Transcript

 

Michael Palumbos (00:48.952)

Welcome everybody to the Family Biz Show. I am your host, Michael Palumbos with Family Wealth and Legacy in Rochester, New York. Today, we have a fabulous show for you. Peter Moustakerski from the Family Office Exchange is joining us today. And we've got a lot of questions for you, Peter. So I hope that you're ready. Welcome.

 

Peter Moustakerski

Thank you, Michael. It's a real pleasure to be here. Happy to.

 

Michael Palumbos (01:28.984)

So Peter and I were lucky enough to meet each other through the Purposeful Planning Institute. And we were sitting at the same table and the person that was going through and speaking at the time took us through several exercises. So we really got to know each other a little bit, which was really cool. when I've had a few clients through the years and a few people that I've talked to that trying to understand.

You know, what is this whole family office thing and when should I be doing it? So, you know, after having met you, I'm like, I've got to have Peter on the show. So I'm glad we finally got around to doing it. If you don't mind, one of the things that we like to do is just typically the work that somebody's doing today. Wasn't the work that they always did. There was a journey that took them from point A to point B. Give us your journey. Where did you start when you left college and university and

Tell me about your family and your experience that led you to working with the family office exchange.

 

Peter Moustakerski (03:00.112)

Yeah, thank you, Michael. I'd be happy to. I've always been envious of people who figured out at age of 19, what they want to do and then retired happily at the age of 60 something. Having done that for 50 plus years. My career does not follow anything like a straight line a little bit to my frustration, but also to my satisfaction because I'm someone who likes to jump into opportunities and explore new ways.

So I am what my Dean of Columbia Business School when I joined politely called my background very interesting or unusual. So what that meant was that I didn't come from a consulting firm or bank, but from a more circuitous path. So I'm originally from Bulgaria from a young age. I was very interested in the world and at age 20, found an opportunity to be an exchange student at the time, at China, which was a very different China from today. This was China of 1988, just opening its doors and just beginning its amazing transformation. So I was lucky enough to spend 13 years that ensued there. I stayed after I completed my studies. I started a couple of businesses in China. worked for the United States of the, the U S department of agriculture.

 

and ran a couple of businesses, both consulting food, et cetera. So I managed to really witness the amazing transformation of that society, that economy, and the world at that time between the years of 1988, 2001. Also very lucky to meet my wife, who was another expat from New Jersey, posted in China, and saw a Bulgarian and New Jersey meet in Shanghai.

 

And that was probably one of the best things that happened to me, you know, having been in China. But in 2001, we moved to New York. went to Columbia Business School from Columbia. went to Booz Allen Hamilton to be a management consultant, primarily focusing on wealth management and financial services. One of my clients, UBS, hired me at the time to lead their strategy function for the wealth management division here in New York. And in 2010,

 

I sort of got this kind of cryptic email through LinkedIn saying that I fit a profile for this family office opportunity, which at the time I hadn't really heard much about. And it turned out to be the Dalio, Ray Dalio's family office at the time just being established and formalized. So I had this amazing opportunity through a maybe six month recruiting cycle to join.

 

Peter Moustakerski (05:22.19)

at the time, the very young Dalio family office and to have the opportunity to work with the Dalio family and with Ray Dalio very closely in helping them kind of conceptualize and build the office. We joined Fox, the office exchange at the time as members and that's how I discovered Fox. And after several years at the Dalio office, I moved on and had another...

 

entrepreneurial journey this time as a chocolatier. I had to go explore kind of some of the creative culinary instincts and desires. But that couldn't last better.

 

Let me interrupt you for a second because I'm a little disappointed that you did not bring any chocolates with you that I know about to the Purposeful Planning Institute.

 

So maybe this year in this year, I'll do something about it. And my skills are getting rusty. But anyway, after that detour kind of corporate strategy came back to recruit me. And so I became the chief strategy officer of a News Corp subsidiary, which we sold to a private equity firm during COVID. And that's the time when I reconnected with Sarah Hamilton, the family office exchange and

 

first joined their advisory board as someone who had been a member and also ran a family office. And over the course of a few months, we started talking about the future of Fox and Sarah's eventual retirement and transition to the next phase of her life. And that's what led me to my current role, which I consider myself very lucky and fortunate to have stepped under three years ago to lead Family Office Exchange into the future and to be part of the succession of a

 

Peter Moustakerski (07:02.04)

really storied and creative founder who has created this organization over 35 years ago. So that's my brief journey.

 

Yeah, no, that's fabulous. And it helps to set a framework. You know, I want people to understand if you haven't read Ray Dalio's book, Principles, you should be reading that book. And, you know, here's somebody who is very, very successful. And you, you like you said, had a lot of interaction with Ray to put together their very first family office. I think that piece is really, really super important. And I'll make sure that we...

 

that people click on that. It was a combination of your experience and what Ray was looking for and what the family was looking for that built that first family office. And that piece right there, communication and collaboration made all the difference in the world. Without good communication and good collaboration between the family and you and the rest of the team who came together, it wouldn't have been a good experience.

 

yeah. it's, we will come sure a lot of aspects of what we're saying here, but I think, the mental kind of principles are that, number one, both the family and the people serving the family need to understand the goals, desires and culture and character of the family. If you come into a family thinking it's like a corporation and you can just go from one job to another, you're going to have a very difficult few, few years. then once, once,

 

You know, the skillset, like we talk in many of our sessions at PPI, Purposeful Playing Institute, the skillsets professionals need to sharpen and develop are often different and much more complex and nuanced than what makes you successful in a corporate kind of regular job. mean, the need for ego and patience and understanding and...

 

Peter Moustakerski (09:02.898)

kind of the ability to navigate family dynamics and interpersonal relationships becomes a fundamental success factor for everyone involved, both for, again, for family members and for the professionals inside the family office and even outside the family office who have to serve and help the family achieve their goals and kind of their journey. Great.

 

So for those people that have never heard what a family office is, and there's gonna be many of them, most of our family business owners, so they've achieved some level of success already, maybe not Ray Dalio level of success. Can you help them understand what is a family office, a single family office and a multifamily office and how they kinda, what's the difference?

 

Yeah, I mean, family offices have gone from somewhat obscure, rare kind of animals to being very, very popular in the past, I would say five to 10 years interest and formation of family offices has exploded. And what happens when this kind of thing happens to anything is you have a lot of misunderstanding, misconception and misuse sometimes of the late and the constructs.

 

Very broadly, a family office is an entity that is owned by the family, operated by the family. Sometimes family members are staffed within the family office. More often than not, it's external professionals who are the staff of the family office. And more often than not, the goal of the family office is to help support and execute the family's personal business investment, philanthropic and other, again,

 

There is an adage which is both overused and sometimes despised in our space. You've seen one family, you've seen one family office. If you've seen one family office, you've seen one family office. And the point here is to emphasize that because the family office gets into the quote unquote business of the family, things like personal relationship, personal interests, personal struggles, it does end up being very unique and hard to kind of pinpoint to a particular model. But...

 

Peter Moustakerski (11:18.798)

That's also somewhat misleading because, you know, people fundamentally, archetypically are similar. You know, our DNA is 99 % the same. And, and so our, our needs, our journeys, and therefore the best practices, the structures that we can deploy against them in a family office or a family wealth. There are a lot of commonalities and a lot a lot of learning apply. And, and this is really the fundamental principle behind

 

organizations like Family Office Exchange, PPI, and other organizations that serve the spaces to find the commonalities, the common best practices, the appropriate practices that families can learn from. So back to the the definitional, however, before I digress. More often than not, so I would say there are two varieties of family offices. And again, this is oversimplification.

 

There's something you could maybe call a founder's office, which is a very early in the journey of the family. The founder is still there, very active. Maybe the business is still operating. Maybe the kids are there, maybe they've grown up, but it's generation one, two, it's still kind of a nuclear family, still mom, dad, and dynamics and kids are still there. And so it behaves like the nuclear family we all know and experience in our own lives. And so there's that family usually.

 

very much driven by the desires of the first generation or the needs of the first generation or the philosophy of the first generation creates a certain set of structures which could be associated with helping manage the business or the ownership of the business, more likely associated with managing the portfolio beyond the operating business or if there's no longer an operating business which was maybe sold and there is now a financial portfolio to manage.

 

Very often there is a philanthropic organization like a family foundation that is being established at that stage. And the family office very commonly is being asked to help coordinate the work of that, as well as many other sort of personal and family activities, anything managing properties, personal security, vehicles, vessels, if there are any in the picture.

 

Peter Moustakerski (13:31.194)

the wellness and wellbeing and personal life and leisure activities, et cetera, that's being called concierge services, so to speak. Often it has to do with education and helping raise the kids or their path into their careers and their future leadership. And so those are usually the scopes of services. Family offices start with a financial mandate, especially in the early stage. And then the second variety is what

 

more probably appropriately fits the label of family offices. When you get into third generation and beyond and you're cousins and multiple branches of families, there's a lot more complexity, a lot more dynamics at play. At play, it's much more difficult to make decisions. The kind of hierarchical top-down structure is no longer there and it has to be replaced with something that the family members who are now by now cousins or distant cousins have to agree.

 

to work together as where governance of family offices, family enterprises and kind of family systems comes into play, very important discipline. So these are the two varieties and again, the scope of usually with financial types of services, like let's do the taxes, manage the investments, create reports, make sure compliance accounting all is done properly, but very commonly goes into

 

the less technical and more kind of human capital or family oriented services, which could be about how we make decisions, how we educate and develop the human capital, we find purpose and stay together, et cetera. So that's, again, it's hard to find a simple and single definition, but that gives you a bit of a kind of scope of what usually family offices are asked to do for their

 

family principles.

 

Michael Palumbos (15:30.222)

love it, thank you. And that was very helpful. when we're looking at these things, and I'll just tell you from my experience, I've had several people, most of their wealth in the family-owned business is in the business. They don't have tons of investable wealth. Even after they sell the business, it's split up among a number of family members.

 

we sell a $50 million business, there's three families, you know, it's like, there's not, the odds of them pooling all their money together into one family office, even at, you know, a $50 million level, when you start talking about to have the expertise that's needed, you know, someone to manage it, then you've got somebody on the legal side, on the accounting side, those salaries start to eat into, you know, being able to manage it.

 

And I know this is just generalities, but when, you what type of wealth does it really take, you know, to really start to think about, you know, I want my own group of people working for my family specifically to start a single family office.

 

Yeah, so let me answer this starting with some data points. Based on Fox research, the average family office has six to eight employees. Even the largest family offices and some of the ones that I know and work with are...

 

close to a hundred or 150 people. So that sounds like a big family office. It's still a very small company if you think about it. So family offices, even at the high wealth levels are fairly small and under resourced, you know, operations. And yet they still cost like the average family office costs between 1.5 to $3 million to run just from salaries and

 

Peter Moustakerski (17:30.902)

equipment, technology, office, etc. And that's not even including the money to actually manage the wealth in terms of external advisors or fund fees, etc. That's just the operational. So if you think about, you know, if you think about as a family office as a wealth management or wealth operation, and you think in basis points, you start to think, all right, well, at what point does it make sense for me to own and operate?

 

an operation that costs me as much as potentially $3 million on an annual basis. Set that aside and then I'll say the following. In the industry in general, although again, it's hard to pinpoint and there's a little bit of a fake precision here, but in general, people in the industry say that unless you are getting close to the 100 million centi-millionaire mark, you're probably going to conclude

 

So.

 

Peter Moustakerski (18:28.896)

sometimes through trial and error that a single family office may be too much as an investment. And in those cases, the right solution to pursue a multifamily office, a virtual family office or some other outsource kind of arrangements. But that also is an oversimplification because the thing with, again, the family office's mission is to support the long-term goals of the family.

 

the family business and the family enterprise beyond the business. If you think about that, don't necessarily follow an investable number. So you could have a family that has a billion dollar business with not much investable assets liquid portfolio, and they could be in the third generation, fourth generation of running that legacy business. They will have the sophisticated needs that a hundred million or a billion dollar family

 

And so those knees.

 

Peter Moustakerski (19:26.688)

would need and vice versa. You could have a billionaire who's by himself with young kids who doesn't have the complexity yet to justify what the average family office solution set looks like. And so I would say that investable assets are one, but still fairly weakly correlated predictor of what you might need or what you might end up having or what it might and what it might end up costing you to a family office because

 

Just the financial portfolio is just one element of what the family office will be asked to do. If the family has hundreds of family members and of trusts and thousands of tax returns, that operation is gonna be a lot more complex than a family that has five members and a much smaller number of trusts and tax returns. If you're doing a lot of investing, venture, impact investing,

 

.

 

Peter Moustakerski (20:24.674)

that are, those are expertise and human capital heavy, that if you compare it to managing, let's say a philanthropic portfolio and just deciding on grant distributions, et cetera, those are two very different sets of activities and you will have a very different set of needs and costs when it comes to establishing a family office to support them.

 

Thank you. So you hit on multifamily offices and again, I think what you just said explained why if you've seen one family office, you've seen one family office. Level of complexity in every family has just a different level of complexity around their entity or around, yes, that's a better way of saying that.

 

What you said that really rung true for me is that, you know, what Fox does and what having all of, having all of this data put up guardrails. They're not necessarily going to keep you from going one direction or another direction, but let's just make sure that you're at least putting in, you know, you're getting your blocking and tackling done properly and you've got the right framework. But outside from that framework,

 

you're, you know, now the art of the family office comes into play. Yeah.

 

Absolutely. Yeah, go ahead.

 

Michael Palumbos (21:49.494)

No, no. I was just kidding. in a multifamily office, these are already built structures typically like I know my firm, you know, is moving in that direction of becoming a multifamily office today. And the reason why that's happened is it's just been a progression of serving wealthy family-owned businesses and their needs changed. So I have had to evolve with their needs and we've learned

 

business strategy coaching and we've had to learn, you know, a lot of trusts, you know, what is a Nevada trust and why would we create dynasty trusts and why are we looking to, you know, take the tax planning and integrate it with the estate and the investments in the business. And so, you know, my level of, I'm a generalist, but I'm a very specialized generalist. So the multifamily offices out there, I would imagine, you know, the ones that are established,

 

They came about the same way.

 

Yeah, I think that's true for the multifamily offices, for some of the wealth managers, RIAs, whose families kind of progress into ultra high net worth status and needs. It's true of single family offices that just evolve with time.

 

I mean, I'll try to connect all the points you make by saying the following. So when you start with the adage, you've seen one family office, you know, this you've seen one family office, essentially what this tells you is we are so unique, it doesn't make sense to look outside, which is obviously wrong. And actually it's that kind of isolation, which was for many years self-imposed by families and family offices because of privacy or this conviction that we are so unique and there's just nobody to potentially learn from.

 

Peter Moustakerski (23:39.705)

is that really has been sort of impeding progress and impeding the ability of families and family offices to progress. One of the biggest thing that has moved the industry forward is the realization both on the individual level of families and family-owned and family office executives, but on the industry level, it's like, we're not alone. If we actually get in a room, somehow well-curated room of people who have the same

 

kind of needs or journey or have gone through the same journey maybe a generation ago and now we can learn from them. That unlocks all sorts of amazing learning and then that accelerates the needs of what you can do to serve the needs of the family. Once you realize that, a second, we don't have to struggle with this. Someone else has solved it over there or this family that's very similar to us has done this and maybe we can learn. So this is the fundamental premise of Fox is creating a community

 

of peer families that can come together in a private, protected environment just to share. You know, as that realization of, wait a second, best practices do exist, has kind of started to wash over the industry, that has enabled a lot of more professionalization and therefore advancement of needs. All of a sudden, families are saying, well, maybe our education needs, maybe our wellness needs.

 

And so.

 

Peter Moustakerski (25:04.972)

Maybe the wellbeing, mental health and things like this should be part because those things are all connected. You can just think about the business, the philanthropy or the investment for portfolio and not talk about the rest of what the FED has to do to stay together, to stay united, to stay happy, motivated and achieve its purpose. so this creation of a community and almost an industry ecosystem has actually

 

in order to

 

Peter Moustakerski (25:32.45)

propelled the development of needs and the professionalization of how these needs are served. And so what that has meant is that for all the professionals like yourself or wealth management firms at the high end of the spectrum, what it meant is that they've been clients, they've been dragged into essentially family office territory and the territory being a set of needs that goes beyond managing investments, you know, even beyond reporting and taxes and goes into

 

areas like estate planning, future vision, preparing the next generation, and even into these qualitative human capital aspects of purpose, happiness, and fulfillment, which is in talking a lot at the Purposeful Planning Institute is at the core of what ends up ensuring long-term success. Because you can do

 

a lot of great things on technical side with the technical disciplines of accounting, investing, finance, estate planning. But if you're failing on the human capital, purpose, happiness, togetherness side, then it all ends up being for naught. So multifamily offices essentially emerged from several directions. They either emerged from...

 

larger institution like a private bank that is being asked to do more and more. And now the portfolio of services goes beyond what an investment management or even wealth management traditional definition would include into a set of services that are more family oriented. The second trajectory is from smaller RA at first that that again, their clients kind of drag them along into a new territory of services and needs.

 

and the ones who are smart rather than saying no are trying to figure out, how do I develop this portfolio of services that my client is asking me? I've never done things like this, but maybe I need to have a partner or I need to acquire something. We need to combine with someone else. So that's another kind of trajectory where multifamily offices get created usually by acquisition or merger of smaller shops. And then there's the third trajectory, which is a single family office that

 

Peter Moustakerski (27:47.842)

was created for a single family, but then maybe progressed into multiple generations, it starts to feel less like a single family and or they have friends and families that are in similar situations and they're like, instead of you reinventing the wheel, maybe we we've built this, we could use it together. And so that's another also very common trajectory for a multifamily office to be born out of a single family office adding.

 

initially just a couple of friends, family, friends, and then over time a broader portfolio.

 

So, there's a lot that you just said to unpack a little bit because I think it's really, really helpful. One, some of the things that I heard are, you know, obviously firms, whether it's a multifamily, single family, you know, or just a high-end RIA or wealth advisor, they need to constantly be learning. They need to constantly be open to the idea that...

 

I'm better off, there's an old saying, think it's an, I don't remember exactly what country it comes from, but it says, if you want to go fast, go alone. If you want to go far, go together. so I have always been of the nature, I hang around with other successful wealth advisors and multifamily office advisors and the Purposeful Playing Institute. I want to learn, I want to see what else is happening.

 

for them. And so that idea of collaboration, I think is also, you know, a huge term that you need to, you know, how collaborative is your advisory team? Are they meeting? Are they talking? Are they putting those things, those pieces together? And this is really interesting because it doesn't matter whether you're a single family office, multifamily office, or you're just a family business, you know, just, you know, with, with, with high needs, you may not have an office, but

 

Michael Palumbos (29:47.714)

virtually that would mean that there is good collaboration, there is good communication between all of the different disciplines.

 

Again, the evolution of needs and the explosion of complexity of needs basically dictates an evolution or transformation of what it means to have knowledge, of what means to have capabilities. mean, think about as your clients start to ask questions that go way beyond...

 

you know, expertise that you are trained for or can ever be trained into. Um, and they are asking these questions that are very fast and accelerating pace. It becomes an imperative that you have developed a very, a new and very agile knowledge system. just like you used to be an accountant, you hire accountants, you do accounting services and everybody's happy. Now you're getting all these questions that have to talk about psychology. They talk about education, not about kids. They talk about happiness and

 

You can try and you should obviously try to full spectrum of those needs, meet as many people who are professional specializing in that space. But you also have to figure out, so how much of that am I actually going to learn and build into my business model? And how much of that I'm going to partner, outsource, of refer so that my clients can still have a pathway to top-notch services through my kind of network.

 

But the key there to be and with that is if you're adding services and you don't figure out how to monetize those services or your clients don't necessarily see them as something they need to pay for, then that could be really, really painful and sometimes even damaging to your business. there's this balance that has to be struck between you have to as a provider be very open and aware that your field

 

Peter Moustakerski (31:47.694)

is not only bigger, broader, but more interconnected. And you as a specialist have to at least understand who the other specialists are. You may not need to become a psychologist. You may not need to become a governance expert, but you need to know who the players are. And when your client asks you, am thinking of doing a governance project, who would you recommend or where should I go to find the best ones? You need to at least have one or two pointers as a trusted advisor.

 

and having these ecosystems being part of these cox PPI and others that create this fabric of knowledge and sharing is to survival in the ultra high network space as an advisor now.

 

100 % agree. And what's really interesting for me is having joined, I was one of the founding members of PPI, one of the first hundred, and at the very first event and met Jay Hughes and John, you know, Johnny Warnick and, you know, Dennis Jaffe and, you know, everybody that was, you know, it was in this little small space and they just had this idea of that there's supposed to be more to serving these families. And for probably the first,

 

Beeee

 

maybe eight years, was out of my, you know, I was out of most of my clients didn't need that level of service. But I knew that there was going to come a day or I felt there was going to come a day that I would need to tap, you know, Kristin Keffler or Jeff Zale, you know, all the different members, somebody like yourself and say, I need some help, you know, in what I'm doing. So that was, that was pretty interesting for me.

 

Michael Palumbos (33:30.314)

having, you that it's surrounded by those things. Now it's popping up. It's like, you've got 10 years of training in this already, Michael. So, you know, you're well suited for it. I want to talk about the other side that you mentioned, which is, you know, the, the health and the wellbeing and the family and entity of itself. And that a really great organization that

 

whether you're working with a wealth advisor or an RIA or a multifamily office, the really top level ones are going to be talking about what can we do to strengthen the family? What can we do to make sure that you're talking and communicating and building to another so that we can have conversations that when we have difficult conversations and they will come up, that there's a little love, you know, another level of that.

 

How do you, if I'm interviewing a wealth advisor or RIA family, a multifamily office, and I'm the family I'm looking for, what are those signs that they know, they're gonna be about, and they can prove to me that they're gonna be providing services beyond wealth management.

 

Yeah, I I would turn the question first on you as a family member to say, do you know what you're looking for? Do you know what actually work? And this is a lot of the difficulties and occasional failures in our space occur is when clients go in fully well intentioned to for a particular expert in a particular area of expertise.

 

would

 

Peter Moustakerski (35:16.776)

and approach it as like this tactical project that I got to find an estate planner, I have to find a tax accountant, or I have to find, and sometimes the need is very straightforward and tactical and that is what you need to do. But when we're talking about the holistic wealth management and wellbeing of the family, most fundamental and still,

 

often neglected step is to have the family go through a process, which is surprisingly difficult. And families, for all their wonderful characteristics and all the love and nurturing and longevity and everything they bring to the table, often do not either spend the time or avoid spending the time having some of these very fundamental conversations of...

 

What are we about? What, what, yes, we have a business, like, okay, no, or yes, we sold the business and now, or you inherited something or whatever it might be that the, the source of wealth is, but now source of wealth is one thing. makes it a family thing over the years is the decision of people in this family to stay together and do things together. whether it's running the business, owning the business or working with the philanthropy or just managing the portfolio or doing

 

other things that defines them as a family. So, and that decision is not just one person's or generation's decision. I mean, right now we have up to five generations actively involved in the workplace and therefore in the family leadership and life. So you have people in their twenties and you have people in their nineties. And for a family to go, to be able to go and figure out who should I hire? What, what advisors do I need?

 

Do I need a family office? What kind of family office? How big? What services should it provide? I think all of that has to back up to a few fundamental conversations that most families end up having over the course of a few months, sometimes a year, to figure out what does it mean to us to be together as a family? How do we define what the, now in industry, the family enterprise? The family enterprise is sort of this moniker that describes

 

Peter Moustakerski (37:37.55)

Who are we as a family beyond the thing that maybe first brought us together, either the shared DNA or a business or some other activity or pool of wealth. But going forward, who are we going to be? What motivates us to stay together? What do we want to do together? Therefore, what are the values and needs? And one of the things we decide that maybe if now we're in the third or fourth generation, then there's 50 or 100 of us,

 

What are the things we are going to do together? Like, like all of us as this large family that's third generation. And one of the things that are going to be just me, my own nuclear family or my branch that's going to be separate from the family enterprise. All of that has to be, discussed and arrived at and managed before you start putting technical solutions in place. Because it's like, it's like having a, it's like,

 

buying a car but not knowing what you want to use it for. It's like I want to install software but I haven't really told my IT team what my business objectives are for this software. So you just go and ask for solutions, people are going to give you their solutions. So I think it's first fundamentally to go in with a very well understood set of your own needs and therefore how do these needs get translated into potentially a web of solutions. And now when you know those and you're looking for one of that,

 

web, let's say an estate planner, or you're looking for a software provider, you can then create a sort of a set of requirements or needs or criteria that lead back and support your larger vision as a family, larger purpose as a family. And then then you will know the questions to ask. And those are more important questions than is this person sitting across from me qualified because

 

That letter, even though that is an important question and you want to make sure that you're working with qualified experts, believe it or not, it's slightly easier to answer because again, I would say join some networks, talk to your peers, talk to other experts you trust and they will, they all have ecosystems and orbits of highly specialized, highly credible, recommended experts in every field. Like at Fox we have

 

Peter Moustakerski (40:02.37)

hundreds and hundreds of experts in every esoteric field a family might have a question with. We have at Fox, we have a online chat community where people in their homes can ask each other questions even anonymously. And they ask each other also questions. I'm looking for a divorce attorney in California. I'm looking for a, you know.

 

private jet interior decorator in South Carolina and somebody provides a recommendation. So get the credible, trusted check is I would trust more of a community and recommendations than necessarily any particular interviewing technique you might have. mean, we know from recruiting that interviewing and fast decision-making is very flawed. You meet somebody for 45 minutes and you think what they are,

 

and then you discover over the next 18 months that they are not what you thought. so recruiting both for talent and for advisors in the classic interview setting is highly flawed and risky and doesn't mean you shouldn't do it and you should have a set of questions and criteria, but it should be really trying to figure out are they speaking to your needs more importantly.

 

And then did they come through a trusted source? they come, do you trust this source that recommended or how you found that person? Or is that dubious? mean, unfortunately in our space, we have a lot of charlatans now because of the popularity and these horror stories of like events in Dubai and people take people's money and then neighbors show up and there's going to be a family office conference and it was actually fraud. So yeah, and protect yourself, but

 

The way you protect yourself from fraud or poor qualifications, in my view, is through peer knowledge, through sharing and learning from a community that you trust of peers or experts.

 

Michael Palumbos (42:01.238)

You've talked about, does Fox have an assessment that families could, you know, through to ask, you know, because a lot of times what happens for families, they don't always know what they might need. They know the basics. I know I'm going to need somebody to help me with trust and taxes and estate planning and wealth management. But aside from that, you know, they don't know exactly what they need and what's important. know, as an example,

 

We talked about the health and the wellbeing of the family. And I would say that it's probably two out of 10 families that when I start even mentioning the fact that we want to talk about these other capitals, the non-financial capitals, at first, especially at the level that I play in, is those $100 million families where it's mostly in the business, they're just used to running their business and doing their things.

 

Yeah. How do you guide through that?

 

And by the way, this question wasn't planted and you are giving me an opportunity to kind of boast about a few things we do. I believe we do really well and I'm very proud of what we do at Fox. And I'll answer tactically first then come back to the big picture. So there are a couple of things we do that I think are really smart and valuable and I really appreciated when I was a member of Fox. One.

 

We do something that's called a complexity profile. So we actually interview or, or, use a survey kind of base tool to, information about each family that becomes a member of Fox about. There there's like 40 something factors that fall into buckets of what's the family like, what is the family enterprise family office business like, and what is the investment portfolio and, and, and, and governance structures.

 

Peter Moustakerski (43:56.62)

that manage the money like 40 factors. And we actually create kind of a profile that shows you on this factor, let's say, how many like a family driver would be, how many generations do you serve or how many trusts do you have? How many tax returns do you file? How many K ones? And those are all, you know, different aspects of activity or complexity driven by the nature of the family.

 

that will translate into needs and needs for solutions and services. and you can see like, okay, I filled out my, can see that my family in terms of number of households and people is in the 20th percentile of the Fox universe, but my staffing of my family office is in the 80th percentile. Why is that? maybe because my direct investing activity is in the 90th percentile. I do a lot more. So,

 

is

 

Peter Moustakerski (44:53.772)

you, or if it's not, then you have a question like, why, why is it costing me so much to run something that should be a lot simpler? Firstly, if I'm so complex, how, how come I'm so under investing compared to my peers, some of these capabilities. So that's an invaluable tool, and somewhat quantitative, obviously. and then the other thing we do is every Fox member has a relationship manager. So as soon as you become a member of Fox and, an ongoing basis, usually quarterly.

 

There's a conversation with very knowledgeable relationship managers who know folks, families, they know the industry. And in these conversations, we try to tease out, okay, so where are you? What are you looking for? And they'll know exactly what they want and need. And sometimes we'll figure out that you might be missing something and you may want to talk to a few people and you might discover that you have needs that you did not necessarily know you had, kind of the unknown unknowns, right?

 

and so we then to connect them with right peers and people to try and find, the right path forward for those needs. mean, generally the best thing is, a family, as you said, like family might not be there. The business might be still active. The complexity might not be there, but if you're thinking of the future, it's a mindset game. If you, if you're thinking about the future, if you're thinking the movie of my family look like next generation, the generation after.

 

And can I go and talk to people who've seen that movie? Not the same exact movie, but archetypically pretty similar movie. What can I learn from that? And should I be thinking about the things that don't seem to be important right now, now versus then in 10 years? And those are the kinds of things that education and kind of mind opening and, and, and for some people that realization that yes, we got to start doing now. And for others, it's like, well, no, this is not necessary for us.

 

And for some people actually, they find out that they were on the path of more complexity than they needed. And we've had family members who, or families who discontinue a family office because it's just, not necessary or there is a better way or a to accomplish these same goals. So it doesn't all lead to one solution. The most important thing is to, again, understand your needs, which should be motivated by your long-term objectives as a family.

 

Michael Palumbos (47:18.894)

Perfect. for, let's see if I can word this properly. I think again, for the audience that I serve, for the most part, that are probably listening to this, they may not be running, so they may not be running in the right circles. They be the most successful person or family in their circle. So they don't know where to draw upon. And I see this over and over again where the set of advisors,

 

that they are working with today, those advisors work really, really hard to make sure that the family stays with them because it's their largest client. And they really have outgrown that groups of the, what they're getting for advice at that point or who they're opening up that circle to is almost detrimental to them. Talk about that for me for a little bit, because I'm sure you've had to have seen that through the years.

 

How do families avoid getting trapped into, and I don't use that lightly, I don't mean that harsh. Yeah, yeah.

 

That unfortunately, I think, and I'd like to think and believe it's not the best, but it was definitely a thing of the past where, you know, if you kind of somewhat land on a very valuable relationship, you feel so protective as an advisor and sometimes to the exclusion of some of the client's own benefits. And so I think, and that was emblematic of both the...

 

advisor-client relationships, was also emblematic of inter-advisor relationships, advisors, and even groups like Fox were much more their own island. And I think the world has changed and it's definitely in last 10 years, it certainly feels very different right now. And it could be new generations of people, could be technology, could be pandemic, could be lots of things that are changing how we feel and act about this. And...

 

Peter Moustakerski (49:20.662)

And I think the best advisors are understanding that that kind hoarding of a client and their needs is actually counterproductive and it is a near term myopic strategy because they will inevitably fail to serve some of the important needs that they are not able to satisfy because they just don't have the network and the resources and the connectivity to other players in the industry. So I think everybody who's smart and successful, I believe in our space,

 

and

 

Peter Moustakerski (49:49.3)

is creating actively as part of their strategy, proactively creating ecosystems and connectivity to all sorts of players and creating, rather than hoarding, creating safe pathways. Obviously, the important thing is not to recommend someone who ends up disappointing or hurting your client, right? So having a safe, trusted ecosystem to be able to help a client, which will be beneficial to them.

 

and then being really satisfied by that other advisors who were recommended by you. That's a much better client experience in a long-term kind of stickiness of the relationship than if you just protect them from everybody else. And I think the same is true for organizations. We are very openly communicating and collaborating with a myriad of advisors and advisor groups like PPI, Ultra-Kindred Perth Institute, FFI, FBN, et cetera.

 

We are actively building alliances because we know it's in the interest of our members to have this connectivity to any expertise, whether it originates or resides within Fox or more likely it will not because it's just nowadays it's impossible to retain all the expertise people need within any one organization. Even giant organizations like the large banks and wealth management firms and consulting firms and tax firms cannot build.

 

a complete set of solutions that meets all needs and therefore need the connectivity. So I'd like to say that optimistically and happily we have evolved as a space and the best advisors are and groups are interconnected. And I would say if you as a client that that's not happening to you. Yeah, then you probably need to just remember

 

That's the key.

 

Peter Moustakerski (51:39.49)

that you've seen one family office, you've seen one family office at it wrong, that there's lots of people like you out there. I mean, the family wealth space, the number of family offices by different accounts has double tripled, quadripled in the past 10, 15 years. So there's tremendous growth and there's a huge peer base, both in the United States and globally.

 

And so.

 

Definitely, if you're a client or a family member and you're feeling like, I feel like I'm only talking to this person and I'm not getting to the right expertise, just join a community or ask peers to recommend credible other sources of knowledge and information. And there are many of those. And obviously just make sure they're credible.

 

You threw out some acronyms. I just want to demystify the acronyms real quick. Family Office Exchange, known as FOX, FFI, the Family Firm Institute, the Purposeful Planning Institute. So FFI is geared towards helping advisors to prepare themselves. FOX is more geared towards the family.

 

and helping the family prepare themselves, but they also have a network of advisors. The Purposeful Planning Institute is designed primarily on that space of the other forms of wealth, the non-financial forms of wealth and making sure that people are emotionally and thoughtfully thinking about purpose and values and helping advisors to do that. Families are welcome to come in, but it's designed for the advisors. You also mentioned the Family Business Network.

 

Michael Palumbos (53:17.132)

Yeah. And I, know, just as simple as grabbing and getting the family business, family business magazine, I think is a fabulous way for people, you know, open to some new ideas. And I think that that is where I think it becomes really important for people to remember that their situation that we go back to where we started, your situation is not unique. And to get curious about what else is out there.

 

And it's probably a okay to say, know, if we, if we, if, if you own a business, run it heavily for your employees, you probably run a request or proposal every few years to see if that 401k is doing okay. It's probably not a bad idea to run an RFP for your group of advisors and to network and say who else is out there so that you can see. I tell my clients that they should be doing that.

 

And if they find somebody that can elevate their situation beyond what we can bring them, I think that's in their best interest as much as I hate to say that, you know, again, from a standpoint of revenue, but it's the right thing to be talking about.

 

It's definitely the right thing and again, I believe the world has evolved from some game to like a multi-stage game where there's a lot of benefits for

 

all involved of that open platform, open sort of trajectory we are on. So I would definitely advise your clients and listeners to find the communities that you trust and you feel safe to exchange information and test your own assumptions or your own choices and decisions. Ask for recommendations when you don't have an immediate solution in mind.

 

Peter Moustakerski (55:08.61)

Definitely run a quality process like you would do for your business if it's something important for your family. Definitely run a very high quality recruiting process if you are recruiting a family office CEO or someone critical to the future success of your family. Don't just grab the friend, accountant or lawyer you know that is usually not a great long-term solution. Often it's the go-to solution because of trust and convenience.

 

And definitely be part of those networks that will give you the resources and breadth to ask questions, to discover new knowledge. There's a lot of publications. You mentioned Family Business Magazine that I would recommend. Crane's Currency, online newsletter that has become very well read and I think quality material in the family, well, family office space. So there's a lot of... resources like this that I think you should be using and treat your business and your family importantly as you treat your business or your portfolio.

 

that. I love that. Peter, I could talk for hours more. I have so many more questions. We'll have to have you back again in the future. We'll do a family office 2.0 or you know, version two on this. Peter Mustacharovsky, really appreciate your time today. Family Office Exchange and the website is familyoffice.com. And I highly recommend that if you know, you're listening to this and

 

you know, anything piqued your interest, go out, sign up, at least sign up for the newsletter and be, you know, get their organization, just top notch, fabulous stuff. Really appreciate your time today. Thanks for joining us.

 

Peter Moustakerski (57:00.972)

Thank Michael, it's a real pleasure. I would also recommend to listeners subscribe to my podcast. I'm trying to invite some really interesting and exciting practitioners in our space. Obviously you're a real pro and I'm more of a beginner at that but...

Nonetheless, in the spirit of discovering more networks and more channels of knowledge, I recommend that as well, and I would love to resource available. And finally, thank you so much for inviting me, and it's real pleasure and an honor.

Michael Palumbos

What was the name of your podcast?

Peter Moustakerski 

It's called Foxcast. It's on every major platform as well as on the Fox website, familyoffice.com. So please subscribe and let me know your feedback. And again, Michael, thank you for inviting me and I look forward to our future collaboration and future conversations.

Michael Palumbos (57:46.00)

Great. Thank you everybody for joining us today. I'm Michael Palumbos with the Family Biz Show and I'm in Rochester, New York. Family Wealth of Legacy is the name of the company. We look forward to having you on other future episodes and listening in and learning from the people that we bring in to share their stories. Have a great day everybody.