Family “WealthCo” Opportunity Knocks

Family “WealthCo” Opportunity Knocks

A couple of weeks ago I travelled to Toronto to attend a one-day investment conference aimed at Family Offices.

As someone who used to be interested in the nuts and bolts of investing my family’s investment assets, I used to attend a lot more of these events

I had a bit of a flashback as I listened to speakers talking about the future direction of the S&P500, and what the Fed was expected to do with interest rates.

But I let out more than one contented sigh of relief, as I also recognized that I have now found more interesting things to occupy both my mind and my time.

The Family Office aspect of the conference thankfully added some more interesting ideas to the agenda.

 

Liquid Assets

The first noteworthy take-home message that I got from the day came from the very first panel.

On stage were a number of investment specialists, all of whom are charged with providing investment vehicles and advice to a number of family offices and families of wealth.

Most “family offices” are formed after a “liquidity event”, in which a substantial business asset is sold by a family, creating a pool of capital available for investment in other assets.

 

The Family “WealthCo”

One panelist (whose name escapes me, otherwise I would happily credit him) noted that when he has a client who experiences such an event, he makes sure that they do not become complacent.

Too often (and I have seen this up close myself) when a family sells an operating company and winds up with a proverbial “pile of cash”, they think that things are now going to be so much easier.

They wrongly believe that they’ll be able to become “Do-It-Yourselfers” for much of what they’ll now need to manage.

The speaker related that he always insists that these client families realize that whereas they previously had an “OpCo” (operating company), they were now the proud owners of a “WealthCo”.

This WealthCo requires diligent leadership, qualified people, and formal procedures and governance, just like the OpCo did.

His message is worth keeping in mind, and I’ll certainly be using his term going forward.

 

Opportunistic Opportunities

During the same panel, I got another interesting “blog-worthy” tidbit, and this time the fact that I don’t recall the speaker’s name may be a plus.

Speaking without notes, someone was talking about evaluating opportunities, and used the adjective “opportunistic” and then searched for the right noun to complete the phrase.

He eventually ended up uttering the phrase “opportunistic opportunities”, to a mild chuckle. I note this not to make fun of someone on stage searching for the right word (been there, don’t that) but because his “expression” made me realize something important.

 

Not All Opportunities Are Created Equal

The point that was driven home for me is that not all “opportunities” that are presented to us are in fact “opportunistic”.

In fact, one of its biggest challenges a family “WealthCo” faces is the careful selection of which opportunities to pursue.

As someone who’s selected some very good opportunities over the years, I must grudgingly admit that I have made a number of poor choices too.

And if you think that you’re qualified to “cast the first stone” as the exception, then I must either congratulate you, call you a liar, or suggest you scan your memory bank again for some examples.

 

Diligence and Governance

Earlier I noted that a WealthCo requires procedures and governance, and I know that it’s tempting to really enjoy the newfound freedom that comes with putting liquid investable assets to work.

There can be a tendency to see many opportunities as being much more “opportunistic” than they really are at first glance.

You need to force yourself, as a family, to look at your family wealth as a “WealthCo”, that needs to be managed and governed in as serious and diligent a manner as you ran your former OpCo.

 

Think (and ACT) Like a Family Office

In my book, SHIFT your Family Business, Chapter 9 is called “Think Like a Family Office”. The WealthCo idea takes it a bit further, and actually suggests that you “Act Like a Family Office” too.

WealthCo is just another way of saying it. However you say it, just don’t get complacent with the newfound freedom liquidity brings.

Govern yourselves accordingly.

Next Week: I’m looking forward to the first ever Guest Blog post here next week. Kim Harland will be supplying a guest piece here, while one of my original blog posts will be going to her subscribers.

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