Transcript:

 

Michael Palumbos (00:00.148) Welcome everybody to the Family Biz Show. I'm your host, Michael Palumbos with Family Wealth and Legacy in Rochester, New York. And today we have Scott Saslow here. Scott is the author of Building a Sustainable Family Office and the founder of One World Investments. Scott, welcome to the show.

Scott Saslow: Thank you. I really appreciate you having me on.

Michael Palumbos: One of the, you know, we always do the, where did you come from and how did you get here kind of a thing. So kind of take us through, you know, very few people end up writing books about family offices. So there's gotta be a story behind, you know, your journey to get to where you are today.

Scott Saslow: Yeah. Thank you for allowing me to share some of that. Uh, let's see. So I'm a Chicago boy, a proud Midwestern. I grew up when my father had already purchased and had been running a family held business. This was a manufacturing company in Chicago business made dental and medical products. And kind of a neat story. My father bought it from a entrepreneur that had come to Chicago in the early 1900s, 1908.

And that entrepreneur had run the business from 1908 to 1958. And he tripled the size of the business. In 1908, it was one person and in 1958, it was three people. So my father bought it when it was a teeny little company and he grew it very successfully. The subsequent 60 years it was in the family and my father ran it the first 30 years and my brother then took the helm the next 30 years.

Scott Saslow (01:32.078) They both did a tremendous job. became a global powerhouse in its field. And in 2019, the family decided it was an appropriate opportunity to sell. And so we had a liquidity event for the family. And whereas I was never involved other than, you know, some summers in college and that sort of thing in the family business, I became very interested and more active in the family office. And I can kind of walk, walk through that a little bit. But that's kind of the broad stroke story of, you know, kind of my background and connection to family business and family office.

Michael Palumbos:  Love it. So let's talk about for the people that are listening the first time and they just heard the word family office. They've been part of the family business for years. You know, that only happens for families that have a very successful business and a liquidity event. we've got, you know, can you explain, dig into that a little bit? What is a family office and why would you do that?

Scott Saslow: Family office generally refers to the infrastructure that a family typically it's a family, can start with an individual sets up to help them manage their wealth plus plus. So yes, it's typically when a threshold of wealth is met, it might be 50 million, it might be a little bit north of there. But the point is it becomes complex enough that instead of going to a retail investment advisor and saying, you know, manage my capital, you start.

to bring some of those services in-house. The amount of work, the amount of complexity becomes where, you know what, I can probably hire a part-time accountant, maybe a full-time investment advisor, and cobble together a team. And then for some family offices, and it does generally scale with the amount of wealth, they have very significant teams. They have armies. And some of the family offices are 500 people, some of the most kind of notable family names out there.

Scott Saslow (03:17.998) So what's kind of interesting in relates to family business is often this activity will start within a family business. It's usually referred to as an embedded family office and it might quite frankly be, and this was the case in our family. You know, my father had a trusted accountant in the accounting department and attorney. And that's where some of the quote family activity as opposed to the business activity started where some of those individuals were kind of.

tasked with in addition to their quote day job on the operating company. Can you help us set up some structures that will benefit the family? Can we protect some of this capital in the form of a trust? Can we do some smart estate planning? Can you help us manage these investments and those sorts of things? So that's a very typical thing. I would say it gets for any publicly traded company, you want to be very careful and have a nice kind of separation between family office activities and family business.

But even in privately held companies, I think it's wise to be thoughtful about how much of that you actually do want to do. And there's a whole host of reasons I can get into, but that's often where you will start to see some, some wealth management on behalf of the broader family within a family operating company.

Michael Palumbos: So going back, this is 2019. You get interested in this. I'm assuming, I'm taking a leap of faith that you are writing this book because, or wrote this book because you went through some things. Learning experiences that you wanted to make sure that other people might not have had to go through the same learning experiences.

Scott Saslow (04:49.71) Yeah, exactly. Yeah, indeed, indeed. And it was a very intense learning process in those years 2019, 2020, a confluence of events necessitated that I helped to essentially stand up my family line. Now I'm talking about my wife and my two children and set that up as an additional family office in addition to the legacy one that I had with my father. My father passed actually a year after the liquidity event. So now we're talking 2020 in the middle of COVID and all that craziness.

We needed to, as a family, kind of move quickly, my siblings and I have two siblings and recreate some of this family office. And, you know, a little bit on my career path, whereas I wasn't involved in the operating company, you know, in college and shortly after, and after grad school, I got very interested in entrepreneurship. Most of my career is in startup situations. I've been a founder of seven different founding teams of startups. Some have been my own companies. Some have been ones that I started in other.

Big companies, Microsoft notably, as well as another one called Siebel in the Bay area. And so I was kind of a startup guy, I had my career path, but as the years clicked on, I got more and more intrigued about the family office activity. And at this point in time, it moved out from being an embedded function in the family operating company. And it kind of essentially was its own entity then that was created to, manage that family office.

But the reality is I was never full-time running that. And that's often the case with a lot of families, especially when there's an operating company and the family members are running the company. They really can't do both. They're essentially two different companies. And so often you'll see that you'll see family office principles or owners that they're running the company and, or they're, they're, they're doing something other than running the family office full-time. And as was the case with our family back in 2019, we had some outside talent that was hired to run.

And so the point was, whereas I needed to kind of quickly jump in, grab the reins and recreate a lot of it, that was a very intense period. And, and I would love this book that I've now written. came out this past July to be helpful to anyone who's either thinking about doing that or as often the case, are plenty of existing family offices and sometimes they go through the transitions if they're successful. And if they're robust, they will stand the test of time.

Scott Saslow (07:10.678) And then the new generation comes in and often naturally they'll have their own ideas of how they'll want that office to function. And so I think the book can be helpful in either case. And then as well through the service provider community, all the wealth management, state planning, accounting, all the service providers, there's a great kind of ecosystem. I hope that this can be an insider's view kind of coming from the principal side of what it's like to both create and run a family office. 

Michael Palumbos: What were some of the things that were happening inside the family office? What were some of the services that were happening? I have found through the years, it's not like there's 7,500, 75,000 family offices. I don't know what the number is, it's compared to the number of successful businesses, and it's only 1 % of US businesses, ever break the $10 million mark in revenues. even that number's small. So we're starting off with a small group. And then when we're moving into the level of needing a family office, it's probably even smaller. So there's, a lot of the people that are listening right now, okay, there's a family office, get it. I've got estate planning needs. I've got wealth management needs. I've got all of these different pieces that we're putting together. And they're right. I have, thinking of the families that I serve, there's many of the family businesses where you know,

some of the first acts of the family office, and I'm doing air quotes for those that are listening, are happening because, you know, we need to put an employment policy in place for the business. So we're thinking about the family and we're thinking about the business. And so that might be one of the first things that we're thinking about. During a liquidity event, you know, what were the things that you were going through? What were the things that were happening for you? What were the services that you were really focusing in on, to make sure the family was taken care of?

Scott Saslow (09:01.618) Great set of questions. So let me see. the first thing I would say is for operators of family held businesses, I actually don't believe there's that great a distinction when it comes to managing a family office. The problem is as follows. Many principles lose sight of that. In other words, they put their heart and soul, blood, sweat and tears into running a family business. They're successful. They create wealth. And then something happens where they kind of go down this false assumption, you know, I can just kind of put the money over here or with this provider or this person or this was this was my trusted advisor, my accountant, he or she must know what he's doing, right. And, you know, that's a very dangerous thing. And I understand why it happens, especially when there's a liquidity event, we can talk about that. But often in those situations, you know, the founder, rightfully so wants to take some time and chill and enjoy the wealth that they've created for their family.

But the reality is making money. This is a point I steal out of Morgan House's great book, The Psychology of Money. It's appropriate for any wealth owner, whatever that level of wealth is. Making money and keeping money are two different things. And I've seen time and time again, fantastic entrepreneurs. These could be those that created the wealth at the first generational level or, you know, inheritors in a family office system who then went on to do great things with their wealth. But running an operating company and running

What's effectively an investment shop, but with a couple of weird quirks on it because it's designed to serve a family and not kind of the general public. They're very different. The most successful cases, I guess, are where maybe it's a hedge fund manager or a venture capitalist who's created the wealth and then they go to create this family office for their own wealth. They tend to kind of, that tends to go well, right?

Cause they're very familiar, but I've seen it time and again, a successful entrepreneur worked really hard, kind of caught lightning in a bottle once, let's say, and thinks, this will be easy. I'll just, the wealth can go over here. I'll hire a of people and it's all good. So back to good practices, whether that's talent management practices, whether succession practices, whether it's good kind of practices regarding the talent that you, how you hire that talent, how you manage that talent. All of that applies in a family office ecosystem. And I wish more principles would kind of...

Scott Saslow (11:24.034) Do just that. Take those same principles that made the wealth in the first place and use it for managing the wealth. Now, again, if finance is not your thing, maybe you have a construction company or maybe you have in the medical field or real estate, however hard it is you created that wealth, if running the numbers directly, managing the capital directly is not your thing, that's okay, reasonable. Find someone whose job it is and that's their expertise.

So the phrase we'd use there is kind of like at least know how to manage the managers. And that means know what to look for in terms of good performance, know when it's time to move on and swap out. You and I were talking before the call. mean, this is a very common problem you see, which is loyalty sometimes, you know, becomes a deciding factor around how, how to, how long to keep someone on the team or, or even a vendor relationship.

And sometimes there's good in that there's trust, there's familiarity, but quite honestly, you know, running a $1 million business and the providers that you need, to help you doing that, to do that, compared to then when it's a hundred million dollar business, it's a different level of expertise. And someone that can manage your wealth when you have a million dollars in liquid money may not be the same sort of person that can manage it when it's now a hundred million dollars and it gets a lot more complex. So on one hand, I'm saying, you know, some of those same good kind of business practices of managing a family office also apply to a family office.

And even quite frankly, if there's not a distinct office, even if it is just let's say it's it's a kernel of that. And it's something embedded in the operating company. But be really thoughtful about about how that wealth is managed and, and hire the right people don't don't, you know, hire this one or that one out of convenience, because you already know them and trust them.  It's okay to have them in the pool, the candidate pool, but make sure your pool is a little bigger. 

Michael Palumbos: You're the first person that I've spoken with that talked about the family office the same way you would talk about a business. if something's clicked for me, that I really want to make sure that people catch on to. Jim Collins, good to great, talks about, identify the right seats, put the right people in those seats, and then make sure they're doing the right things, right? It should be no different for the family office. And so now there's, like in your family office when it started,

Michael Palumbos (13:44.162) What were some of the functions, what were some of the seats that you identified to make that happen for your family office? And I've spoken to other family office people and I had Peter Mustachowski from Vox, on the show. And so it's just jumping at me right now is that, you hear the phrase, if you've seen one family office, you've seen one family office. a lot of people don't like that. But at the same time, it's so true because what functions you need in your family office may be different than somebody else's, so it's gonna look different.

Scott Saslow: Absolutely. It's a great point. So I was as an undergrad, was trained as a economist, and I think a lot about supply and demand. And when you think about the family office supply and demand, so the demand, the needs of a family office, that's a very dynamic thing. You as an individual are changing, you may have family members who are changing, evolving, they're going through life stages. And so the demand side of the equation is changing. But guess what, so is the supply side, especially these days, there have been so many

To your question about number, the research I showed talks in the figures of 10,000, 10 to 15,000 global family offices. A global, and a lot of them have been created in the last decade, which means they're new, they're getting their sea legs. And guess what? The provider community, whether that's wealth managers, state planners, accountants, et cetera, they're all over this trend. They're very excited as they should be. It's a great opportunity to bring some expertise to.

global, right?

Scott Saslow (15:14.338) you know, to this community. But the point is, if both supply and demand are evolving, you have to really stay in your toes. And that's one things I tell them on the book, one of the big lessons is, you know, just like you would manage an entrepreneurial business, this is no different. It's a business to our earlier point, it's not something you can kind of hire a few people and put it on autopilot, you've now started a new company, whether you like it or not, except that reality and...

Two, it's a very entrepreneurial business. It's gonna, you're never quote, done setting up the family office. So, okay, to your question, what the hell is in these family businesses? So yes, know, wealth management, asset management tends to be the most obvious and probably universal. Sometimes that can be in-sourced, i.e. I'm gonna hire someone to manage my different assets and the different asset classes and or, and increasingly interestingly, it's finding third party providers that can do this as an arm length, arms length relationship, for the family.

There's you have you have liquid capital, you have private capital, you know, you have all the various asset classes, how do you want to manage that? Who's managing that? Does it make sense? There's efficiencies having one, you know, neck to choke, so to speak, but there's also some advantages if if the assets are so substantive in certain asset classes that you want to find some specialists. So there's a whole bunch of kind of activity around that. That's one of the foundational pieces. The third foundational piece is estate planning.

and kind of legal in general, right? So one of the first things you want to do should you be fortunate enough to have an exit or even if, you know, nice liquid capital has been pulled out of the operating company over the years, how do you want to manage that capital? How do you want to protect it from creditors? How do you want to think about are you looking to pass it on to your family and or you want to pass it on to your, your college or the local community hospital? What do you want to do with that capital? And when do you want to do that?

You may not know all those answers. You don't want to make any rash decisions, but you want to gradually, and I would say periodically revisit some of these key decisions with your estate planners so you can do it in a way that's tax efficient, that protects the capital, that allows it to grow in the way it can. And then the third I would say is kind of on the accounting front. And again, sometimes family offices, even bigger ones, guilty of kind of not having all the

Scott Saslow (17:35.062) the processes in place and all the, all the, let's say checks and balances and systems, but that is you're, being kind of, you know, penny wise pound foolish. you skimp there, you it's going to buy you it's eventually. So again, doesn't mean you have to build it all in house, but if you're thinking about XYZ national firm,

Boy, I can get it a lot more cheaper. You know, this guy on the internet that I found or, you know, my neighbor, they can do Mike. Yeah. Is that really worth it? Is it worth like saving 60 grand? And then your chances of audit just went up fivefold. And guess what? If you're audited, you're going to spend hundreds of pounds, you know, so I say like, thoughtful. Sometimes I'll see family houses where they think, you know, I created this money and this is great.

And I want all of that money to be accessible for me and for my family or for people I want to give it to down the road, philanthropy. And I understand that mindset, but by the same token, you have to properly invest in the infrastructure so that it is well managed and don't skimp on that, right? That's not the place you want to cut corners. 

Michael Palumbos: I say it's all three. You can't cut corners in all three of those. If you're going to hire a great attorney inside the family office, and this is where I think it's really worthwhile for people to understand. think you threw out the number of like, you know, starting around $50 million. I think it might be tough when you know, when you start talking about, know, you've got benefits for these. If you're just talking three positions, a wealth advisor, somebody to help you to do the research and put those pieces together, an attorney in-house and a good accountant in-house, just the salaries of those three people alone, then you throw benefits on top of that to bring them in, to entice them to leave whatever area they're in, if they're as good.

Michael Palumbos (19:20.846) If they're that good for your family, I can't imagine they're working for less than $400. I mean, I'm just throwing a broad number out there. $400,000 now you're sitting at three people at $400,000 plus benefits. You're at a million two plus, plus, and if you had a hundred million dollars, there's 1 % of assets plus. so it gets, that's where people really need to be thinking about.

Is it better? I outsourcing up until a certain point? And when do I bring it in?

Scott Saslow: And I agree. And I would say what's really fascinating is I'm seeing some very substantial family offices from an AUM standpoint and investible asset standpoint, go back to what's called an MFO model or a multifamily office. MFO, you can think of it as an investment shop that is not owned by any one family. Some start out as being owned by a family and then they kind of spin out or they take on other clients.

But they serve many clients. And the reason is, is just as you say, to help spread those fixed costs, but it's also sometimes families start and they get all excited and they start hiring people and they realize, shit, I want to hire people. I don't want to manage people. Like I, that's why I sold my business. I want to be like on the road and in my boat. Right. So you're totally right. The good news is back to the ecosystem and how it's evolving. There are so many options to choose from. You can hire that finance person, accounting person, you know, legal expert.

On a full-time basis, on a part-time basis, you can, you know, go to a third party entity that is serving many families and get the expertise of, their serving many different situations. And I always say like, take it slow before you start like staffing up, be thoughtful. What do you need today? What do need in the future? What is your expertise? If your expertise isn't in managing people necessarily, or that's not your interest, don't build a team, right? Go to an MFO and let them do the heavy lifting for you.

Scott Saslow (21:15.658) So I see this not only and feel like maybe we didn't fully answer the question. What else is, under the. Sure. Guys at the family office. So in addition to those functions, it depends on the family's interests, right? Okay. So in my own family, one of the areas I'm very interested in, one of my jobs is running an early stage seed fund. It's a venture capital fund and we invest in early stage companies, seed and pre-seed, and we'll stick with them usually through their early institutional rounds.

Now that's something I know and love. And I've been on the other side as an entrepreneur. I feel I'm, I'm well versed to do that. I sit in Silicon Valley. I see a lot of good deal flow. And so, you know, that's an area where I've kind of insourced it, if you will. And I I'm actually wearing the third of my time or whatever is, is doing that activity and look to actually hire, hire some more people internal to do that. Other family houses may say, I don't want to touch venture capital. It's not my thing or.

We'll do it, but I'm going to do it by investing in a few funds and call it a day. And that's how we'll get our exposure. So, you know, that's the beauty. There are so many different options of how one's money could be invested in no shortage of people that would love to help you with it. And on that front, you know, I'd say, I guess, just, just like anything, just like if you're hiring a CFO for your operating company, you know, do your due diligence, ask around, ask for references, find references that weren't given to you, you know, understand how these people work just because they come from a brand name a Goldman or a mortgage, you know, doesn't mean they're a good fit for you. So you know, really think, think about what your needs are, because there's there's seemingly an endless supply of providers, but it's all about finding a good match.

Michael Palumbos: Very, very great. Again, I'm still loving the family office is just an extension of the business. It's just a beautiful way for people to understand this.

Michael Palumbos (23:01.154) Because a lot of, to your point, and it struck again, could be the second time you said it, sometimes somebody has that liquidity event and the last thing that's on their mind is running another business. And so if you're going to start a family office, you are running another business. You're not going to be sitting on the boat. You're not going to be, you know, flying around the world doing, you're doing what you enjoy and love. You're going to be managing that if you want it to be successful. No different than you managed your business to become successful.

Scott Saslow: You can again, like an operating company, you can, I'd say eventually in time move to let's say a board position, you can be the chairman, you don't have to run it. But I will say this, if you're standing it up, and it's it's the first time in your family that this kind of separate office is being created, you should be intimately involved. If you are building a house, let's say, you know, you're not going to just like hire a owner's representative to go build your house, you're gonna you're gonna be involved you and your partner. That's the fun stuff. Like, what color is the bathroom in the in the basement? And what kind of tile we want in the back like and tacos and whatnot.

Right? Absolutely get get involved, know these people and then you know, once it's built and this had a cycle or two, you can pull back a little maybe you can hire a full time CEO that's not an unusual thing at all. Unfortunately, there's sometimes a mindset which is either like I'm running it I'm doing it. You know, I'm running my business you told me to run a business right Scott or I'm not involved at all and I hire someone and then I just do a quarterly check in and I kind of hope that the numbers are good. Well, that's that's not good either. Right? There's a lot of gray in between.

Scott Saslow (24:36.332) So fit in these bigger families and multi-generation families, you know, there's great opportunities. You bring the next gen in, may, maybe they're not finance people, maybe they're all about public health and, one's a doctor, one's a social worker, one's whatever they all want to do, but there's still meaningful ways they can be involved. And this is also, I think, a really cool aspect of the family office world or wherever you have a material amount of wealth. People may know this. So if so, cut me off and we'll go on to the next topic, but.

There's so many interesting ways to use capital, right? On one hand, it can be given away, philanthropy, that's a beautiful thing, help out society and the environment and the community. It can obviously go to support the family, whatever their interests are that can be, you know, I want to blow it. I want to go to Vegas and put it on red, fine, no judgment. Or I want to invest in a new business and start a new, you know, have a new career. Great. All of that's wonderful.

What I find really interesting, and this is just a little bit of a peek into my other part of work I do on the sustainable investing front is there's ways to take your capital, even while it's sitting in a bank or in funds or with managers earning a return for you. And that then can lead to more capital for you to enjoy and use as you choose. You can also put it toward things that can have some sort of broader impact.

And this kind of gets to probably where something I imagine will resonate great with your audience. You you referenced some of the, the, good to greats and some of the great business minds out there. What I took away from a lot of that great work and business, you know, those business gurus was the importance of purpose in business. Yeah, you got to run a tight shop. All your functions have to be, you know, kind of top notch hiring, great people, everything do a great job of the basics, building great product, satisfying your customers, but

When you can attach a purpose to your business, boy, does that become something that's inspiring. It helps you attract and keep talent. Your customers get excited about that. They tell other customers same exact thing with a family office. And unfortunately, especially with kind of the first time or new family offices, the mentality is, well, I don't know, I guess I have to invest this money. So let me think about investing this money. And yes, that's true. But there's also an opportunity to think broader and say, in addition to me,

Scott Saslow (26:52.96) and maybe my family members enjoying some of this capital, what can we do with it that will be inspiring and beneficial to folks outside of the family? And there's a way to do both. It's not just either I keep it for myself or I give it away. Nothing wrong with just, you know, straight up philanthropy. We want more of that certainly in this world. But I'm saying there's this middle ground, which I find pretty interesting.

Michael Palumbos: I want to expand on that a little bit. love the idea of strategic investments because I do think that there are, forget when we think about philanthropy and it always goes to that giving it away, but investing in companies, that are doing really good work and doing really great things, we forget that that's okay for a lot of people. And for a matter of fact, for a lot of people, I think that they would rather do that, but they just don't know how and they haven't been taught about it or they haven't thought about it. go back to the most successful companies out there. They have a core purpose that's bigger than just making a profit. It's why do we exist beyond making a profit?

My company, the core purpose is strengthen families, strengthen wealth and strengthen legacy. It's all of those pieces, thus family wealth and legacy. But we really realize that it's not about the money. If we're not helping the family become a tighter, more functional unit, more emotionally intelligent, then we're really not doing the services that we're supposed to be doing, in my opinion.

Scott Saslow: Absolutely agree.

Michael Palumbos (28:28.086) This is pretty neat. Talk about that. What are some of the ways that through the years that you have had that kind of an impact in some of the work that you're doing?

Scott Saslow: You know, for me, I do get really excited about the direct investing in these early stage startups. You know, if you're a 20 something, they tend to be wired in a good way, in a positive way, toward wanting to do both. You know, many of them want to work in business. They want to work in the private sector, but they want to be at a company that where they can is also deriving some broader good for the society.

So for some companies that might mean, well, you know, they look after neglected populations. You know, they, they, they try even harder to hire veterans into the workforce. They feel a soft spot for that population. They haven't gotten a fair shake in life. And wouldn't it be great if our company can find a meaningful way where it's not charity, but we want to look extra hard at those veterans and see if we can find a place for them in our company. And those sorts of things are, are pretty magical, right? Or it might be, Hey, you know, we, we have a company we really care about the environment.

We think there's some things that we can do the way that we buy our energy, the way we consume energy within the company. Let's be more smart about it. By the way, it's good economics. We're going to save money. So it's going to hit the bottom line, but we're also going to do it in a way that's that we think is kind of additive to the broader society. So there's many ways for companies irrespective of what their mission is. They don't have to be like a Ben and Jerry's, know, died in the wool, you know, impact kind of company. A lot of the early startups I love investing, I'd say are, you know, both the way that they're run, but also their core purpose is what I would call pretty impactful.

So let me give you some examples. So one of our startups is called Elemento Health, and it's a digital health app that helps frontline responders. So think nurses and paramedics and whatnot with educational services.

Scott Saslow (30:25.1) so that they can do their job even better. And the people that they're serving benefit by the education that they're getting. They found like micro courses and micro avenues to deliver content to this specific population. completely different sort of company that we're backers of very excited is called Lilac Solutions. They have invented a new way of processing lithium. The way that lithium is historically processed is expensive, time consuming, and it's actually can be pretty damaging to the environment, it consumes a ton of fresh water. They've invented a process that does this all better, cheaper, faster, better for the environment. And lithium is among today's gold and it's holding back in some ways the transition to clean energy, the lack of supplies.

That's a really cool company in a completely different field. We have education technology companies that are focused on the kind of the emotional health of kids. know this, unfortunately, all too well. You know, young, my youngest is in middle school and I see the emotional health in middle schools and high schools. And it's really scary. These, these kids, you know, especially, you know, with, with on the heels of lockdown and COVID and all this, they've gone through a lot. And so the company is called Sown to Grow.

It's all about helping teachers and administrators get a sense of which kids are most at risk and how could the school respond in a proactive way? Hey, you know, this student here, that student there, they actually need a little bit more support. They're really struggling and maybe they're not, you know, telling, they don't walk in their teacher and say, Hey, I'm struggling today. And so, you know, we think these kind of, you know, we think these are good businesses. They're all, you know, the amount of good that they do correlates to their sales. They only do good if they sell, you know, these aren't, these aren't charities. They're, they're selling products and service. So.

We get really excited about that. If your thing is more investing in the public markets, there's kind of ways to do what's called sustainable investing. And I think this is a really exciting area. about a third of all professionally managed dollars, over a trillion dollars, is are in sustainable strategies on a global basis. So it's no longer kind of a niche, you know, side area, this notion of sustainable investing in them. I think that's good for everyone.

Michael Palumbos (32:36.716) Go back to your book for a second and I know that's this is part of the book these are some of the things that you've talked about in the book, correct? Is there anything that we haven't talked about? are you know any other foundational tenets of the book that we should be hitting on before?

Scott Saslow: Yeah. Well, I mean, the main one you quickly jumped on, which is, know, manage a family office, or if it's not officially a separate family office, it's an embedded into your business. It's your financial function, manage it just as rigorously as you do your business. Understand, you know, we came up with kind of like a five point model, right? When we looked at the family offices that seemed to be the most successful that were, you know, stood the test of time. They were now fourth or fifth generation family offices. There's some in Europe. Europe even has more that are, you know, six and seven, eight generation. I mean, it's, really staggering, but those are clearly the exception. Many quite frankly, won't make it to the next, the second generation, let alone third or fifth. But the point is what are the things, you know, again, kind of a la good to great. What did, what did those families do differently? It starts with a mindset. They understand the challenge at hand.

They respect the challenge at hand. Back to the Morgan-Hausel quote, keeping money and making money and keeping money are two different things. Number two is the mission. They attach some sort of mission to this family capital that is really helpful for a couple of reasons. Number one, it helps to engage the rest of the family.

The number one challenge that a family office principals have is not like, am I getting a good enough return or should I be more exposed to equity or debt or what have you. It's how do I engage the broader family in this? You know, this is a what a beautiful opportunity I as a founder been presented with. What a lucky person. I lot of luck, a lot of hard work. But how do I extend this to the broader family? So having a mission is a great way to do that. And to your earlier point, you know, attracting talent, getting good, you know, if you if you even if you have endless dollars to bring in and hire a great chief investment officer.

Scott Saslow (34:41.73) You know, there's a war for talent for those positions. All the institutional funds are throwing money and services and benefits. So point is when you have a mission and you say, look, here's how I created this money and here's what we want to kind of do with it going forward. That helps remarkably in terms of being able to attract good talent. The third is around structure. And I get into some of the details about how you can actually set this up and kind of what to do first and so forth.

The fourth is one again, I think for any GM, any CEO of a family business, we'll get this in two seconds, which is talent management. Who's driving the bus? Who's on the bus? Are they the right people? Is the person in seat three really should be in seat seven? Person in seat seven should be off the bus. Why do you keep them around if they should be off the bus, right? So it's taking a hard look at talent and again, based on your needs.

And then the last point is, yeah, I think we touched on as well, on being entrepreneurial? Understanding that you're never really there. You know, this is it's continual improvement and it's a living breathing organism. And you know, that needs to be your mindset doesn't mean you have to be spend 60 hours a week, but just know, you know, that there's going to be some meaningful work on the front end. And it's a good thing if you're never done, you're constantly making changes.

Michael Palumbos: I appreciate the summary and putting them together so that we could hear them all together. That's helpful for a lot of people. When you're going through, do you do any consulting for family offices or somebody that's going through this or is that any of the work that you do?

Scott Saslow: Not formally. We don't do that as kind of you know, a paid advisory service, but by the same token, I'm happy to have an informal conversation and see if I can be helpful. You know, again, we're not managing third party capital. We know a lot of people that do that. Should someone be looking for that? We're not a state experts, but we can certainly recommend people. So, you know, I'm happy for your community to be kind of a peer that they can call on and say, Hey, I'm

Scott Saslow (36:44.046) trying to kind of think about this, or do know someone that does XYZ? But generally, no, we don't take this sort of work on in a paid capacity.

Michael Palumbos: Your book is going to get people in the right path regardless.

Scott Saslow: I sure hope so. That's you anyone who's written a book knows you don't do it for the money. You do it because you want to get the ideas out there and see if you can help people and if that could be my small little dent on this planet, then I'm happy. Perfect.

Michael Palumbos: Talk about for just a second, what is the future of your family office? Where are you going? What are some of the things, your priorities over the next five, 10, 15 years?

Scott Saslow: Yeah, that's a great question. Thank you for asking. you know, one is I have to practice what I preach and, you know, continue to invest and see where we want to make changes. As I alluded to earlier, I do have two youngish kids, middle school and high school. We'll see, you know, in the years to come, if they want to be affiliated in any way, my philosophy there, and maybe this is good to hear for for those in the family business construct too, is, you know,

Scott Saslow (37:47.938) Hope for the best, but prepare for the worst. And by best, mean, I will have continued to groan, you know, th this capital, not just the financial capital, but all the work, the intellectual capital, all the work that we're doing at one world. And there'll be some in-stream opportunities should my children or even my broader family, nieces and nephews want to be involved in some way, full-time, part-time running it all, you know, a board member, whatever it might look like.

So I hope for that and I want to be deliberate about creating those opportunities. But by the same token, most want, especially my kids to kind of find their own path and do what they deem interesting and valuable with their limited time on this planet. And no offense if that's not at all affiliated. So, you know, one does need to think about kind of the sustainability of the work.

And it's kind of interesting because, you know, I grew up with a family office, sorry, a family business, in the broader family. As I mentioned, I wasn't directly involved in that, but it was, of course, part of every family gathering and, dinner conversation. And then with an exit, you know, that capital largely flows into to kind of family office or family offices across the different family members. But what I find interesting is in some ways, I find myself now creating what I'd call a family business, meaning these are operating companies that

The purpose is not just to benefit the family office. It's actually to create an operating company that just like any regular business, you know, has external clients and revenue sources and so forth and so on. So I'm in the process, long way of answering your question in the process of doing that with some of my entities, kind of transitioning them, if you will, from a family office to back to a family business. And then time will tell, you know, who, who from the broader family may want to be involved. But if the answer is no one.

That's okay and they need to be built to, you know, essentially attract and retain talent on their own two feet.

Michael Palumbos (39:47.01) You're sitting in front of a group of family businesses that are getting ready for a liquidity event in the next five years. What is your, you know, pieces of advice as they're getting ready? They're not there yet. They're thinking about it. They're going to have it. What should they be thinking about?

Scott Saslow: Yeah, it's a great question. Well, it probably would be to start with, whatever amount of wealth has been created and pulled out of the business thus far, who's managing that and are they the right person after any liquidity event? And sometimes that can be tough because it can be kind of a, it's my colleague, I've trusted Vizor for 20 years, but you have to be realistic and you have to do your homework a bit and dig in and say, okay, I mean,

It's interesting, right? There's, I think, a truism in the asset management world for the client side, which is you don't want to be the biggest client at your investment advisor. You also don't want to be the smallest, right? Ideally, you're somewhere in the middle, the sweet spot, and the company's been built to serve as clients that kind of look like you. You don't want to be like 30 % of the whole firm's capital, and you don't want to be a half of a 4%. How much attention are you going to get? often after a liquidity event,

It is time to kind of look at the advisor. No, doesn't, doesn't mean they go from everything to zero. Maybe they, maybe they join an advisory board for you and they help you in the search and they have the continuity and they're with you for the next five, 10 years still. So I guess that's step one. Think about who's actually could manage the money. Step two is, you know, clean up any skeletons in the closet, so to speak, as it relates to just, you know, different legal structures, different ownership, make sure that you're

very comfortable. You know exactly how the company shares are owned and managed. God forbid there's a divorce, you know, tomorrow or in five years or in 10 years. What does that actually mean? Are you comfortable with that? Do you feel like you're you're you and your spouse are aligned on those things? And you know, so I'd say that's another area to kind of dig into before, know, you don't wait till the liquidity event and I say, Okay, let's let's have those tough conversations, right? Those are probably the two that I think warrant the most. And then it's also I you know, look, it's never

Scott Saslow (41:56.872) early for some soul searching, which is to say, okay, you know, do I want that liquidity event? Like I always used to think that was the goal when I started the company. I always thought, do I still want that? Or maybe there's a middle ground. Maybe I want to sell a controlling interest, but I still want to be around. There's a lot of founders and CEOs who kind of rightfully so are kind of scared to death of like retiring, like all of a sudden waking up and they sign the papers, they have nothing to do the next day. Or for some, sounds really sexy. But honestly, after a couple of months,

Michael Palumbos: Yeah, we, we got a program called for the CEOs in that position called, from success to significance. the idea is it's just, it's three, you know, steps to walk them through, to get them thinking about all of those concepts and ideas. And what do I want? Where do I want my future to look like? And let's face it, we're all mortal. So I'm not on this planet for an indefinite amount of time after this. So, what really is the most important, what are my values, what do want to put together? So, and that's, we have found that to be a really powerful transition for CEOs to think about those things.

Scott Saslow: Absolutely. And again, there's so many shades of gray to how an acquisition can go and to whom it could go and what your role will be. And there's so many different ways to slice and dice that. it's probably a good thought exercise to periodically dream a little and say, okay, if I really had this opportunity, how would I want it to go? Because as often is the case, all of a sudden an acquisition opportunity will come. It's like pedal to the metal. Sometimes you don't have a second to think and it's ...

It's paperwork and it's due diligence and it's intense and there's attorneys and it's like, whoa, wait, how exactly do I want this to play out? If you've at least thought about a few versions of it ahead of time, you'll probably be able to manage to one of those ends.

Michael Palumbos (43:47.384) Scott, this has been a wonderful conversation. really appreciate it. Scott Saslow, author of Building a Sustainable Family Office. Thank you, thank you, thank you for joining us. Your book is available, I would imagine, on all of the major platforms, Amazon or just Google the book and I'll be able to find it.

Thank you.

Scott Saslow (44:06.51) Indeed. Yes. Yes. Yeah.

Michael Palumbos: I appreciate your time and appreciate you sharing your experiences with all of us today. forward to, you know, reading. I have not read the book, so I'm going I apologize. I'm going to buy the book because I just think that there's so many little nuggets in there for people that we're working with. For me, it's end of the year and a little haywire, but we will, we will grab that and put that on the list.

Scott Saslow: When you have a chance to look at it, let me know where you have questions, but I appreciate the opportunity, Michael. think it's really wonderful what you're doing with the podcast and sharing this knowledge. helps thousands and thousands of people make better decisions and you should feel great about that. It's quality work.

Michael Palumbos: Thank you everybody for joining us today. Again, I'm Michael Palumbos from Family Wealth and Legacy. You've been listening to the Family Biz Show and we can't wait to have you on the next episode listening with us. Have a great day everybody.

Scott Saslow: Thank you very much.