Uncovering ultra-high net worth families
It seemed like the storyline of a movie or television show. The patriarch of a wealthy family having enough of the entitlement attitude of his adult children "pulls the plug" on their monthly "allowance" check.
The story seemed more than anecdotal, coming from more than one speaker of panelists who represented multi-family offices (MFOs).
"The fifty-plus-year-old son who never worked a day in his life was suddenly thrown into a tailspin when his father stopped his allowance," said one chief executive officer of an MFO organization.
"Some of these adult children know nothing about money, and either live a frivolous lifestyle or constantly are making poor financial decisions," said one MFO director. "My job is often to give dad, the patriarch of the family, the hard facts that his children are bleeding him dry," explained the director.
The panelists of MFO representatives were asked for stories of parts of their job that are not the norm. The stories were surprising, but few.
MFOs and single-family offices (SFOs) are private wealth advisory firms for ultra-high net worth (UHNW) individuals and families. An MFO may represent several UHNW families while an SFO is a company office set up by and for one family. SFOs are operated as a company with officers, staff, and frequently a board of directors.
Recently, I attended a family office forum in Napa, California. UHNW individuals participated in the week-long event along with the officers of several SFOs, and investment company managers like me.
I am rolling out a private equity commercial real estate fund in another company I recently started (StoneMarkerInvestments.com). The fund focuses on commercial real estate investments for accredited investors and potentially small SFOs. It was beneficial to network with others in the industry as well as meet potential investors.
I had the pleasure of meeting several UHNW individuals, having lunch with one memorable patriarch who created his wealth trading public equities. It was quite the opportunity of having a dialogue with a billionaire, asking him questions such as what he looks for in an investment.
The SFO created for the wealth management of my lunch partner invests in hedge funds, venture capital opportunities, private equity funds, operating companies, and real estate. His SFO invests approximately ten percent of their assets in commercial real estate. His maximum investment amount is one billion dollars.
Most UHNW investors worked hard to attain their level of wealth and made the right decisions at the right time. Several of the UHNW individuals were quite approachable and extremely knowledgable in their realm of investments.
SFOs have a vision, mission, and strategy for their investing. Diversification is an essential part of the UHNW strategy with a focus on hedge funds and non-correlated investments. A non-correlated investment is an investment that would increase in value when others decrease. A hedge fund is a collection of these investments.
At the forum, I listened to several companies pitch their investments from cancer research and artificial intelligence to investing in the production of the next blockbuster movie.
UHNW investors are looking for alternative investments to stocks, bonds, and real estate. So when one investment suffers in value, the other non-correlated investment grows.
The forum was a success. I met many great people and uncovered a little of the world of UHNW individuals.
Burt M. Polson, CCIM, is an active commercial real estate broker. Reach him at 707-254-8000, or [email protected].