I haven’t talked much yet about the 8th Key, namely Family Offices. But I’m going to start changing that now. I attended a Family Office Conference in Manhattan in February. There were 200 people there … all of whom were either part of a family office or somehow serve family offices. Most of the attendees work with (or in) family offices for centimillionaires and billionaire families. But first…

What’s a family office?

It’s a holistic, full-balance-sheet wealth management solution for an affluent individual or family. Most families worth $10 million or more know something about managing their wealth, otherwise, they wouldn’t have achieved that level of financial success.

However, the vast majority of wealthy families that I work with have not formally organized themselves.

And in fact, most wealthy families do not talk about having a family office. They may have a holding company. But most wealthy families have not taken all the steps to formally create what’s called a family office.

Benefits of a family office vs. a holding company

A holding company is a partnership that owns 5 LLCs and those LLCs own real estate properties. That’s just an example. But that is not a family office. When you have a family office, your family is run like a business — and it’s organized to help you…

… manage your financials…
… protect your investments…
… set up rules for investing…
… leverage tax strategies…

Basically, when you have a family office, your family becomes more “profitable” because…

Running a family like a business is exactly how affluent individuals and families are passing on their wealth to their kids without ruining them.

I’ll talk more about family offices in future blog posts — for now, I’d like to share…

3 takeaways from the Family Office Conference that I attended:

Takeaway #1 — About 80% of the people there were somehow involved in real estate investments.

Takeaway #2 — Most wealthy families run away from venture capital deals. But …

There are some families who know how to make VC deals work. You just need to know that your money will be tied up for seven to ten years. If you do VC deals…

You need to do ten good ones with the knowledge that nine will fail and the tenth will make you the profit. AND be very careful in picking your ten deals.

Takeaway #3 — Impact investing (i.e., investing with the intention of generating a measurable, beneficial social or environmental impact alongside a financial return) is becoming increasingly popular, even among very affluent families.

Impact investing is a way of getting the younger generation to care more about what the family does with its money because…

It connects parents and their children — typically millennial — to work together for one purpose. An example of impact investing is investing in solar energy.

You the parent (if you’re older) cares more about the money than your children (millennials) who cares more about saving the environment than making a bunch of money.

One more thing today…

I met one man who is worth over $100 million. In talking to him, I noticed two things. First, his wallet was an inch thick (two inches when folded). I don’t know how he could sit — But it was filled half with cash, and the other half with business cards. In other words…

He equates wealth with relationships. Also, he was like so many people I run into. He had no idea how to successfully pass his wealth to his kids without ruining them. Those are the highlights I wanted to share with you.

Until next time, be well and enjoy yourself.

If you have any questions or comments, feel free to write them below, or email my team at support@eachgenerationstronger.com.

– Paul Deloughery

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