Life is complicated. And it gets more so as wealth increases – particularly when assets are owned in common, structures become more complex, the number of family members increases, and founders plan to pass on operating businesses and financial or real assets. At the same time, the world in which we operate is also becoming more complicated with investments, taxes, regulations, and geopolitical events spinning faster every day.
You can’t be good at everything, so it is probably inevitable that you will have to rely on advisors with key technical skill and practical experience. Also, since you will often have only one shot at making key decisions (such as a business sale), you might want to talk to someone has significant and familiarity with this particular issue.
But it can be hard to find the right advisor – especially someone with integrity, a good demeanor, the right fit with you, the best set of skills, and the appropriate incentives and motivations. In this section, our authors help you think through the fundamental questions of working with advisors – how do you choose them, which ones are right for your family, how do you use them well, how do you evaluate them and when do you change them?
We start with an essay by Susan Massenzio responding to the question “What types of advisors should you consider?” Even that is not a simple question because the menu can include generalists, specialists, technicians, mentors, coaches, facilitators, counselors, and even family members, all with varying degrees of appropriateness for those roles. Susan looks at all the different sorts of people who can advise families, what specific benefits they can bring, and what you should (and should not) expect from them. She also offers a series of questions that can help families separate the wheat from the chaff and find advisors who will be a positive force in the life of a family, with a particular focus on advisor competence, experience, and goodwill.
In his typical no nonsense, no-holds-barred approach, Philip Marcovici provides guidance on the question “How can you find trustworthy advisors?” His many years of experience as a lawyer to families of wealth have given him a jaundiced view of many advisor motivations, incentives, and desire for control. He provides great input on reducing conflicts of interest and improving alignment between advisors and clients for the benefit of families.
What do you do when you think you found a good advisor but you’re not sure? Perhaps there are some red flags and maybe just some yellow ones. Stephen Horan and Robert Dannhauser tackle the topic, “How can you avoid the next Bernie Madoff?” Unscrupulous advisors and inappropriate investment products will never disappear, but in a complex investment arena where advisors are often required, Stephen and Robert provide guidance on how to, in the words of Ronald Reagan, “Trust, but verify.”
Some families have determined that they could benefit from the integrated objective approach offered by a family office, which then leads to another set of questions such as “Should you choose a single-family office or a multi-family office?” There are a multiplicity of decision factors that should be taken into account, and Kirby Rosplock walks us through a thoughtful, reasoned, yet personally relevant way to make this decision. She also offers some handy evaluation tools to understand the choices.
Finally, Hartley Goldstone answers the question, “How do you choose a good trustee?” A trustee makes decisions in the place of others, for the benefit of others. They need to be skilled, trustworthy, experienced, and have good emotional intelligence. Harley provides guidance on finding, evaluating, and engaging good trustees who will not only execute the technical components of the trust but will also fulfill the original intent of the settlors and care about the beneficiaries as unique individuals.
At the end of the day, a good advisor is trustworthy. And what kind of person is trustworthy? They are credible (you can count on them to know what they are talking about), they are reliable (they do what they say they are going to do), you can talk to them (you know they will listen and keep confidences), and they are not self-oriented (you can be sure they will be focused on your best interests, not their own).1
1David H. Maister, Charles H. Green, and Robert M. Galford, The Trusted Advisor, (New York: Simon & Schuster, 2000).
Chapter 45 – What Types of Advisors Should You Consider?
Chapter 46 – How Can You Find Trustworthy Advisors?
Chapter 47 – How Can You Avoid the Next Bernie Madoff?
Stephen Horan and Robert Dannhauser
Chapter 48 – Should You Choose a Single-Family Office or a Multi-Family Office?
Chapter 49 – How Do You Choose a Good Trustee?