Why Human Capital is as Important as Finance to Family Office

CEO says staying curious is vital in bringing best-in-class solutions to clients but that it's also important to understand family dynamics

Investors have to move where the puck is going not where it’s at, to mangle the famous Wayne Gretzky line. Nowhere is this more important than in family offices, where advisors are typically managing significant money for a relatively small amount of clients. Arthur Salzer, CEO and CIO of Northland Wealth Management, believes the key to success is staying curious, constantly educating yourself and your families, and understanding what each client stands for.

These are the pillars that have seen his business thrive since he started it 10 years ago, with the aim of bringing the best-in-class U.S. model at the time over to Canada. That means having access, similar to the pensions and endowment funds, to the best-institutional quality investment solutions or managers in both the public and alternative space. He was also careful not to overlook the families themselves – and the personalities involved.

“The human capital side is as important or even more important than the financial side,” he said.

“You have to understand the family dynamics. Understanding what the family stands for can make more of a difference in preventing ‘shirt sleeves to shirt sleeves in three generations’ than some of even the best investment solutions.

But when you combine them together, we're really one of, if not the only, firm in Canada that offers that to our families.”

The learning process for the advisor in this situation is ongoing, Salzer said, and the onus is on them to use that education and knowledge to know what is suitable for each family. For Northland, that is illustrated by the private equity they began investing in a decade ago, being one of the original investors in Shopify at a $70 million valuation through a Toronto growth equity manager.

Salzer added: “We've invested in private real estate and some of the first secondary PE funds and debt funds available in North America. And even just over two years ago, we began investing in Bitcoin for our families after a two-year, 2,000-hour due diligence process. It’s always about learning what's going on, and understanding some of the risks, as well as the opportunities, and then educating our families on that. It's a never-ending cycle.”

Northland had a minimal drawdown during the pandemic, something Salzer credits to its multi-asset class models. Of course, communication was primarily through video conferencing software but having been cloud-based since inception, that wasn’t a big deal for Salzer and his team. His families are global by nature, whether they be in Canada, the Caribbean, or the Middle East. His air miles dipped but the communication levels remained the same.

It’s another example of how the world is constantly changing – and how practices must always do their utmost to stay ahead of that metaphorical puck.

“We’re always trying to be out front,” Salzer said.

“We've invested in areas like secondary private equity and secondary private debt, for instance. This can provide opportunities to get a better look at loans with the managers and actually even achieve higher rates of return."

"There's still lots going on in the decentralized finance space that’s outside of Bitcoin, and we're continuing to look at that for opportunities as well. It's continual education of ourselves and our families, and really trying to see what the next thing is, what the potential risks versus return are, and where that fits in portfolios.”

The original article featured in Wealth Professional Canada.