Doing the groundwork to ensure your family office continues to thrive
Doing the groundwork to ensure your family office continues to thrive.
The notion of never mixing business and pleasure has long been irrelevant for families with a significant legacy of business acumen and wealth, for whom ‘the family business’ is often mirrored by ‘the business of family’. We learned that being able to have hard conversations is essential to the long-term viability of a family office, as is a clearly defined playbook in the form of a family constitution, guidelines or shareholder’s agreement to define roles, appetite for risk and succession planning. Some families facilitate their own communication and decision making; others find involving external experts such as consultants and advisors helpful.
Giving shape to generational succession and ensuring access to higher education for all members of the family are high on the agenda at the Maldonado’s family office.
“A family business is a completely different animal from a normal US corporation. How a family business should be approached and treated and the knowledge pertaining to family business is quite extensive as a separate topic from regular corporate practices,” says Alexander Degwitz, second-generation family member and Family Council Chair at Grupo Económico Maldonado (GEM, or Maldonado Economic Group).
“It's a lot of psychology, a lot of dealing with merit versus entitlement. It can be a very complex environment, but when a family group or a group of owners work well together? The potential is infinite.”
Creating and designing its family office enabled the Maldonados to put a structure and plan into place that worked for them. The next generation is given considerable weight in the Family Council’s decision-making processes, with one chair designated for a member of the next generation. The family has also created an Education Fund.
“One of our objectives is to make sure that any family member that wants to get higher education will get it, regardless of their parents’ success or failure in business.”
“In general, we have discovered the importance of educating ownership, as when owners are not educated about their business it is unlikely they can make the right decisions. Moving forward I would place more emphasis on this central function of a family office, education is the best guarantee for long term success.”
Over time, as the Vermeer family has grown and become more geographically dispersed, it has become challenging to maintain the family dynamic, says Senior Family Office Manager Aaron Smith.
Today, only about half of the family is living in an immediate 40-mile radius around Pella, Iowa. Thirty years ago, that figure was close to 100 percent. One way the family offsets this is with an annual, three-day-long family camp. Held every July, the 80 family members get together to reconnect.
“The intention is to create and maintain those relationships, for the cousins to get to know one another, and to reaffirm the family’s values and priorities. Our outside board chair and our CEO are there, and we have some updates, but frankly, it's more of a values-based gathering to reaffirm what the family holds dear,” says Smith.
Smith also says that managing conflict is part and parcel of family business. To optimize the way it does this, the Vermeer Family Office is working on a conflict resolution framework.
“The point of the framework is to identify the right avenue for those difficult conversations. For us, those conversations have historically happened largely outside of our formal structure, so we're trying to get folks in the same room hearing the same things, reducing the likelihood of experiencing triangulation, because that’s a real issue. The more you can codify an objective process that everybody believes in – at least in the abstract – the easier it is to remove the emotion that's naturally going to be there.”
The Fortmuller family mandate for its office flows from a stewardship mentality, where the previous generation’s wealth is protected by the current generation, for those still to come.
“It takes a significant amount of time and risk to grow capital, and once you have it, it's a legacy. It would be really sad if all the hard work, blood, sweat and tears involved in getting to this point were ruined because we didn't take it as seriously as previous generations have.”
The family has four formal business meetings a year, during which it reviews its portfolio and returns, plans and makes decisions. Fortmuller takes care to ensure everyone has a voice.
Decision making is done as a family. When the office was first established in 2008, the Fortmullers decided that votes between three siblings and their mother would decide outcomes. If the votes are ever split down the middle, matriarch Dagmar Fortmuller gets the deciding vote – a strategy the family has never had to put into the place.
Fortmuller subscribes to the three-circle model of family business: ownership, family and management.
“Knowing which circle you're in at a particular point in time, and knowing that no matter what, you'll always be family, is important. One of the ways I've earned this role is knowing that it's not about me, it's about the family moving forward. It's important to separate yourself from the family objectives. If you can think beyond yourself, then people are more likely to trust you, and empower you to make decisions.”
As it evolves and determines the structure and workings of its family office, Placements Italcan Inc, the Saputo family is involving external consultants to optimize fairness, transparency and trust.
“Outside consultants come in with independence and are neutral in terms of which way things will go. Their advice is based on what the family's wants and needs are. It creates more transparency and trust in the process taking the route it needs to take,” says CEO Patricia Saputo, who believes it’s important to reflect on the human and relational side of the family.
“There's a family side, and then there's a business side, and we put family first, not business first. Having the conversations and building relationships are the most important part of creating a positive family dynamic.”
Patricia Saputo finds the three-circle model of family, operations and ownership useful. She recommends each person in a family be supported to explore their role and what it is they’re looking for from the family, and the family business.
“What's the glue that keeps you together? Is it the family office or is it an investment holding company, or is it love for each other, or do you just want to be a part of something bigger? Maybe it’s just coming together during the holidays, have dinner and enjoy each other's company!”
Saputo expects the family will formalize its version 3.0 with a family constitution and mission statement. She expects there will be a meritorious Board of Directors that appoints executive staff and will determine the governance structure as to who in the family has a voice, and who has a vote.
The Del Río family has three independent family offices, each led by one of the second-generation children of the original wealth creator. These offices are housed within a larger multi-family office.
Many family members, spanning three generations and three lines of descent, are actively involved in the various business and investment interests of the Huillinco Family Office.
"Working with family is always interesting and challenging," says Andrés Del Río, Director and third-generation family member. "Our family office is somewhat unique because we have many family members involved, which is not very common. It's good to have family eyes reviewing decisions and participating in the business, but you must be very organized! Maintaining high discipline and professionalism is crucial, especially to attract external talent."
Del Río has found that involving trusted external individuals helps mitigate the intensity of the family dynamic, both in his direct office and within the multi-family office it sits within. This is particularly true when it comes to investment advice, with the family hiring some of the most respected advisors in Latin America to guide how they manage and grow their investment portfolio.
To protect the family dynamic and legacy, the office is currently undergoing a consultation and review process aimed at streamlining processes, decision-making, and personal involvement of various family members.