This article explores the the reasons for the problems families encounter by failing to view the family office as a methodology.
In the second half of an essay by Edward V Marshall, global head of the Dentons Family Office Group and a member of this news service’s editorial advisory board, he sets out the reasons for the problems families encounter by failing to view the family office as a methodology. The first part of the article can be viewed here. (More on the author below.) As stated, readers who want to respond can contact us at email@example.com
Cause 1: Scope and expertise creep of vendors and
We frequently discuss scope creep in the context of internal staff who support wealthy families. This expansion of duties frequently manifests itself in the internal team taking on an ever-increasing number of tasks to put out new “fires” from the requirements levied by the family. Secondly, service providers will discuss scope creep in terms of profitability to support wealthy families given the expansion of duty requirements from a wealthy family.
However, the issue of scope creep, which is directly attributable to a family’s vendors and advisors, is not sufficiently addressed. This type of scope creep can be devastating for a family looking for help to solve complex problems or operate more efficiently.
There is a natural tendency for family office advisors and vendors to introduce scope creep into a family office, often biting off more than they can chew in an effort to serve a wealthy client. We have all seen it.
Why does this vendor/advisor scope creep happen?
The problem lies in the opportunity to serve a wealthy family. These opportunities are infrequent and obviously coveted. Therefore, vendors and advisors will jump at the chance to support these kinds of families. The problem is that, when presented with a family with a net worth of $500 million, service providers are highly tempted to offer assistance in any manner they can, even if doing so would put them entirely outside of their comfort zone.
"Of course, we can help with that as well," is a phrase that can have very negative consequences for families.
No single individual or organization can do everything absolutely necessary to support a wealthy family. But it takes incredible discipline, experience, and confidence to admit that to a prospective or current client.
Furthermore, knowing the general lexicon of the issues that wealthy families face does not replace direct experience in resolving those issues. Yes, we can all buy cookbooks, read them, and try the dishes out on our unsuspecting families. But it takes years of experience to master how to make something simple as Potage Parmentier or as complex as Beef Bourguignon. The same is true for professionals expressing opinions on topics outside of their direct experience.
Further, wealthy families often lack comprehensive knowledge
regarding the vast array of services and guidance that are
accessible to them. The reason for this is also not unexpected.
Wealthy families can have complex service requirements. How does
a family determine which service provider is the "best" in each
category of need? Through rankings and awards? Through referrals
from trusted advisors or other families? Through marketing
materials or testimonials? Through luck and learning from
Even if a family takes the time to conduct its own independent research to fulfil a service requirement, they will have to 1) slog through potentially hundreds of providers per category to find relevant advisors; 2) be lucky to find the relevant service providers in that category according to their particular needs; or 3) have the ability to separate hype from the ability to successfully deliver.
The problem is vendor/advisor scope creep and again, one of incentives. It can be very tempting for service providers to claim expertise beyond their core competencies because of the tremendous revenue opportunities connected to serving wealthy families.
Naturally, businesses seek to find ways to expand wallet share with customers. In the family office sector, we are seeing more advisors advertise and/or develop additional internal "family office"-related capabilities to better serve their wealthy clients. Sometimes these new product or advice expansions are natural extensions (e.g., a bookkeeping firm offering consolidated asset reporting); others are more distant (e.g., a classic car advisor expanding into selling cybersecurity services).
For families, the phrase "one-stop shop" may portend unfavorable outcomes and missed opportunities. Families run the risk of forgoing valuable guidance and alternatives that could have been offered to resolve a problem or accomplish an objective.
Trying to do “everything” to the detriment of your core expertise or “dabbling” can lead to poor outcomes for a family and reputational damage for the service provider. Families should also keep in mind that real client segment expertise differs from client segment focus. It is time for the family office industry to acknowledge that this is a growing concern and to confront it head on.
Cause 2: Lack of project management skills
Project management is a core function of serving wealthy families. However, many of the service providers who support wealthy families lack or misunderstand project management skills.
Families will work with the vendors to develop grandiose plans and get mired in mediocre execution. Pointing fingers is easy (e.g., “the client changed their mind” or “the client had unreasonable expectations"), but fixing the issue requires understanding the fundamentals.
The under appreciated element of any business, partnership, or endeavor in general is the “chief get-stuff-done officer” role (CGSDO). The CGSDO is the person or people who can be relied on to turn an idea into action, a problem into a solution, or ambiguity into clarity.
The same is true for advisors who support wealthy families. A family's lofty ambitions can quickly be derailed by poor execution. Families lacking a strong project management system may experience frustration stemming from slow progress, missed deadlines, finger-pointing among service providers and internal staff over who should be held responsible for unfulfilled family tasks, and increased expenses in terms of both money and time. Ineffective project management will make families feel more like they and their team are playing "whack-a-mole" than assisting them in reaching their objectives.
In the context of family offices, CGSDOs' ability to oversee and oversee project completion is ubiquitous. It is helpful, but not always necessary, to use expensive project management software to achieve these objectives. To get started, you can use sophisticated technology like a pencil and paper. Upskilling in this field, however, can be a simple and efficient approach to enhance the intended results for a family. In conclusion, enhancing project management abilities can be achieved through a variety of means, including using numerous technological platforms to stay on top of tasks, deadlines, and deliverables or by studying online tutorials.