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Building Bridges

bbridgesPrivate Wealth | May-Jun 2014

One of the exceptional strengths of the very wealthy is the depth and breadth of their personal and professional relationships. Even more powerful are their core connections to advocates that help them garner key resources and generate new business opportunities.

The self-made wealthy’s astute ability to strategically expand their networks and monetize these relationships is fundamental to amassing a sizable personal fortune. They generally take a measured and targeted approach to building their contacts, affiliations and alliances. While they’re open to serendipitous opportunities, most situations are a direct result of intentional outreach and positioning.

The self-made wealthy are highly motivated and very focused on identifying scenarios where their relationships can be financially fruitful. To put it succinctly: Their network produced their net worth.

More and more, non-family senior executives of single-family offices are adopting the same approach and working to develop a results-driven professional network.

Connecting With Peers
In a survey of 78 single-family offices, 84.6% of the senior executives report that they’re making concerted efforts to expand and strengthen their relationships with their counterparts at other SFOs.
They list a number of reasons for their outreach:
• Sharing operational best practices.
• Sourcing investment opportunities, including co-investment scenarios.
• Evaluating and referring
professionals.
• Assessing trends that can impact their business models.
• Seeking a sounding board for new ideas and problems.
Of the 66 senior executives that are reaching out to their peers, all of them have found other executives to be responsive. They all agree that sharing and collaborating can be exceptionally valuable for single-
family office operations, while creating a conduit for future career and investment opportunities for the executives themselves.

Ways To Connect
While the family office universe is generally opaque, there are numerous forums through which executives can establish relationships with their peers at other SFOs. Formats vary, as do the attendees, which means a combination of activities is often needed for SFO executives to have the right reach and expertise at their fingertips.

National or regional conferences geared toward SFOs. The topics and speakers at these types of events can be entertaining and informative and the larger size can mean access to a broader cross-section of people and organizations than more intimate events can provide. But it’s worth knowing the mix of attendees, specifically the ratio of service vendors to family offices, and the format (i.e., “speed dating” style sit-downs with vendors, keynotes and general sessions, small-group break-outs, closed-door round-table discussions, refreshment breaks with exhibitors), before committing.

Sponsored small-group meetings. Providers to family offices, such as custodians and asset managers, often host small group meetings with outside experts for their SFO clients to help facilitate private dialogue and learning. These types of forums allow executives to leverage their collective relationship with each vendor to effect change. It can be a potent approach, but it’s not for everyone and can become increasingly political.

Informal study groups. Some SFO executives host their own monthly and quarterly meetings with peers. Sometimes they function as a support group, allowing professionals in similar roles to explore problems and solutions together. Other times, specialists are brought in to discuss specific expertise and updates. The highest value is created when the executives are engaged, interact with one another regularly and remain open to new perspectives.

Large-scale, global conclaves. These types of events are typically focused on macro societal and economic concerns and can be an excellent way to find others who share the same ideals. They are also a useful way to meet powerful, high-profile political, business and philanthropic leaders.

Dedicated associations. As the number of family offices continues to grow, more membership organizations have emerged to give families and their representatives a place to learn, socialize and source expertise. Ongoing value for executives is largely dependent on the new insights and solutions that can be delivered. As with some conferences, the composition of the membership and participants can skew the dynamics and effectiveness.

A large percentage of SFO executives are proactively taking steps to network with each other and they’re garnering reasonable success. This is a trend that’s likely to intensify, especially as the numbers of single-family offices continue to grow.

Connecting With The Wealthy And Influential
Wealthy families provide a potentially more viable and meaningful set of connections that senior executives can leverage. As noted, such a family probably has extensive and powerful relationships. Understanding and profiting from these relationships has a multitude of benefits that can lead to the success of the SFO, the wealthy family and the senior executives themselves.

Of the 78 senior SFO executives surveyed, 69.2% are highly interested in leveraging the wealthy family’s relationships on behalf of their family offices. In general, they understand the connections and the possibilities they represent but only 7.4% are having any success with this strategy.

Just four executives in our relatively small sample have been able to tap the networks of wealthy families—all while actively networking with peers. When asked which set of relationships is more advantageous, the answers were unanimous: the wealthy families. Those connections resulted in tremendous financial opportunities for both the SFO and executives. The benefits derived from these relations were both personal and professional:

• Arranging an internship for an executive’s daughter at one of the world’s leading fashion houses.

• Getting immediate access to a world-class oncologist for an executive’s spouse.

• Opportunities to invest in private businesses on highly preferential terms.

• Access to “closed” alternative investments.

Detriments To Connectivity
There are two principal reasons that the large majority of senior executives are unable to leverage wealthy family relationships. The more pervasive explanation is that the senior executives lack the requisite process expertise. They don’t always grasp the sheer extent of the various personal and professional relationships available to them or the influence of the wealthy family and its members. For SFO executives to be successful in this type of networking, they need to drive the process and be strategic and systematic in their actions.

The other main deterrent is lack of support from the family. More often than not, this can be chalked up to poor communication between the parties. By constructing well-conceptualized narratives that highlight the benefits to the SFO and, by extension, to the family, this impediment can be managed and eliminated.

While there’s considerable interest in accessing these powerful, extended networks—results indicate that this type of networking can be effective for everyone—it doesn’t happen serendipitously or without effort. SFO executives must follow a well-conceptualized and implemented methodology in order to extract maximum value from each contact.

Networking The Street-Smart Way
It’s not about meeting other people, even if they’re considered the “right” people, but rather the ability to get results from or through them. As noted previously, the self-made wealthy very often have purposely and diligently extended and monetized their relationships. Most executives want to do the same thing and have tremendous advantages due to their positions and responsibilities within their respective SFOs. The key is to replicate the framework employed by the wealthy.

Leveraging the framework starts with mapping the relationships among different people, including the executives, the family members and their extended networks. Once the mapping has been completed, each relationship requires a strategy with a carefully constructed agenda. A central part of strategizing is developing an understanding of the target contact. Specifically, there are five core areas that need to be evaluated for each relationship:

• Attributes are the central and often defining characteristics of the person.

• Contacts are the people the individual knows and can access.

• Resources are the “assets” and means at the person’s disposal.

• Intent refers to the individual’s preferences, needs and wants as they translate into interim objectives, which feed into larger goals.

• Crucial concerns are the dominant and persuasive issues and interests the person is presently facing.

With this information in hand, it’s possible to discern the most efficient ways to achieve alignment between the parties and deliver benefits to everyone. This framework can be very effective in other environments as well, giving SFO executives a way to approach their peers, the contacts of the wealthy family, industry professionals and virtually anyone in their personal and business networks.

Conclusion
Senior SFO executives are wisely networking with their peers, as well as the moneyed and influential people that populate the ecosystems around the wealthy families they serve. When they achieve results, it can be exceptionally valuable for the SFO and their own personal and professional situations, but the efforts are still ill-defined and inconsistent. Outreach to and interaction with both groups can be dramatically improved by adopting a systematic and focused approach to each relationship that includes clear goals and objectives, supported by the forums, resources and means to achieve them. 

 

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