An unknown commodity in Canada, family offices by some estimates are a decade behind the U.S. in both prevalence and sophistication. Advisors can learn a thing or two from this niche segment of the financial services business. Most people’s understanding of the family office includes the usual silos: wealth management, tax, legal, insurance and estate planning. However, Arthur Salzer, CEO of Northland Wealth Management, a Toronto-based family office that got its start a decade ago by helping a wealthy Canadian family take its retail business public, suggests it goes well beyond these commonly called-upon services. A good family office is all about education with family governance and succession planning being two important subjects that if ignored can result in the failure of wealth to pass from one generation to the next. Multi-generational family wealth exists in large part because family members understand how the future is going to unfold and what, if any, role they will play in that future. Brown-Forman, producers of Jack Daniel’s and other liquor brands, faced a serious governance issue back in 2005 when Paul Varga ascended to the CEO role, the first non-family member to take the helm. With few younger members of the Brown clan taking an interest in the family business, it was losing touch with future generations and potentially jeopardizing Brown-Forman itself. To remedy this situation the company created a committee of family shareholders that meets six times a year including immediately before the annual meeting to discuss issues facing the company and how the Brown family should interact with Brown-Forman on those issues. Although the business has been controlled by the family for almost 140 years, the family governance issues tackled in recent years will likely be the glue that keeps it together for another 140. So what can advisors learn from this? Plenty. Most importantly it demonstrates that family wealth is best grown in an environment of openness and understanding where all family members are involved. Whether your client has a million dollars in investable assets or even a billion, it’s vital they have a plan that addresses future generations beyond the current two or three that exist today. As Salzer reminds WP, there is what’s referred to as “family wealth” and then there is “personal wealth.” The two are entirely different.
Family Offices Go Above and Beyond
Updated: May 27, 2020