I’m instantly relaxed as my blood pressure drops and I get that feeling that’s difficult to describe. It’s not just home, it’s a way of life.

Growing up in Maine is something that made me who I am today. I often tell people about what it was like and they look at me like I must be fabricating a story. We left our doors and windows unlocked, I never saw theft or crime, there weren’t problems with drugs or the stereotypical urban life stories I hear from my other friends. Instead, we grew up cycling, camping, hiking, playing hockey, and generally enjoying the outdoors. We didn’t care what kind of clothes kids wore, what kind of car you drove, or how fancy your home was. It just didn’t matter.

Maine is also where I learned the value of hard work. Growing up in New England and enduring the cold winters was not something we ever thought about – it was just a fact of life. That meant chopping wood all summer to fuel the wood stove in the winter. It also meant gardening, learning how to can fruits and vegetables for the winter months, and running out the door on “snow days’ to earn money shoveling driveways and walkways. As a young age, the entrepreneurial spirit just came naturally as my buddy Patrick and I gradually took over other boy’s newspaper delivery routes. We found a way to attach baskets to the front, back and sides of our ten speed bikes, and carry twice as many papers as the other kids.

There is a noticeable friendliness many out-of-staters notice the first time they visit Maine. People still look you in the eye, say hello, and offer a firm handshake. There are a few other traditions such as honking the car horn when you pass friends and neighbors on the road. There’s also the “nod” when driving and passing a friend in an oncoming car. I can only describe it by saying this; the forefinger ONLY lifts from the right hand on the steering wheel WHILE AT THE SAME TIME the driver lifts his head slightly and opens his mouth as if taking in a breath. You have to see it to know what I mean.

Last but not least the food. Especially the seafood. I never realized how lucky we were growing up with such an abundance of fresh, cold water fish. Everyone knows about the lobster, but the mussels, scallops, haddock, cod and bluefish are just a few of the tasty plates you can find at any local spot.

I spent most of my youth looking forward to the day when I would be old enough to leave Maine and see the world. Nowadays, I spend most of my time thinking about when I can get back there to retire, or semi-retire, and enjoy life the way it truly should be.

What’s the Importance of Branding and Image?

What kind of branding services do you offer?

Most people have and project an image of themselves which they want the world to see and believe. Oftentimes I find that’s not the case when if you spend time doing research, reading professional blogs, or even going through social media. For example, when we were hiring people it was common practice to look on Instagram and Facebook to see what kind of pictures people posted when they were not under the scrutiny of employers. In one situation, we had an employee call in “sick” only to find out she spent the night at an Irish Pub celebrating St Patrick’s Day! Sick with the Irish Flu!

Our goal is to help clients take a realistic look at not just what they want the world to see, but the world actually sees. Sometimes bad things happen to good people – the old saying is true in that we all make mistakes. I am a perfect example of this. I spent most of my career serving my country in uniform, as a civilian government employee, and even in the private sector with the business I founded. When my company became the subject of a government investigation and I encountered legal troubles, I could have given up and walked away. Even since then, I’ve had to deal with the scrutiny that comes from going through what I went through. The most important thing has been helping show people who I am and the things I have done my entire life, prior to this incident and since this occurred. My actions are the true measure of the man I am, have become, and will be.

Our services help clients portray the image of them that is fair, unbiased, and accurate based upon who they are as people. In some cases, it simply means building a website (like I did), sharing your past (like I have), and even revealing personal things about you that you have hesitated to share in the past, but have become relevant now. Making these accomplishments public is an important aspect of building your brand and your image.

How do you help clients who have zero negative press build a brand reputation?

Building a brand from scratch is like a clean sheet of paper where the artist can create his or her work and ensure that it accurately reflects their abilities. Building your reputation is no different and it starts with a plan. Like any good plan, your reputation plan has a goal; I am HERE now and I want to get to THERE. Getting to that end point is where we specialize in helping clients understand what it takes to get to the endpoint, and what tools can be used to assist them along the way.

How do you help clients who do have negative press?

The challenge of addressing negative press can seem insurmountable. When I first Googled my own name, I found dozens of articles written by authors whom apparently did little if any research on what actually happened to me and my company. If they did, they would not have written the things they did unless they were solely focused on selling the sizzle.

For clients with negative press, it’s not the end of the world. Look at Martha Stewart and her brand.  She went through some incredibly difficult times and even spent time in a Federal Prison. She emerged stronger, tougher, and even financially more successful. In 2005 she launched her comeback campaign, and in 2015 her company was acquired. Again, overcoming this is a function of creating a plan with a clear end goal and means of getting where we want to go.

Do you do brand research for clients?

We do have some capabilities for research however they are limited. To the extent our clients need additional resources, we do have a select team of partners we rely upon for research, accounting, finance, and legal advice. In addition we have reputation partners we work with whom can assist our clients with specific campaigns.

Do family offices usually offer branding services or is this something you offer because you know how important image is?

No, most family offices do not offer branding services because their scope of services typically falls within managing the needs of one family, or a very small group of 2 or 3 other families who have pooled resources. Because my personal situation felt different to me, and because it was not a service I saw elsewhere in the market, I felt it was an important issue to address. Life happens and we all know that. We can choose to ignore it and sweep it under the rug, or we can face it head on and build a plan to overcome these challenges.

What is the most important step, in your opinion, when it comes to helping a client who has experienced bad press in the past to rebuild their reputation?

The most important step is talking and meeting with someone who has gone through the same challenges and sharing your concerns with a trusted confidante. This experience can help you not only learn how they dealt with overcoming their adversity, but prove that there’s light at the end of the tunnel. A lot of the challenges that deal with overcoming adversity begin at step one; talking about it and confronting the matter. An experienced advisor is not there to judge you – he or she has been there and they know how it feels to be in those shoes.

Dan Lounsbury Family Office celebrates establishment of Legacy Growth Services

One year ago today, Dan Lounsbury established a Family Office in South Florida with the goal of building a legacy for his family. Today, that effort is evolving as he adjusts his strategy based on his own past business challenges.

Lounsbury picked up knowledge and experience in investing and stock markets working with Merrill Lynch after moving to the D.C. Metro area shortly after leaving the Navy. But that’s not what his Family Office is about.

“Let the experts do what they do best,” Said Lounsbury. Creating a strategy for growth of a family’s legacy is a dynamic process. It’s so much more than just asset management. And while asset management is the one aspect most firms concentrate on because it generates fees, Lounsbury doesn’t. Instead, he focuses on what he calls Legacy Growth Services (LGS).

But without capital to attract the attention of big-name management firms and trust offices, Lounsbury has spent a lot of time learning from successful people around him – lawyers, accountants, business owners, and other mentors who had developed their own custom strategies. It’s these lessons, learned over a career of diverse business challenges that led him to helping others build their own legacies.

“Going through my experiences, which culminated with my legal troubles, forced me to analyze a lot of complex issues and matters in my life and create a plan to sustain all the important aspects of my life – that is what Legacy Planning is to me. Its a little bit disaster prevention and protection, and a little bit preparing for the unexpected. A life prepper.”

Lounsbury has been through a perfect storm of challenges, both personal and business-related. He went through a difficult divorce in 2015, lost his mom in 2018, and has fought lawsuits and federal court cases – and lost. But it’s exactly those experiences that he feels drive his current successes.

“Celebrating one year of a successful Family Office means the world to me,” said Lounsbury. To learn more about Lounsbury’s services, visit

Read more:

Creating a Strategic Plan

What is Legacy Growth Services? It starts with building a strategic plan. The key to building this plan is being able to dedicate a significant amount of time to sit down, write everything out, and then step away.

That’s why having a coach or a mentor can help you realize all the various aspects of your plan and how many moving parts are involved. Once you step away and come back to the plan, it becomes easier to see the things you missed the first time, make adjustments, and start to create a living, working blueprint.

Let’s take a quick walk through a short example of a situation without an excessive number of variables and moving parts. This example is about my buddy Patrick.

Patrick is an avid outdoors man and has spent most of his life focused on everything outdoors. After working in the outdoor industry for years, Pat saw an opportunity to create his own brand of flies for fly fishing. He was already making his own flies; stonefly, mayflay, trout flys and more! All his buddies were buying his creations, and word spread throughout New England that if you wanted to land big fish, you need to use his flies!

Fast forward 15 years and Patrick’s little company became a big fishing equipment business and was purchased by a much larger retailer for a tidy sum. Over the years, Patrick acquired a fishing camp in Idaho, along with his property in Maine and a small place in Vermont near the corporate office.

Patrick created a unique legacy for him, his family, and generations to come but his complex situation had a lot of unique challenges. Hence the reason we decided to create a strategy tailored to his family and their needs. Asset management is only one part of his plan, but there were so many other important variables that we needed to address and many people overlook them.

Actually sitting down to discuss, explore and write all these variables down was seemingly daunting. It looked a little like this;

Asset Management – Assets including multiple accounts, investment accounts, bank accounts, safe deposit boxes, precious metals, retirement accounts, trust accounts, and reviewing the effectiveness of current asset allocation strategy/fee structure

Physical Assets – Homes, jewelry, boats, personal effects, art, toys, aircraft, wine, movement and location of assets, value and adequate insurance coverage for all assets, and even other investments ( restaurants, land, etc.)

Operations – Budgets, spending, credit cards, small staff, home/s maintenance, payroll, family operations (travel, vacation, college, etc.), insurance, umbrella polices, life insurance, annuity, safety/security

Planning – Contingency planning (disaster recovery) and continuity, safety and security, data security, goals and plans to achieve the goals, charitable giving plan

Health and Welfare – Family physical health and well being, diet and exercise, nutrition, alcohol or tobacco use, mental health and well being, stress, quality of life, plan for extending life to a comfortable age

Business – Ongoing operations and involvement, liquidity plan, key man insurance, exit strategy and many more

As you can see, this was just the starting point for sitting down and addressing the most obvious variables and moving parts. Putting a plan together for Patrick was a dynamic process which evolved over a period of months, and we know monitor it on a quarterly basis, making adjustments when needed.

We literally filled the white boards in the conference room, adding different pieces in various colors of dry erase marker. It was a brainstorming session which helped us visualize all the important aspects of Patrick’s life.

If you think it’s time to sit down to discuss your situation and evaluate your strategy, reach out to me!

-DTL, West Palm Beach, March 2020