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| First Person: Industry View |
An Industry in Flux
Henry (Hap) Perry
10/01/2004
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Hap Perry is the founder, chairman and a client of Asset Management Advisors, a
multifamily office purchased by Atlanta-based SunTrust in 2001. It has locations
in Palm Beach, Orlando, Miami, Atlanta, Washington, Greenwich, Conn., and
Charlotte, N.C. A graduate of the Wharton School, Perry managed his family’s and
his own businesses before founding AMA in 1989.
I see the family office as the right platform for wealthy families seeking to
cope with multigenerational dilemmas and problems that, if not properly attended
to, can result in the syndrome summed up in the saying: “Rags to riches to rags
in three generations.” The best way for families to avoid this fate is to
leverage their financial capital (what they own) with their human capital (who
they are) and their intellectual capital (what they know), while creating a
lasting partnership that involves all their members. I began Asset Management
Advisors as a multifamily office for families who, like my own, had this
vision.
 | | (Photograph by Diane Bradford.) |
Most of a family’s advisors, while very competent, have their own
unique perspectives on the world and do not address the complexities of the
interrelated issues. As an example, much of the financial services business,
while competent at looking after a family’s investment performance for the next
quarter, is not equipped to look after it for the next generation, nor does it
consider this its mission. Other types of advisors focus on their own areas of
expertise, and consequently cannot help the family resolve the dilemmas that
arise from the interrelationship of all three forms of capital.
| Most financial institutions still focus on building their capability to grow
the financial capital, rather than the human capital. |
As an
example, the head of a family can go to some very competent legal advisors who
may do a wonderful job structuring a plan to minimize his estate taxes, but they
may also inadvertently create a battleground for his heirs. Only a firm that has
invested in understanding the family’s human capital needs can mentor it and its
advisors appropriately to make that tax-saving structure work from the
perspective of more than one generation. Meanwhile, most financial institutions
still focus on building their capability to grow the financial capital, rather
than the human capital.
Integrating all of a family’s forms of capital is a
challenge. It draws on expertise in a number of disciplines, including finance,
law,accounting, psychiatry, education and governance. Only those families with
vast resources can afford to field a team of experts and devote the time
necessary to develop their own processes. Single-family offices, or even
small multifamily offices, can only succeed at this, typically, for a limited
number of generations, until the family’s original “sparkplugs” give way to age
and retire. Typically, without a good deal of luck, the resources (and
challenges) are not sufficient to attract the top talent required to keep the
operation going in subsequent generations.
A New Paradigm
This situation cries out for an institutional solution that
can bring both a measure of continuity and appropriate resources to bear on the
problem. Many of the institutional solutions currently available are not
comprehensive, nor are they “high touch” enough for affluent families. Even so,
many firms that now claim to be in the family office business do not have the
necessary capabilities. It is often difficult for a client to decide which firms
are able to provide the comprehensive suite of services they need, and which are
simply claiming to have that capability for marketing purposes. There are,
however, several questions a client can ask in order to discriminate among
firms.
1. Can the firm clearly define and explain the processes it will employ
to help its clients with their human and intellectual capital? Everyone can
provide anecdotes, but can the firm point to specific expertise and programs in
credible detail?
2. How much of the firm’s resources are
dedicated to the nonfinancial services, and what are the firm’s plans to expand
those offerings?
3. Is the firm interested in cross-selling products or
finding unique client solutions? Are its advisors compensated for selling the
firm’s own products?
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