Exploring relevancy in the family office

Feature artice from our U.S. partners

Examining the forces and key drivers that can affect relevancy

From my team’s experience working with hundreds of family offices over the last 15+ years, we know that relevancy – the real and perceived connection between any one piece of a system and another – is foundational to the success of a family office, as well as to the satisfaction and self-actualization of the individuals in the system.

Yet, despite its importance, it’s not viewed as urgently as other, more tangible issues, and is often ignored until problems arise. Family office executives who think about relevancy are often kept up at night by that sinking feeling that the pieces

in the system – the office, the various generations of family, the office executive themselves – are slowly drifting apart. Those not kept up at night are either confident in their strategy to address it or possibly on their way to becoming irrelevant themselves.

The purpose of the paper is to help executives and family members see the forest for the trees. It can be easy to miss the bigger picture when individuals are focused on the day-to-day. It’s important for executives and family members to pause, zoom out to appreciate the full relevancy picture (as well as the different dynamics at play) and then focus back in to better understand where they and their family office stand.

Defining relevancy and its importance to a family office

While relevancy is probably easier to feel than it is to articulate, the definition we will propose is a combination of connection, significance and value delivered over time. Connection feels like comfort, relatability and trust; significance feels like usefulness, gravity and meaning; value feels like appreciation and expectations exceeded.

A relevant family office of course delivers on the tangible finance, tax and risk needs of the family, but beyond that, a relevant office is something family members turn to with a question, something family members pay attention to, something that grows and evolves as the family evolves, and it is something that can effectively push and pull a family toward its own definition of multigenerational success.

Offices don’t need to be relevant. Looking around, it’s easy to find an active office that, for example, plays one specific role for one specific person. Or to find a wealth creator who has no interest in staffing an office “so someone can walk my granddaughter’s poodle.” Offices can serve purposes as broad or as focused as those controlling them want. That said, experience shows that offices that are not relevant are eventually abandoned. While abandonment can be a slow process that plays out over years, it can also happen more abruptly, such as when a founder passes and family members immediately “cash out.” There is nothing wrong with closing an office or encouraging family members to start their own offices, when that is the intention. When it happens despite intentions, however, it opens the family up to unnecessary risk and conflict. Much less common, but perhaps more traumatic, a lack of relevancy can lead to family members taking more abrupt action, such as forcing out a long-tenured leader, or turning to litigation to get what they want.

Who gets to determine what makes the office relevant?

Connection, significance and value delivered over time may help identify when an office feels relevant to the family, but it doesn’t suggest the specifics – such as offerings, culture or personnel – needed to get there. Nor does it answer the question, “Who gets to define what will make an office relevant?”

The assumed answer to this question might be that the family should define what will make the office relevant—after all, it is their office. However, in our experience, families can have a hard time seeing beyond the current moment or today’s needs at hand. Their focus is too often on the individual trees in front of them and they fail to see and appreciate the collective forest.

When faced with defining how to achieve relevancy for their office, we’ve seen families limited by any number of factors:

They don’t necessarily know what the family office does. As funny as this sounds, it is fairly common.
Even if family members have good visibility into their family office, they might not have any real voice in it.
Family members often know their own experience with the office but don’t understand – or even care about – how other family members (kids, siblings, cousins) are being served or not served by it.
Being a “client” of a family office is different than being responsible for its governance.
Many families have not articulated shared goals, so there is no shared definition for what success looks like.
Even when families have full transparency into their office, theirs may be the only family office they know, so they are unaware of the different or additional ways other offices serve their families.
The family fully relies on the professional opinion of the executive they’ve hired to run the office, a professional who may be biased or limited by his or her own scope of expertise or perspective (e.g., tax-obsessed, or untrained in dealing with family dynamics). Understandably, families often hire a task-focused professional to build an office, rather than a visionary CEO.
Families are made up of individuals, who all have their own biases and preferences, and therefore resonate with, connect with and feel comfortable with different types of people or office cultures. Age, personality, philosophies and vocation can all lead to wildly disparate opinions about relatability and connectivity (e.g., “I am comfortable with her because she is kind of like me,” or “Our investment team speaks a totally foreign language.”)

While these limiting factors can lead to a myopic or biased definition of relevancy, we’re not suggesting families should not define what a relevant office looks like. Rather, we’re suggesting that family members and office executives might benefit from reflecting on them.

Using stated needs versus true needs to understand relevancy

One approach to moving beyond the factors that can obscure or limit a family’s definition of relevancy is to explore what the families truly need and want over the long term.

Families are pretty good at stating needs that are at their fingertips. Accordingly, stated needs are the foundation upon which most family offices are started: “We need to file our taxes”; “We need our own investment team”; “We need annual foundation board meetings.” But those stated needs are often less-than-visionary, or include only the tangible needs of the day. For example, a family who wants to preserve financial wealth

through the generations likely invests heavily in estate planning and tax avoidance. But honest reflection can tell us the most efficient tax planning won’t prepare inheritors not to be derailed when they become the beneficiary of a significant trust. The stated need is for capital preservation and estate planning. But when challenged to think more deeply, the family might recognize their “true” need is actually for healthy, prepared family members who can enhance their lives with the financial capital that estate plan grants them.

In another example of reflecting on true needs, one family office that was traditionally organized around its stated need for governance of an operating business (which was helpful for the business, but had little impact on the rapidly growing family) expanded its scope to create efforts to increase the mental, spiritual and physical well-being of all family members.

Stated and true needs play out not just in “the what” of a family office but also in “the how.” For example, many family offices are built around a desire for efficiency, low overhead and extreme confidentiality; these are the stated needs. But for those families who do not want subsequent generations to break the family office apart (for any number of security, continuity or investment reasons), their offices will also need to continually improve and evolve. True needs in this case may be finding more modern ways to operate and to innovate new services that reflect the times. And to meet them, family office executives may need time to network with peers, be exposed to other offices and solutions and vendors or learn about new

trends or macro shifts that will affect the family – all things that are not comfortably supported when an office’s stated needs only include “efficiency, low overhead and extreme confidentiality.”

Stated needs versus true needs can also be a lens to examine the existential question of “Why a family office at all?” Family office leader and family member Scott Peppet has written about posing the following question to his family: “In the coming year, would you rather have slightly better tax preparation in your life or more joy?” Despite the answer always being “More joy” – the true need of the

family – few offices invest anywhere near the resources in joy as they do in the stated need of tax preparation. (And if you’re like most, the concept of investing in joy just tripped you up.)

We understand it might sound like hubris to say that families don’t know or aren’t asking for exactly what they need, but this concept of true and stated needs creates an opportunity to think about the what, how and why of a family office, all of which will give you clues as to what makes an office feel connected, significant and valuable over time.

Exploration of true needs can take many forms, some of which are likely familiar. Some families use targeted conversations during family meetings, others hire consultants to interview family members and facilitate decision-making, others intentionally hire visionary executives with high emotional intelligence or dedicated family learning and development professionals, and some families simply make space for such conversations around the dinner table or in the car. This article is concluded with questions that can be used to get these conversations rolling.

Benefits of offices that remain relevant to the family

Here are four longer-term outcomes we’ve seen emerge when offices were able to sustain relevancy with their families as the family grows and evolves:

Keeping the family safe and protected. Family members will participate in and listen to an office – regarding, say, money movement protocols, emergency preparedness or cybersecurity best practices – that they believe is relevant. Family members will often ignore the wisdom of offices that are not relevant to them.
Helping the family thrive outside of financial capital. It’s about more than just tax returns here. When family members feel a connection to their executives, those executives are betterpositioned to nudge families into the unknown or uncomfortable work of defining and pursuing the nonfinancial success of the family members and/or the collective family.
Achieving continuity. Families will evolve. Talent, skills and success will vary. Interests of family members or groups of members won’t always align. An office that can remain relevant to much of the family is better positioned to smooth the peaks and valleys and bridge rocky transitions, lowering risk for the family.
Establishing independent empowerment. If a family’s hopes include developing strong, independent family members, and the family office doesn’t feel relevant to those family members, it will be hard to empower them, and they’ll more likely remain enabled or disinterested or feel disenfranchised. Executives who are perceived as relevant are better positioned to foster an environment of belonging versus one of infantilization or sidelining particular family members.

Beware: An individual’s quest for relevancy can get in the way of an office’s relevancy

The relevancy of any one player in the family office system to another (executive, family members of differing generations, etc.) can have a significant impact on the office’s relevancy to the family beyond the what, how and why of the office offering. This impact is not always positive. With the best intentions of building their own personal relevancy, individuals can unfortunately make missteps or find themselves in any number of unintended consequences that can hurt the office’s relevancy, or their own careers. These tangles look a little different for non-family executives and family members, but being aware of them can help both parties more honestly critique the gap between their intent and their outcomes.

Non-family executives

We’ve seen the quest for personal relevancy trip up non-family executives in several areas:

False relevancy. We see executives who have a negative impact on the office’s relevancy because they are overly confident that they are doing the right things, because they remain fully invested in and focused on what they know best (which is why they believe the family hired them). This micro focus on a specific task or expertise keeps them from a) being able to zoom out to see the broader picture and b) keeps them stuck in a task-based or managerial role rather than a more visionary leadership or CEO role where they are continually scanning, seeking feedback, and evolving. A master-of-tasks mentality can understandably be hard to shake when so much of the role needs to be focused on tasks.
Ignoring the wisdom of crowds. Related to, or founded in, the false relevancy issue, we also see professionals who keep their family office from being relevant because they work in a bubble or have set up the office more like a dictatorship than a democracy, often in an unconscious effort to make themselves as valuable as possible to the family. Without engaging the broader office team in conversation or exploration of how the office is serving the family or how the office needs to evolve and innovate, executives are more likely to fall into the narrow focus/false relevancy trap. Diverse perspectives can illuminate blind spots. Stepping away from “command and control” creates room for effective teams to emerge. For example, an executive extracting an embedded office out of an operating business is 100% focused on their one area of technical expertise and struggling to catalyze the family’s interest or engagement in the office. To us as outsiders, it is not surprising. The family’s operating business is demonstratively a values- driven business; its values and visions are visible in everything they do. If this executive were to spend more time listening to others who have experience working with the family, we think it is likely they would see the opportunity in creating a family office driven by vision and values.
Commoditization. Many family office professionals find themselves in their roles because of their heartfelt dedication to serving the family. This drive to serve leads some professionals to believe their relevancy to the family is defined by their ability to deliver whatever the family wants, whenever the family wants, while never showing the complexity or difficulty required in doing it. Sounds wonderful, right? But we’ve seen this play out in unintended ways where the family learns to assume anyone can do anything, and thus everyone becomes replaceable. Moreover, the family can learn to not value the executive’s role, not value pushback or perspective, or not appreciate the importance of boundaries between work and the personal lives of the office professionals. In some cases, commoditization actually keeps family members from wanting to understand what the office does and what it takes; it keeps them from being curious about how the family office solution could provide greater or additional value to the family.
Enabling and impeding. At times, a professional’s authentic desire to help can lead to something that looks less like relevancy and more like an obstacle to the family’s broader goals. Jumping on a moment’s notice to do something for a family member can make an executive feel great (and it’s the job, no?), but it is possible for all of these little acts to bring about negative outcomes such as enabling family members to not build needed skills or resilience that the family wants them to have. We saw this occur recently when a thirty-something family member became stranded at an airport because they could not reach their family office and had absolutely no idea how to navigate a flight change. On the flip side, striving to feel useful and keeping oneself in the action can turn from relevance to impediment such as when a long-serving executive says they are committed to family office leadership succession, yet stays actively and visibly involved in running the office after agreeing upon making room for the new, incoming leader.

Family member

Similarly, family members can fall into many of these same tangles as executives, especially after years of positive reinforcement from others, or when there are disincentives to keep office staff or other family members from being truly honest with them.

Boxing others out. A desire to help or lead the office under the banner of relevancy can enable other family members to not build their own skills or to become unengaged with management—or even understanding—of the family office. And as we’ve heard family office advisor Greg McCann say: the most dangerous creature in a family enterprise can be an uninformed owner.
Holding on too long. It’s common for family members to try to maintain relevancy long after the family needed them to transition involvement to other family members. The line between finding purpose in involvement and being in the way can be a blurry one.
Losing touch. Even before the family might need a member to pass the baton, it is possible that member will “lose touch” with the evolving office and families. For example, we’ve all seen family leaders who, for too long, hung on to the myth that business could not be done unless employees were at their desks all day every day. In cases such as this, we’ve seen family members turn for help from their executives to stay in touch—and look in-touch—with the office. “I understand it may not feel like you’re the king when you’re not surrounded by your court, but that doesn’t mean you can ignore that the world, and our workforce, has changed,” counseled one executive to his principal (but in much more delicate terms).

Forces that affect relevancy

Identifying key drivers that affect relevancy, as well as asking identifying questions to help uncover needs, are crucial to the continued (and future) success of the family office system.

Admittedly, there are plenty of forces beyond an individual’s or office’s control that can affect relevancy, including generational trends, geographic diversity, global disruption (e.g., pandemic), family disruption (e.g., death of a principal), ideological diversity, the changing needs of different life stages, market forces, geopolitical forces, evolving cultural norms and the rate of change in areas such as customer and personal communications.

Yet there are many controllable forces that influence an office’s relevancy, including how the office presents itself, how much voice each constituent has, how much decision-making power each constituent has, what the family asks from the office – and what the family doesn’t or refuses to ask – and how the office decides what requests to take on. More importantly, these controllable forces are all set in motion by several strategic imperatives that affect relevancy. By being more intentional regarding these key drivers, offices and families can partner to ensure the continued relevancy of a family office solution. These imperatives should be viewed through a systems-thinking lens, because the success of each is affected by the others. These imperatives include:

Trust. Everything circles back to trust. If the family trusts the office (and there’s a strong foundational relationship built on trust), there are more opportunities to offer recommendations and/or course corrections to help maintain relevancy to the family. And while personal trust is good, “professionalized” trust, a more informed trust based on engagement, is even better.
Service. Service can build relevancy if the family’s needs and wants are met – and if executives keep a wary eye on the potential downside of commoditization or enabling family members’ dependence or disengagement.
Rapport. If a family member isn’t comfortable with office executives, that family member is always going to stay hands-off, and it’s hard to build trust without rapport, especially since so much of relevancy is emotional (remember, perceived relevancy is relevancy).
Communication. It’s all about transparency, and ties directly back to rapport, listening and trust.
Listening. The key component here is seeking understanding of the whole family, not just the loudest voices or the biggest votes. Feedback needs to be sought, not avoided.
Executional excellence. None of the aforementioned drivers matter if you can’t execute flawlessly.
Space for foresight. No leader can see what might be emerging on the horizon if their eyes are always down focusing on executional excellence.
Ability to speak truth to power. Some “trusted advisors” have earned that title simply because the family “trusts” them not to push back or raise uncomfortable topics. This does not make anyone relevant. Often, more value can be created by explaining an unpopular decision to the family, rather than accommodating an off-target request.
Innovation, agility and flexibility. Families evolve continually, if only at a glacial pace. Executives who can react and stay slightly ahead of the family’s evolution are more likely to assure their relevancy over the long haul.

What are the questions executives and families should ask of themselves?

Since relevancy looks different for every family and every family office, we cannot make definitive recommendations. Rather, we can suggest a range of questions that family office executives and family members might use to reflect on the topic to determine where they might prioritize further explorations. And as mentioned above, we encourage families and executives to be true partners in this work. The process can be simple: reflect independently on each question and then, being aware of any power imbalances that may exist, come together to share, listen, challenge and support one another.

Family office executives

Is the office on a trajectory to deliver connection, significance and value throughout the years? And as the family evolves?
How might the family articulate a relevant family office? Has this question been asked of them?
What factors might bias or constrain how the family articulates relevancy?
Beyond the family’s stated needs, do the family’s long-term goals or current reality suggest additional areas where the office might provide value?
As an executive, do I have blind spots that might be keeping me or the office from increasing our relevance to the family?
When do I need to be a master of tasks and when do I need to be a visionary?
What indicators could I look for to understand if I’m moving toward commoditization? Where are the lines between serving family members and enabling their lack of agency and involvement?
Is the office staffed intentionally to ensure meaningful connections with all family members?
Rationally, at what point should my own relevancy to the office or family start to decrease?

Family members

How would I articulate what a relevant office looks like? How might others articulate it differently?
What factors might bias or constrain how my family thinks about connection, significance and value over time?
Are the requests and expectations for the office aligned with how my family defines relevancy?
Are there multigenerational goals or ambitions my family holds that are not being supported by the office? Are there goals that are potentially being undermined by the office?
How might the focus or experience of our executives shape the office or its relevancy?
In what situations do we need a master of tasks running our office, and when are we best served by a visionary?
How might the family better support or develop our family office executives so they are better positioned to meet the long-term needs of our family?
Do our executives have the time and resources to keep an eye on the horizon?
How do we know if we’re playing the role our family wants us to play? And how would we know when it is time to change the role we play?

Again, we feel strongly that addressing the topic of relevancy will lead to an enhanced, vibrant and more sustainable family office, as well as to the satisfaction and self-actualization of the individuals in the system. Our hope is that executives and family members use this article as an opportunity to reexamine their respective roles in the family office system, with the goal of using the drivers and shared questions to help begin conversation and set the family office for continued success.