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INTRODUCTION 7
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Richard@Centimillionaires.com Text for Help: (305) 333-1155
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Richard@Centimillionaires.com Text for help: (305) 333-1155
I have invested the past decade in ultra-wealthy families, family offices, and
first-generation business owners. This book provides a concise collection of
insights, lessons learned, and models to pick up and adapt. These ideas have
been helpful to other families who have sold a business or real estate
portfolio in the past, and I hope they will help you as well.
If you get through this book and were expecting help in another area, or
would like us to build out a chapter further please let me know at
Richard@Centimillionaires.com, and we will do the best to get back to you
with additional resources and feedback on your family office, personal, or
investment objectives.
Also, please ensure you register to access the Centimillionaire Data Room we
have set up, which is full of free tools, an assessment, other books, and other
free resources at http://Centimillionaires.com/Book.
Richard C. Wilson
(305) 333-1155
CEO & Founder
Centimillionaire Advisors, LLC
328 Crandon Blvd. Suite #225
Key Biscayne, FL 33149
http://Centimillionaires.com
Disclosure
The contents of this book, including any videos presented herein, do not
constitute an investment recommendation. As such, this book does not
contain all information that a prospective investor may desire in evaluating
an investment strategy or individual investment.
Introduction
The goal of this book is to share some suggested and proven strategies for the
most common and challenges of my clients that are worth over $100M.
Every challenge, model, strategy, and example is based on work I have done
first hand with clients and seen families implementing to address these
issues. I would like to make this book as valuable as possible in fewer than
100 pages so that it is both practical and concise. While I would like this
book to be a must read for anyone worth over $100M, it is not meant to be an
exhaustive guide to ultra-wealthy investment planning, wealth management,
or family offices, nor is it meant to be the solution to every challenge you
may face while ultra-wealthy.
Perspective: My
examples and lessons
learned that are shared
in this book are from
my 11 years spent
founding and growing
the Family Office Club,
a platform for ultra-wealthy families and those that want to build
relationships with such clients. I have helped form several dozen solutions
for holding companies, families, and family offices—and there are
commonalities between these families. Having now met in person with well
over 2,000 family offices in 14 countries, as well as having hosted over
30,000 professionals at our 100+ live events, I see golden threads that tie
together many issues that are core to the challenges of being ultra-wealthy. It
is this bird’s-eye view of the ultra-wealthy forest while working with many
centimillionaires at all stages of life and the development of their response to
being wealthy that provides the examples, case studies, and insights in this
book. I have not seen these ideas taught in a school or provided in a course,
and I hope that this $20 book—along with all of the free resources, videos,
tools, and worksheets—is just as valuable as a $5,000 course or $2,500
consulting session.
There are around 3,000 billionaires and well over 60,000 centimillionaires
globally, according to sources such as the Financial Times and Bloomberg.
However, these numbers are under-reported due to lack of access to data as
well as under-reporting by the families that have wealth spread across several
family members or hold wealth in secret due to fear of media invasion of
their personal lives, kidnapping/ransom, or being the target of potential
government corruption or regulatory actions. In other words, we do not know
how many billionaire or centimillionaire families there are out there—we
never will—but we do know that there are roughly 20 times as many
centimillionaires as there are billionaires. Below is a chart showing recent
figures of how many centimillionaires there are and in what parts of the
world these numbers are rising fastest, which, unsurprisingly, is Asia.
Mainstream media often talk about and sometimes vilify billionaires, but
most have never heard of centimillionaires as a term. In fact, this last month,
“billionaire” was searched for 49,500 times on Google, while
“centimillionaire” was searched for just 320 times. It is important to shine a
light on this area so ideas can be cross-pollinated, evolved, and customized to
this specific segment and their needs. To show just how little this niche is
talked about, there has never been a book written with the word
Throughout this book, I am going to cover the top six challenges that I have
encountered while working with $100M+ net worth families. You will see
how each chapter’s suggested actions that could help a whole range of issues
related to those challenges. You will also discover how putting in place a
dashboard, compass, aligned advisors, and positioning creates a platform
through which to design the daily experiences and long-term results your
family wants to prioritize. These are the result of current and past work with
families in manufacturing, real estate, consumer products, technology,
healthcare, and other niche industries; the suggestions provided in this text
are not specific to any industry or source of wealth.
Perspective: I get asked several times a week how I got started working with
ultra-wealthy families. I grew up around my father raising over $1B+ for
hospitals, universities, and non-profits via capital campaigns. I was around
when he met with donors regarding gifts, endowments, and managing their
foundations. Through that, I was exposed to this world early, and after
starting and running five businesses before I had graduated from college, I
was hired at a capital markets firm in Boston. There I stumbled on the term
“family office” and found that it meant a holistic wealth solution for the
ultra-wealthy. I decided I would only meet with and talk to those types of
firms going forward but had a very challenging time doing so. I found that
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the only way to learn about them was to meet with them as otherwise I was
relying upon articles from Bloomberg and the Financial Times, and there was
not much even from them back in 2006. From that point, to capture what I
was learning and share it with others and to make sure I was remembering
the insights I was picking up, I started writing about the industry online.
Through writing a few times a week, I got the website up to 1,000 hits/day. I
then purchased www.FamilyOffices.com and decided to write even more on
the industry and what I was learning. I got a book deal with Wiley, got the
front page of the Boston Globe and Miami Herald, spoke at over 200 events
in 15 countries, wrote three more books on the space, and started hosting my
own events. The business took on a life of its own as the family office space
continued to grow and thrive to what it is today. It seems most of the wealthy
that hear about having a holistic, 360-degree solution to managing their
wealth want that in place for themselves. Fast forward a decade, and I now
run a 20-person team that operates the Family Office Club and
Centimillionaire Advisors, which implements discreet full balance sheet
solutions for $100M+ net worth clients.
one. In short, anyone who is worth over $30M most likely needs some sort of
virtual family office or family office solution, and anyone worth $100M or
more certainly needs family office quality solutions in place.
With that said, in this book, I want to focus on the specific common
challenges directly and then the respective solutions for each of them. If you
want to dive into 500+ pages of content on family offices across my other
books, those are available for your consumption, or we can connect directly
to answer your specific questions, but I do not want to get hung up on
terminology, as it distracts from what is needed and limits effectiveness. You
can download PDF versions of our other books within the Centimillionaire
Resources Data Room, which is free to access at
http://Centimillionaires.com.
If you have any questions while reading this or afterward or wish we had
included more details or examples in a certain area, please text me at (305)
333-1155 or email me directly at Advisory@Centimillionaires.com.
There is a forced evolution that comes with the territory of becoming ultra-
wealthy. Similar to when you first started your business or real estate
portfolio and then had to elevate your actions to work on your business
instead of just in your business, at some point you also need to focus a
portion of your energy on your portfolio of holdings and broader vision.
Typically, this evolution is forced most clearly upon the sale of a business or
real estate portfolio, when a company is taken public, or when an inheritance
is received. I have also seen it happen more gradually for those who have
seven- and eight-figure income levels for over a decade and then look around
and realize they need to elevate their mental models, strategies, and solution
providers.
With the exception of inheritance, most of those who are ultra-wealthy that I
work with have been in control of the appreciation of their wealth. They have
run the operating business or part of it. They selected the real estate assets or
developed their portfolio of holdings through careful decision making and
iterating on lessons learned over time to accomplish their goals.
This same mindset can be helpful at the holdings level for you, but many
times the complexities grow exponentially when you become ultra-wealthy,
and these changes can come suddenly. To make matters more complex, you
may have developed a team of 30, 100, or 1,000+ employees to support your
operating or real estate holdings, but at the portfolio/holding company level,
you may have nobody but a CFO or spouse to support you or provide
feedback on ideas you have.
The result is blurred vision when it comes to where to head next and often a
splintering of attention, meetings, deals, investments, advisors, and time
allocations. This is the first challenge to be discussed in this book.
For investors today there are more valid possibilities of size and industry than
ever before, so your screening must tighten exponentially to keep your
strategic focus. Without an explicit decision on what will be focused on,
everything else will take up your time, and you will be time and energy
bankrupt due to 1,000 inquiries and meetings.
I have seen the full spectrum, from highly organized and focused families
with a very clear vision to a newly liquid family that is starting with a clean
slate and everything in between. Some of my clients have over 100 LLCs
invested in a few dozen industries, while others are focused on just one to
two areas of direct investment with a dozen or more core holdings in that one
space.
For decades, the mantra of wealth management and financial advisors has
been diversification to the extreme—and for good reason. The average HNW
person relies upon their income and job to create their wealth and trusts their
wealth advisor, in many cases, to defend them against market fluctuations
What I have found consistently over time is not that there needs to be a
certain level of focus or broad diversification of assets but that the family is
very clear on who they are and what new reality they are attempting to create.
The families that make the most progress each year are crystal clear on their
values, mission, objectives, and story of where they are headed and why.
This ensures more synergy at many levels and keeps everyone aligned,
effective, and focused.
Some questions to ask yourself regarding your progress in this area may
include the following:
1) ____________________ 2) ________________________
3) ____________________ 4) ________________________
5) ____________________
What new reality do you want to create moving forward for yourself and/or
your family and team?
What are your top three objectives in managing your assets moving forward?
(If one of them is to grow your wealth from $200M–$400M or to become a
billionaire, make sure the other two are focused on why you want to do that
or what you expect to get by accomplishing that goal.)
1) ________________________________________________
2) ________________________________________________
3) ________________________________________________
______________________________________________________________
Many families of significant wealth have never taken the time to write out
even that much about their goals and focus and have not been clear with
themselves and others around them on what their goals are. If you find
yourself skipping over this exercise, please grab a pen and just draft up some
answers here in the book or in a notebook if you are reading this on a Kindle
or listening to it via Audible right now.
Benefits of a Clear Vision: Once you have a clear vision of where you came
from, your strengths, your values, your assets, and what new reality you want
to create, you can sift through everything faster. Through documenting this
explicitly and communicating it with your team, advisors, and family, you
can avoid waste-of-time meetings, proposals, and requests for your time that
are clearly not a fit for your goals. This allows your assistant, portfolio
manager, or CFO to say “no” for you with conviction, and it gives you a
polite strategy for turning down your brother-in-law’s latest crypto-cannabis
fintech solution or whatever it may be.
climbing through the chaos of not knowing how to manage their capital. The
journey of deploying it appropriately is rewarding, and sorting through the
inefficiencies is where the rewards are.
This chapter includes several mental models or strategies that my clients use
to build their wealth, but without a clear vision and understanding of what
you want, none of these ideas will work. These are structures that I have
developed, have picked up from clients, or have seen examples of from the
5,000 investment professionals a year that come through our live Family
Office Club investor summits.
curve on new trends and invest where things are expanding and changing
quickly. These fast-growing markets or changes within old markets lead
to inefficiencies and opportunities. Many families I work with look to
lock up intellectual property, real estate, research, access, or control
infrastructure in these areas so that as the industry matures, they will be
positioned exceptionally well to monetize that trend. While you should
speak to an attorney before attempting to do anything that the
government would consider a true industry monopoly, many families
buy every piece of real estate on a single street, buy any property under
$1M in an area and then relist it higher, acquire every business of a
certain type in a region to control dynamics, or quietly acquire all of the
patents or IP in an industrial or manufacturing niche. We have seen this
niche domination approach within niche areas of government
contracting, hospitality assets around a single airport, consumer product
assets in a small niche area, and we are actively helping a client with this
strategy in a functional clothing niche and applying it to our
http://PitchDecks.com investor relations agency operating business as
well.
While this chapter on having a clear vision and the benefits of doing so is
building the foundation of this book, the next chapter is on control,
governance policies, and why there are likely inherent conflicts embedded in
the setup and operations of your organization and advisors.
Summary: Some suggested actions for helping address blurred vision from
There is a central conflict between the way most wealth is created and how
wealth management solutions operate today. On the one hand are those who
are first-generation wealthy or still entrepreneurial families after several
generations—those who created their wealth through control of their own
destiny in business or real estate assets. They had to steer the ship through
storms, close deals, retain clients, and negotiate with investors or companies
to acquire, and they saw the direct result of those efforts compounded over
time. That is what has worked to make them ultra-wealthy, and it is almost
the polar opposite of giving all of their money over to a private banker or
wealth manager to control and manage on their behalf.
portions of your portfolio that you do not want to have to manage and do not
have a strong background in creating outsized gains in. That is the only way
you can survive the flow of opportunities coming toward you and execute
well on the most valuable contributions you can make in your industry. This
is why we needed to start with the challenge of having “blurry vision.” Once
you have clearer vision, you can decide where you are okay with the cost of
having a control conflict because it is not an area of your expertise and the
counterparties’ expertise far outweighs your own. It is in the areas where you
want to grow your expertise directly or feel you can manage yourself with an
edge that may be worth considering being done in house by you and a
dedicated team.
There is a natural conflict in place with many advisors that is a challenge for
every client I work with. The issue many families face while putting together
their family office is that those who can help most in any niche of your
investment portfolio are often incentivized to sell you on a solution that may
or may not be in your best interest. Here are several examples of this in forms
you may recognize:
You may not know many people who can thoroughly explain various
life insurance options; the person you do know who is an expert
suggests you purchase a very large and expensive policy that is
complex and hard to understand.
Your wealth advisor markets themselves as being “on your side,” yet
when you want to invest in an apartment building or purchase a
company, they are not typically equipped to help. Most of the time,
they suggest you just keep your assets on their platform and allocate
to publicly traded apartment building REIT or a publicly traded
company in the industry you are looking at investing in. This way you
get liquidity and they get to keep a higher share of your wealth under
their fee model. While fiduciary wealth advisors must offer you what
is in your best interest and not what has a higher commission for them
as an advisor, that typically does not mean that they will advise you to
take assets off their platform and invest, for example, in some cash-
flowing commercial real estate—at least not in my experience.
In each of these cases, the advice may be sound and it may be the right move
to follow their suggestions, but it is a conflict in that your “advisors” may be
directing you toward the solution that is best for them while also being good
for you. A skilled solution provider will only suggest things that legitimately
make sense for you, but most will not want an in-depth solution about
options that involve not working with them at all, even though that may be in
your best interest. This natural conflict runs rampant throughout the financial
and wealth advisory industry.
The truth is that most wealth management firms do not serve the ultra-
wealthy or centimillionaires exclusively as a focus, and that is why most are
at complete odds with what this market needs. This is why many individuals
worth $30M or more, especially when their worth is over $100M, create their
own systems to manage their wealth. They likely leverage one or two trust
companies, wealth managers, or private banks, but they also build up their
own reporting, dedicated teams, and investment managers they know well
and trust to give them a variety of brain trusts and levels of strategic
influence, control, fees, and transparency.
right team to trust your investments with that you only work with providers
who are committed to their work, are consistent in their execution, can
provide references, are confident but humble listeners, are centered human
beings, and are contributing to their industry and your organization.
I have found that if you review your internal values and compare them with
those of the organization or individual you are deciding on while also
considering these six areas of character analysis, typically the truth of
whether it is a good fit or not will reveal itself. If you are uneasy or just do
not feel comfortable with the fit, it may not matter why you think so; it may
be a mix of multiple things not being a good match. If you are unsure about
someone, it may not matter why you feel uneasy; my experience has been it
is best to simply move on and trust your gut on that feeling.
One way to ensure you have the right level of control for your family office
is to constantly be interacting with peers, family offices, and other savvy
investors to see what models they have adopted. I tend to put a lot of case
studies, video clips, and examples in our books because we have found that is
not only makes what I write clearer but that it is only the practical application
of the ideas to different industries and families that adds any value. Whether
it is through live events, one-on-one meetings, private group dinners, or
resources such as this book, it is important to always be finding the most
effective way to have the control level you desire while reaching the portfolio
results you want to achieve within the confines of the life you now want to
live.
Connecting in peer networks, like the Family Office Club, YPO, or SC, or
trying to figure out how to identify the other business leaders in Chicago,
New York, etc., and networking with them can help. We also have a free
webinar that we are happy to share on centimillionaire strategies. These are
the business strategies we find centimillionaires use to create their wealth and
are using to sustain their wealth over time. Even if you are not worth over
$100 million yourself, I think that these strategies can be used by small and
medium-sized operating businesses and firms as well.
Many families come to me asking what other families are investing in and
how they think about their portfolio. While the size and industry focus differ,
the most consistent approach I have seen is taking three levels of outsourcing
and control and diversifying across assets and control levels. It is challenging
as no generic investment advice is ever possible or appropriate to give, but as
a general framework for breaking it down, I typically see families dividing
things into three simple buckets:
You can see from the descriptions above that A typically leverages others in
almost everything, B has some outsourced investments and some managed in
house or selected directly at least, and then bucket C is where families
typically outsource the least. This is different for each family, and areas of
focus will be different per family, but this approach helps provide a
framework of discussion on where to focus the most energy internally.
The diagram below shows these three areas of investment that typically are
treated separate from each other on levels of control required by the family
and the amount of risk or investment goals of that general area of their
portfolio. The most important thing to consider while reviewing these three
areas is, which of the six levels of potential control do you want to retain for
each of these three areas of investment?
It may help in your case to think through what advisors and parts of this
portfolio equation you may want to keep 100% control of versus outsource.
Please write in your answers below:
Strategy
Sourcing
Screening
Due Diligence
Negotiation
Management
If you have questions on how to use this table or would like to email or text
me a picture of the completed table at Team@Centimillionaires.com or (305)
333-1155, I would be happy to discuss how to interpret this for your needs.
corrected in multiple ways, and step one is making sure that their level of
desired control and objectives are being established first and everything
else adjusted to that new reality that they want to be operating within.
One ultra-wealthy family that holds 1,000 commercial patents that we have
gotten to know has a famous story they circulate internally of one of their
founders washing out Ziplock bags in the company headquarters’ sink so
they could be hung up to dry and would not go to waste. While on one level
it is of course not the best use of their time, at the same time, it shows the
thrifty, resourceful, prevent-waste attitude that is common among business
owners and yet not respected or understood sometimes in the marketplace.
This is similar to asking why the person who is in excellent shape cannot just
have a piece of pizza. “Why not enjoy three pieces? You won’t ruin your
health,” someone may say. While that may be true, they did not get to that
exceptional level of fitness without a respect for health and nutrition, and the
same goes for most ultra-wealthy families. Many families, as they grow past
$30M and $50M net worth, do have their monthly spending, overhead, and
costs rise significantly. My most recent cold call was from a $250M+ net
worth family that just bought their fourth jet, for example. Still, most families
that are ultra-wealthy and are self-made want to know they are getting value
for their money paid, whether their overhead for their personal life is $30,000
a month or $300,000 a month.
so you are not paying for their services when they lose you money or lose
you money relative to a benchmark that you establish together. I asked a
discussion panel full of real estate investors recently at our 250-person
investor summit in New York City about performance fees, and one
investment manager on stage commented how, in his opinion, fees should not
be so central a part of a discussion. He suggested that it would not be smart to
select a heart surgeon, for example, based on the lowest fees available. I
responded that I would feel better, however, if the heart surgeon got paid
nothing if I died on the table during his handywork, the point being that fees
should mostly be paid for positive results, not just for showing up with the
credentials. Everyone will show up and want you to pay for just being in
existence, but that is not where the out-sized value is.
to mistrust, and over time, as our industry matures, leaders in various solution
provider niches will emerge that earn the respect of ultra-wealthy families
and family offices that appreciate transparent pricing and fair solutions that
deliver a great value for the price. This will also be feasible for providers to
do as they scale and reach critical mass and are able to better predict their
own costs of delivery.
wanted to earn $800,000 a year. The family was considering saying yes
to the individual, who was putting pressure on them to decide quickly
before he became unavailable. In this case, I advised them that 10% or
5–15% above a benchmark of reasonable returns and only earning a
carry or performance fee as the head of their family office on one or two
specific areas where he would be spending the most time or adding the
most value would be more in line with industry standards. Some families
like to pay lower salaries and higher bonus and carry—it just depends on
your values. Listen to your gut if something seems not right, too rushed,
too expensive, or not aligned. Families get labeled as “cheap,” or family
office team members will complain to me that their $100M+ net worth
boss is too “thrifty,” but it is always about the exchange of value, not the
cost of the item at hand. The more aligned you can design the
compensation of investment managers, staff members, family members,
and those that serve you, the less you will worry about the total cost of
them because you can afford to be generous as long as there is a
consistently high ROI.
Summary: Some suggested actions for feeing frenzy from this chapter
included:
1. Identify from the table in the previous chapter (You did
complete that table, right?) where you will be keeping
control internally, and ensure your team can support your
focus on those areas.
2. Make a point to develop your own proprietary structures to
align yourselves with those you invest in over time.
3. Evaluate each service provider and team member based on
their value and degree of alignment versus cost.
4. Identify one or two service providers you pay high fees to
yet do not believe are aligned, effective, or providing you
with a high ROI for the money they are receiving.
One consistent issue across wealthy families is finding high-quality deal flow
in enough volume that they can allocate their capital in a way that is high
conviction and is in line with their long-term goals. Many families fail to
attract the right types of deal flow, so they settle for less optimal minority
stakes in companies, give up control, invest in more fund managers than they
would like, or sit on lots of cash even when they want to be allocating. This
chapter is the most fun to write because so much progress can be made—and
leverage applied—with so little time and so few dollars invested.
Interestingly enough, many families do not realize at first they are even
facing this challenge. They may experience it through frustration with
investment opportunities or complaints of lack of control or fees, but some
families I work with do not realize how few opportunities they are seeing
relative to other families of significant wealth. Some have literally told me
that they have seen 40 deals over the past three years, while others get sent
several deals per day.
Typically, when I ask a
family directly what their
strategy is and what themes
or thesis they are
developing, they do not
have a clear answer.
to any type of investment, but they are not. It is like someone graduating
from college saying they would like any business job, but they quickly learn
what they do not like. Just as the investor does not actually want to invest in a
mobile app in Zimbabwe or biotech company in Boston, most investors have
many preferences; they just have not written down and voiced them yet. The
first step to improving your deal flow is to quickly sort it out at live events
and your email inbox. You cannot thrive in the flow of investment
opportunities as an ultra-wealthy family if you do not have a good strike
defined for your allocations.
There are dozens of potential areas for consideration, but at the very least,
your team and those that visit your website (once you have one) or interact
with you should be screened out in various ways, including by the industry
the deal is in, how credible the materials are or interaction is, their multiple
of profits or valuation, the size of the transaction, where the company or asset
is based, whether you will have control in the investment or be an LP or
limited partner investor in someone else’s deal, and how excellent or average
the team is.
These are first-round screening details that you should think on carefully to
weed out 80% or more of the deals being pitched to you. A head of direct
investments, an analyst, or a portfolio manager can help take a first cut at
deals, and keeping yourself honest in your planning dashboard to only the
best of potential deals will mentally keep your brain focused on deals that are
set up to go well for you. Below is a table that can also be found in the
Centimillionaires.com Data Room—a more detailed listing of additional
criteria that you may want to consider while evaluating a team, asset, or
company for potential investment. These criteria are not exhaustive; in fact,
they are just high-level filtering items, which, if customized for yourself and
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your team, again, will save you time and money in due diligence fees, travel,
team resources allocated, etc.
One truth I have found is that not all deal flow is created equal, and nobody
wants just lots of investment pitches of any quality or location.
We have found that the investment firm or wealthy individual with the
exclusive, better priced, first look, or highest volume of quality deal flow has
a compounding advantage for investing. When you combine the deal
origination strategies in this chapter with having a very clear vision on where
you want to go and aligned service providers that know your values and
goals, then you will waste less time and are more likely to do well with your
direct investments in businesses or real estate. Being focused and clear about
what you would like allows you to be nimble and agile while others may be
slower to take advantage of opportunities.
This level of effort really is required by your team, if not yourself, if you
want to maximize your returns and investment opportunity access. Essential
to getting these components working for you is to flip your thinking on how
most individuals consider getting access to deal flow. Typically, based on the
40,000 professionals who have attended our live events, I have found that
individuals receive deal flow through their relationships, peers, and service
providers and then sometimes through reaching out to a company.
For example, in my case, if I did not want to create Wilson Family Office or
Wilson Investment Holdings, I may instead create something like
Manufacturing Investment Holdings or a more interesting name that speaks
And if they are starting that far down on that learning curve, then they have
to decide whether it is worth all that effort. Is investing in marinas something
they really want to be doing long term? Or is this just an exciting deal
because their peer brought it to them and it looks like an exciting investment
to brag about and to go visit sometimes? I think realizing that every
investment is going to produce strategic fruits is very important, and possible
investments should be screened
by that metric.
What really drives this strategy home is if you can develop a single sentence
that makes it crystal clear what your investment team is looking to acquire or
invest in and how you add strategic value. If you can do that, you are much
more likely to find yourself considering anomaly-type deals. I enjoy helping
families on such projects, so please email me if you are stuck on how to do
this and where to start or if you are hung up on your description being
paragraphs long. This is a critical step that costs nothing to complete, so it is
important to get into place.
Since most families are too private to ever consider having a website, do not
see the power of positioning for deal flow, and
really do not want to say or do anything public, you
will stand out from others by implementing this
advice. It is the fact that many families do not do
this that makes it powerful and effective to use.
then run a process so that you can see more of those deals that meet your
criteria. Instead of trying to attract the deals, in this case, you reach out to
asset owners or company CEOs and attempt to engage them in starting the
process of considering an investment from you or to consider a sale of their
business to you. This is one of my favorite strategies because it is used by
every large private equity fund but by almost no family offices that have less
than $500M in assets. To use this strategy, you need to do the following:
2. If you only are interested in three to four cities, then you have
someone help you build a database of the 400 dry cleaners in that
marketplace.
4. Next you draft an email that is very short, right to the point in one to
two sentences about why you would like to invest in or acquire their
asset or business and suggesting two or three different times for a
phone call.
5. The next step would be to have phone calls with as many of those
leads as possible. This enables you to learn a lot about the
marketplace, to see the personalities behind the assets, and to keep an
ear out for anomalies.
6. To make it all real, you then pick the top three to five leads out of the
20–30 phone calls you completed to meet with them in person, talk
about valuation in depth, and build a relationship with them. These
are hopefully all leads that you may be interested in long term, even
if there is no acquisition to be done in the next one to two years, so it
is time well invested.
I have used this process to originate deals for families I represent and have
recently closed two deals using this process, with a third I expect to close
with a family in 2019. This systematic way of uncovering direct investment
deals can be applied to various industries and carried out by a relatively
small, nimble team. If you want focused deal flow, it is a great way to
originate it. Our most recent two clients, at $200M and $300M each in the
manufacturing and technology industries, are already applying this to their
strategies on how to source deals they wouldn’t see otherwise.
“Diworsification”: While this idea will not be liked by some and has to be
understood in context, in some scenarios, diversifying every part of your
portfolio can hurt your ability to perform well. As mentioned earlier in this
book, many families group their investments into fund managers/public
markets exposure, commercial real estate investments, and direct operating
business investments. Not all families have these three areas of focus, but in
my experience, most do develop activities in these areas over time with a
connected yet separate strategic approach to each area and within sub-areas
of these broader buckets. Let’s say a family is highly diversified in the public
markets and fund managers, they are highly diversified in commercial real
estate that is cash flowing, and they are first generation and wanting to grow
their wealth. There could be two different ways of approaching this:
- Family A: This family has been told their whole life by every person
in wealth management that diversification is key. Due to this and their
When you look at direct investments, you cannot look at them exactly like
you would a public markets portfolio. You can never give blanket advice on
investing in a book, of course, and say, yes, you should be diversified in this
portion of your portfolio, or no, you should not…but you can see in some
cases that it creates much more risk to diversify your bets all over the place
versus being focused on an area so that as strategic fruits come available
from your past efforts, you can use that momentum to make more effective
progress. A few years ago, I invested in an ice cream retail business concept
that seemed to be taking off. I made the mistake of being a minority investor
and not having the ability to take the business over, buy out the founders, or
operate it with my team, and I was left without a chair when revenue growth
slowed. I have since sold that position and have invested in a company called
Better Bath Better Body, which produces functional bath salts and leverages
Amazon to sell directly to consumers. In this case, I have a clause to buy the
company should it come across trouble, and it is in an industry where my
team could, in theory, come in and help operate or run the business, if
needed. We have invested in direct to consumer companies before and own a
few still now, so this was a much wiser investment for me to make.
This has come up numerous times on stage with single family offices
discussing their approaches, and typically those with $30M–$500M of net
worth have one or two industries they focus on in addition to commercial real
estate, and those with $500M–$1B+ may have two to four areas they
primarily invest in. One exception to this is if you have a specific approach or
strategy that can be applied to companies in numerous industries specific to
distribution, manufacturing, marketing, capital structure, or some other
value-add approach that does not limit you to a single industry. The only
other consistent exceptions I have seen would be those families very early on
in managing their liquidity or third or fourth
generations attempting to diversify to the extreme
their direct investment assets in very large cash-
flowing blue chip companies that are still private.
table. This case study is one I hope you will put into place within your
niche business area of focus over time as it is used by fewer than 1% of
single family offices and ultra-wealthy families that I speak with yet has
many benefits to completing.
It is important to decide early on what you do not want to do, what you are
not good at, what you do not enjoy, and what you will for sure not be
investing in or needing so you can ignore or politely say no to 95% of those
that are asking you for your time.
Every single person I have mentioned this to has said, “Yes, of course,
Richard, that is true with me as well.” Yet many of these same $100M+ net
worth individuals do not have a high-power executive assistant, they still
drive themselves everywhere, they take meetings out of feelings of
obligation, and not a single one of the hundreds of centimillionaires I have
met with had their goals, mission, objectives, values, and explicit direct
investment strike zone clearly mapped out on paper. Applying the advice to
your daily activities and being explicit about what is allowed to take up your
time is what is not easy to do, but it is absolutely critical.
Additionally, families often do not think enough about what new reality they
want to create. I went to the home of a $700M family for four hours a couple
weeks ago, and this was something they had not really explicitly thought
about at all. They had no idea what type of family office they wanted in place
so that their daily activities would match up with what they think they should
be doing, what they are passionate about, and what they are really good at
doing. Making sure that they are creating that new reality on purpose through
the design of their family office, and not just through what advisors are
recommending to them, is important.
It seems unrealistic, but I have met $800M net worth families with just one
person managing the wealth and overseeing the private banks and fund
managers. I recently met for a half day with a $500M family with no team,
no office, and no secretary even helping them to look at what they should be
putting together. Just the other day we got a call from someone who inherited
a large sum of money and was starting from scratch. I think it can be helpful
to know that if you have a very informal way of approaching managing your
wealth, you are not alone. We conducted a benchmark study of 179 ultra-
wealthy families and found that only 56% of them have dedicated office
space, 32% had a formal family dashboard with a mission and
goals/objectives stated, and just 38% of them had an advisory board in place.
As the best practices on managing wealth spread and the number of ultra-
wealthy families grows, these numbers will continue to move up, but we are
in the very early days of that being the case. At this point, the industry is very
inefficient and I am often told the experience is confusing and unclear. This
leads to lack of action and lack of conviction on which direction to head next,
and many times families can take a lot of time—sometimes years—to figure
out which structure and approach is best for them.
You do not want to be your service provider’s learning curve. If you are a
whale to your provider, that is bad. If you are a top 10%–20% client, they are
learning through mistakes made on your account. I personally would never
recommend a solution provider that does not have an exclusive focus on
family offices or a division at least laser-focused on ultra-wealthy clients; it
just does not work. Otherwise, if you are not careful, the lawyer may want to
simplify your legal structure just so he himself understands it and not because
it is in your best interest. The value of a provider being able to cross-pollinate
ideas across clients, to help you emulate every changing best practice, and to
make introductions or source opportunities across clientele can be a big
percentage of the total value they bring in addition to the core reason why
you hired them in the first place.
transparency and accountability within your own team and family office
wealth solution as well, or you will quickly find that someone who is running
your family office might keep you blind from certain things, making you feel
like you are reliant upon them. Another example of this time cost if you are
not careful is that your back-office support or bookkeeper might have your
data or might have access to your historical information, and that might make
it feel like it is very painful to unplug or you are not even sure how that
works. Ask up front about all of that, and make sure expectations are set from
the start that you want it to be easy to unplug if that is what you feel is best
for the family, even if you have no intent to do so at this point. You have to
set up your culture, advisors, and team from the beginning to avoid worse
case scenarios and have ways to address issues that come up in a productive
manner — and these issues will surely arise at some point will if you do not
guard against this.
If you are reading this book, there is absolutely no excuse not to have a
virtual assistant, full-time executive assistant, and/or virtual family office
solution in place for yourself. Like I mentioned earlier in this book, if you are
a centimillionaire and you do not have a family office, you are already
paying for that. You are burning money and opportunities and are costing
yourself more through missed tax deadlines, late fees, missed meetings,
unopened emails, or just through moving 30% or 50% slower than you could
with proper support.
I have consistently found that the biggest problems with the approach of
centimillionaires are fundamental items such as the lack of Key Performance
Indicators (KPIs), no clear focus, no dashboard, no value-add solution
providers, no formal team, no systems or checklists, no tracking of smart
numbers, or no posting publicly of how the team or organization is
performing. Each of these and many other tools we discuss in the book are
what reduce chaos and provide the family with leverage of time and
resources to accomplish their goals.
search process to find him the best executive assistant possible and ended up
finding someone who has been the personal assistant to a high-power partner
at a law firm for a decade, but they were not offered the position essentially
due to timing of the team’s travel schedule. They have since put off this
decision, and we struggle to communicate each quarter because they listen to
their own voicemails, respond to their own emails, and do not have anyone
dedicated to picking up the pieces left behind after meetings and planning
sessions. This client is successful and will likely become a billionaire over
the next decade, but they also have much more chaos and friction than is
necessary due to not prioritizing putting into place simple and appropriate
support systems. To their credit, this client has put into place some powerful
service providers, and they now have great support outside of their team for
moving faster with more accurate reporting and protected structures in place.
The most painful challenge that comes with wealth can be the destruction of
the family. It is a type of problem that wealth can create more easily than it
can help fix, and it seems to naturally put barriers and conflicts in place if it
is not proactively managed in a way to prevent and resolve such issues.
Your Family Story: Communicating your family’s story in a way that shines
a light on hard and painful lessons learned, values created and solidified, and
how the wealth has been managed can help establish respect for what has
been built to date. Having these stories that are central to the family’s culture
repeated often and shared among generations is important. For some families,
these stories are just kept in verbal format, while others find it helpful to
create a family legacy video documentary or coffee table book with the most
important stories, pictures, and events captured for passing on the family
values in a consistent fashion. This can prevent fighting within the family
because it sets the norms, expectations, rules, and boundaries around the
morals and goals of the family.
organization got to where it is today. Below are some pictures taken from a
family history book for our family:
I have only met a handful of ultra-wealthy families out of over 1,000+ that
have documented their family’s mission, values, objectives, wealth creation
story, and values stories and had formal family meetings where they
consistently discussed such things.
Data Room) was the idea of the family covenant mindset—that no matter
how bitterly the family may disagree and no matter how critical one may be
of another family member’s actions, the family’s interests are held above all
else. It means that regardless of what happens, issues are solved within the
family, by coaches/private arbitration/consultants as needed but never for any
reason with teams of fighting lawyers or public court appearances. The
family covenant approach means the family is more important than any
conflict that can arise within it. Mitzi is also an advocate of endowed
vacations, family newsletters, and children’s activities that instill the family
values and stories into their lives with actions and experiences instead of just
words and pictures.
When you combine these trends with a family’s desire to create a legacy,
things get complicated quickly when people say they want to make a
difference. Most self-made, ultra-wealthy individuals feel that they have
already made a positive impact through the creation of their wealth by how
they treat others, add value to customers, treat their team, and create wealth
for their investors. The one area I would like to provide some guidance on is
getting the next generation involved with the family. If it is done through
philanthropy, it should be carefully managed and be thoughtfully used with
younger members of the family. If members of the family are only exposed
to the family’s wealth through helping give it away, it may be socially
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beneficial but a detriment to their own ability to then turn around and be a
resourceful, thrifty, hard-working, and enterprising entrepreneur themselves.
For example, if you created your wealth through the real need and desire to
make something happen and to create a new reality for yourself, and success
was critical to your wellbeing, that is in stark contrast to attending a $40,000-
a-year grade school, having four homes, and helping the family by giving
away their money. In fact, some would say it is the exact opposite, so the
same results cannot be expected. This is just an important discussion to have
within the family if the goal is to propel for a culture of being industrious and
entrepreneurial, if those are in fact some of your family values that you
would like carried
on.
family. Many families today are broken apart, do not speak with the eldest
son, or have broken into two or three sects within the family that stay apart
during holidays and refuse to work together because of mismanaged
expectations and unsaid promises seemingly not kept. Many times a family
member hiring an old friend, investing in their friend’s company, or using the
family’s name in public ways that are perhaps not appreciated by all family
members involved leads to resentment and misunderstandings on the true
motivation in play.
Many families also do not want to disclose how much wealth they have
without being able to explain the full story as the number by itself may lead
to certain expectations. By telling the family story, values that got the family
there, family goals, and governance rules around all of that in the same
conversation, you can manage much of those expectations and reactions.
When the context of the wealth is made visual, planned out well, and
communicated thoughtfully, it mitigates the risk of certain reactions or
assumptions about what the money is for or who is getting it and when.
Family Bank (Inheritance Controls): Many times families find that they
created enormous value in their community and for their clients while their
wealth was created and that much fulfillment was derived by growing a
business. The struggle to earn a living is something that is often valued, yet
many families bring their children up helping to run a foundation, giving
away money to charities, and getting a new Mercedes for their 16th birthday.
Remember, this is typically not how first-generation wealth creators were
brought up, so it is important to remind ourselves that if you are not careful,
you may, by accident, raise a Ferrari-driving, non-productive, lazy offspring.
While you cannot control the personalities and life decisions of each family
member, I have never met a family that wanted their child to end up being
thought of in such a way.
One solution to this issue that many families follow is to limit inheritance to
simply undergraduate education or a master’s or Ph.D. degree (and living
expenses during those times), a down payment on a house at age 27, and
perhaps a final inheritance of $1M or $3M at age 55 or 65; otherwise, even if
the family is worth $100M+, they may receive nothing unless they apply to
the family bank for business funding. Under this model, the family would
either loan or invest in a business that a family member wants to start or
acquire. The elders of the family must approve this investment, and it is
structured as a 0% interest loan that must be paid back or structured as a JV
between the family member and
family bank with an equity split
between both groups. In this way,
the only real way for the next
generation to access the wealth is
by applying for responsible use of
those funds, whether it is a $5M or
$20M investment. This is seen as a
more entrepreneurial way of
passing on wealth and encouraging
further creation of it versus simply giving your child $20M to do whatever
they would like with whether they are hardworking and industrious or
wasteful, etc.
– Warren Buffett
Our suggestion is to move from where many families are with no family
history of values documented and no governance rules or ethical policies in
place to a well-thought-out power and wealth transfer plan that considers
multiple generations.
family size has grown considerably. The worst part of the story is that
the family no longer speaks with each other. The wealth was damaged,
but the family was obliterated. This was not the intent or plan by
anyone, but everyone now is bitter at the son for doing something in
hindsight that seemed so poorly thought out. He had good intentions,
and maybe another family member would have lost the wealth at the
same level or worse, but much of that is unsaid. To this day, the son still
runs the money, he still is not paid for his full-time effort, and none of
the family members get together or speaks with each other. The wealth
is a sort of curse instead of a resource that could have propelled forward
the positive values that the father had held while creating the family’s
fortune. Proper focus of energy, respect for moving up a new investment
learning curve, diversification of assets into proper segments, a
documented family history, regular family meetings, governance rules,
ethical policies, an investment policy statement, a dashboard, and many
other processes and tools could have helped prevent or reduce the
damage done here.
Next Steps
Nobody, including you, knows what you really need or why, however, unless
you go through a series of fundamental questions on where you are going. To
help you move forward, we have decided to openly share our 50 Kick-Off
Questions that we use for clients when they onboard with us. These are not
the only questions we ask, but we start here, and it can be good to answer
these for yourself, if not for other advisors you may look to work with, from
an accountant to an attorney or wealth advisor.
Many times over private dinners or first-time meetings, families will ask for
advice on an investment they just got pitched, or they ask me what they
One trend that is growing right now is that of creating a virtual family office.
This is essentially a very leanly operated single-family office where the
family typically would employ a multi-family office for their diversified
investment portion of their portfolio and keep just one to two parts of the
commercial real estate portion, with the direct investment into operating
business portfolio sections in house being managed by their own team. This
keeps expenses relatively low typically and allows families with $30M–
$50M on the low end to those with over $100M+ in assets to invest more
effectively perhaps than just using a wealth management firm or private bank
of a traditional type.
This helps you look at how you can evolve your family office structure and
your approach to managing your wealth. I think starting with this can give
you a little bit of a roadmap on where you need to start, whether your family
office has been around for a few years, it is just starting, or it has been around
for a generation or two.
50 Kick-Off Questions + Assessment Tool: If you have not used any of the
resources in the book, please at least leverage these two. The assessment only
takes 10 minutes to complete and can be useful for years to come while
growing your team and family’s capabilities and holdings.
know what is right for them. The common thread that I keep seeing is
that families should outsource functions and areas of investment where
they did not create their wealth, focus their energy and brain trust on
where they have a distinct advantage and high conviction, and consider a
mix of direct and third parties while allocating to cash-flowing
commercial real estate assets. The quickest way to lose your wealth is at
the two extremes of trying to do everything yourself or outsourcing
100% of everything. The common thread between these three families
and most we work with is that all of them have core expertise in one to
two areas that they could allocate to while also diversifying assets
broadly via a third party and leveraging the tax and appreciation benefits
that cash-flowing commercial real estate assets can give you.
Our hope is that you can refer back to these checklists, tools, and media
resources for the next few years as needed and will have an easy way to
share them with advisors or family members that you want to get on the
same page as you.
Author Profile
If you would like to talk to Richard directly to get help in creating your
family office solution or exploring what options may make the most sense for
you and your family please text (305) 333-1155 or email
Richard@Centimillionaires.com.
We have helped dozens of families start their family offices over the last 12
years, and having met with over 2,500 family offices in person, we bring to
the table a perspective and depth of relationships that equip us to add
particular value to ultra-wealthy families.
If you would like to learn more about how we believe the current wealth
management and multi-family office space is not directly address the needs
of 1st generation and entrepreneurial 2nd gen families please see our 3 minute
whiteboard explainer video here where we have drawn out a new way to look
at your investments and process to help focus your energy and capital.
The other resources references in the book can be found for free at
http://Centimillionaires.com/Book