Now, alas, I know the answer: it’s the e-book phenomenon. Since November 2011 virtually no one is buying The Legacy of Inherited Wealth: Interviews with Heirs or Labors of Love: The Legacy of Inherited Wealth, Book 2 or any of the 5 booklets (the three biggest are hefty—between 40 and 50+ pages in length).

Since 1995 when www.inheritance-project.com went online, thousands of inheritors, wealthy parents, and professionals have read, identified with—and learned from—publications by inheritors for inheritors.

I can’t blame it entirely on e-books. I confess to a problem: I don’t know how to get Google (with its famous top-secret formula) to notice the blog posts I struggle to write. So now even fewer surfers are finding the site, and still fewer are buying anything at all.

I feel unspeakably sad. It’s only a matter of time—a few weeks or possibly a few months—until this web site will disappear . . . unless in the meantime a miracle occurs. If you have anything to say to me, please do so today. Barbara

It gets even better: if you order both books as a package (details on the order page), you’ll save an additional $4.75. Don’t miss this great opportunity!

The sale price of The Legacy of Inherited Wealth is $11.25 (list: $16.00); Labors of Love is $10.00 (list $15.00). The sale price of both books, sold as a package, is $19.50. (list $28.00) Shipping and handling remain the same.

Here’s how it works: fill in the order page, which does not show the sale prices. (It’s too expensive to have the webmaster revise this complicated page for just a month.)

You will receive a rebate check (in U.S. dollars) by air mail, sent the same day as your books are shipped.

Bessemer Trust is one such example:
The bank’s web site tells prospective UHNW clients that they are capable of “enhancing private wealth for generations” and offers them “The experience to meet your family’s complex needs—”

“We help you develop an integrated long-term wealth plan that considers multiple aspects of your life.”
[This includes:] “Developing Developing an Investment Plan; Defining Your Legacy; Preparing the Next Generation; Engaging in Philanthropy; Managing a Family Business; Uncovering Tax-Planning Opportunities; Owning Property; Structuring and Protecting Assets; Analyzing Concentrated Holdings;Accessing Hedge Funds & Private Equity.”

I do not think it is going too far to say that the family-office model has been coopted by these large institutions.

What is going on here? According to recent article in Bloomberg TV, “‘It was fairly demonstrably clear that there was a very significant problem of alignment of interests by private banks and their founders,’ said the 47-year-old founder of Vulpes Investment Management, whose Singapore-based family office has invested in hotels in Japan and farms in Uruguay. ‘They ceased to be custodians of people’s money and are becoming salesmen.’” (Bloomberg TV, September 22, 2011)

If this concern is warranted, then the growing trend of banks and other types of financial institutions advertising themselves as capable and trustworthy managers of UHNW family wealth is a worrisome trend. Even in North America, some well-known banks and trust companies now have family-office types of management services: Bessemer Trust, the Wells Fargo Private Bank, Northern Trust, RBC (Canada), just to name a few.

It also appears that some smaller institutions are getting in on the act—in one case, in a manner that appears misleading. The “Wilmington Family Office” in Wilmington, Delaware is a unit of the Wilmington Trust, which is owned by the M & T Bank in Wilmington. It has the feel of a set of Chinese boxes. (By the way, I found this institution by chance when I googled two groups of words: inherited wealth and family offices.)

There appear to be a number of intersecting issues here. I do not have the experience or the time to explore these issues in depth, but anyone who is “ultra-affluent” and who is considering signing on with a “family office” managed by a bank or a trust company would be well-served by keeping these questions in mind as they make their plans.

What is the size of the financial institution that is offering family-office services? How many employees are working in their “family office” division? How would you know for how long those who are assigned to look after your family’s interests will remain in their current roles?

What is the complexity of the functions they offer? Take another look at the list of functions that Bessemer names, for example. How much overlapping of functions (or services) is there with other institutions or other professionals, such as tax planners, investment managers, attorneys, et cetera?

Other than fees for services provided, will the institution profit on the financial advice they give to your family?

Most important of all, I believe, where is their loyalty? How can the bank or trust company demonstrate its loyalty to you, the UHNW family? How can you determine to what extent you can trust them with your wealth? Is there any potential conflict of interest? These bank (or trust company) officers (and other staff) work for their institution, not for you, unlike the family-office model. This single fact is too important to forget.

Part Five—networking groups—is related to family offices and multi-family offices but with the distinction that these groups groups do not manage money or give any financial advice. Joseph Reilly, founder and president of one such group, the Family Office Association (FOA), describes networking groups like this:

“UHNW (ultra-high-net-worth) networking groups began as a way of getting families together to share ideas and strategies for managing private wealth. At a certain point [i.e., a certain level of wealth], the managing of personal or family wealth becomes very complicated, and the need to keep your life private makes it very difficult to find peers to discuss these issues. Groups like the Family Office Association are helpful in providing a safe place to meet other families and family-office executives, while also hearing the best speakers and thought leaders talk about hedge funds, family governance issues, and philanthropic issues.”

Needless to say, membership in these groups and as their meetings is totally confidential. Each networking group has its own particular style and flavor. Some are truly global in scope (FOA, for example); others are—at least so far—just North American. For example, Tiger 21 is a U.S.-based organization founded in 1991, with offices in 5 cities, which is now interested in forming groups in Canada’s largest cities. Tiger 21 describes itself as a “premier peer-to-peer learning group for high-net-worth investors. . . . Members meet monthly to harness the varied expertise and collective intelligence of their peers in high-energy, day-long sessions.”

The Institute for Private Investors, (IPI) also founded in 1991, is another networking group which, like Tiger 21, describes itself as a “discreet peer-to-peer networking [group], … a safe harbor for families with substantial wealth to learn from each other and leading experts while fostering lifelong relationships with like-minded peers.”

Still another is the CCC Alliance, described as “a group of successful families and individuals that collaborate regularly on wealth management and family office matters.” CCC Alliance, founded in 1995, holds quarterly meetings.

Despite my attempts to describe the role and activities of family offices, multi-family offices, and networking groups, I have found the fruit of my efforts fairly unsatisfying. My apologies for the dryness of these last few blog posts. I feel like I am standing outside an opaque window with my nose pressed against the glass; my curiosity remains unsatisfied. Nevertheless, I think it is useful even to have a somewhat vague idea of the existence of these organizations, to which the 99 % (myself included) will always remain outsiders.

The last blog post in this series will consist of a few final comments.

The Family Office Exchange, or FOX, is the original multi-family office. FOX is a second layer of the original single family-office concept: it is a membership organization for family offices, with over 500 members. Founded in 1989, FOX has offices in Chicago and London. This is how FOX describes its purpose and role: “For 20 years, FOX has provided hundreds of family offices with research, education, networking and advisory services. By leveraging FOX’s member benefits, family office executives and their family members benefit from access to office best practices, direct exposure to other family offices member experiences and solutions, and engagement with industry-leading experts.”

Some perks of membership include: annual forums, senior executive roundtables, member-based roundtables, advisor online forums, and an online advisor directory.

Unlike FOX, GenSpring serves families, not family offices. In this sense, it is the truest multi-family office. Based in Palm Beach Gardens, was founded the same year as FOX—1989. It has a very different and more dynamic flavor, as this statement from its web site reveals:
“[GenSpring founders,] Hap and Ellen Perry, along with a handful of legacy families, founded GenSpring in 1989 as a multifamily office to provide wealth management advice to wealthy families across all aspects of their wealth. They were driven in no small part to create GenSpring by their intense dissatisfaction with traditional wealth management providers: private banks, financial services firms, trust companies, etc. Though great advisors existed within those institutions, the institutions themselves had grown into a hub for the distribution of financial and investment products sold under the guise of advice. …
GenSpring does not earn any incremental revenue as a result of the advice we give or the solutions we utilize. GenSpring’s growth translates into more choices, market power and resources for our client families because we use our size only for their benefit. GenSpring has been built with a purpose—to be aligned with families and serve their individual needs and objectives.”
Currently, GenSpring operates 19 offices in the United States and several more offices internationally.
Please return in about a week to read the next in this series: Networking Groups.

The most common initial reason for starting a family office is the sale of a large business. The head of the company, as well as other family members, wants someone who can park the assets received from the sale of the business in a way that they will earn good returns. (John D. Rockefeller started the first modern family office.)

According to Reilly, “There is really only one type of family office: a dedicated, staffed investment office owned by one family of lineal descendants.” He explains that this structure is desirable because the office answers only to the family itself. When a family has outside advisors managing their assets, there is always the possibility of conflicts of interest. (See a future blog post for clarification of the role of banks and trust companies in offering “family offices”—are they truly family offices??) An outside advisor—for example, an officer at a bank or trust company—is not likely to spend as much time and attention on the family’s needs as a dedicated family office.

Another reason for starting a family office is that it is hard to get objective advice from someone who works for a company or who has his own business. There is always an “angle,” which makes it difficult to find people you can trust. Although family offices are expensive to operate, they are worth the expense. The investments are often in hedge funds, which require large minimum bids; this allows tremendous clout with banks.

The human side of family offices

Here is an abbreviated version, excerpted from The Legacy of Inherited Wealth: Interviews with Heirs, of one heir’s response to being a member of an extended family with its own family office. When Kate Shepherd (a pseudonym) was 16, she was taken to the Shepherd family office, which was managed by her uncle. She was informed of her net worth and of the trusts that were intended to protect her from “gold diggers.” “The whole financial structure of the Shepherd family is built on enabling,” says Kate. “The system is presented under the auspices of being a compassionate and valuable protection, but what it really means is that nobody has to take control of their lives—financially or in any other way. When you’re rich, nothing matters because you can always pay away your mistakes. You don’t even have to get into that risky territory where you might make a mistake. The whole system is infantilizing.”

The Shepherd family office is not unusual in this respect: a family office does just about everything financial for the family members: it pays their credit cards; it collects their income and expense information and files their tax returns; it handles legal issues, like prenuptial agreements; it even balances their checkbooks. And so on. It is infantilizing. Even more so than other inheritors who are not part of a family-office system, these heirs can avoid growing up.

In about a week, please take a look for the next part of this series: Multi-family offices.

It helps to know at least a little about each of these instruments in order to begin to understand the world of Ultra-High Net-Worth (UHNW) individuals.

Private banks have been around for a very long time—since the 19th century in several nations in Western Europe. According to Wikipedia, private banks have “cater[ed] only to high-net-worth individuals with liquidity over $2 million, although it is now possible to open private banking accounts with as little as $250,000 for private investors.” [Disclaimer: The Inheritance Project cannot guarantee that all information provided by Wikipedia is completely accurate.]

Other banks with private-banking divisions. In recent years many large banks accessible to the general public have opened private banks with the same kinds of restrictions as banks that are only private. Wells Fargo Private Bank is one such example; it is just one of many. In Canada, RBC and most other big banks have private banking divisions.

Both private banks and banks (in general) with private banking divisions offer a wider range of services than other banks. Wells Fargo Private Bank, for example, offers “A personalized approach, bringing together our people, philosophy, and wealth planning process to create custom-designed solutions for your most complex financial needs.”

Trust companies. One good example is Fiduciary Trust (Boston) Besides its role in creating and managing trusts, Fiduciary also offers family office services: “Fiduciary Trust was founded as a family office almost 125 years ago. We understand the complex issues that can arise in the process of setting up a family office. We will help you define your family’s mission, and develop a multifaceted financial plan. As requested, we will provide day-to-day services, such as bill paying, help organize family meetings, and assist you in the education of the next generation regarding the obligations and opportunities of wealth.” Although not advertised on its web site, Fiduciary also organizes “client meetings where the focus is investments or various issues effecting family finances such as caring for elderly parents.”

Part 3 of this series will explain the nature and role of family offices and multi-family offices.

Part One provides information on a variety of institutions, organizations, and other services created specifically to provide services to the Ultra-High Net-Worth, or UHNW (whether they are individuals or nuclear families or extended families). These include: private banks, other banks with private-banking divisions, trust companies, offshore banks (including Swiss banks), and the low-profile, off-the-radar family offices. A more recent form of service is called the “multi-family office.”

Part Two is an exploration of privacy in the lives of the very, very rich. This part might be described as a “soft” subject: there are no facts and figures, nothing concrete, but plenty to reflect on.

This blog post is just an introduction. There will be much more to say in subsequent posts. I can’t resist the pun: it is a rich subject. Although I am a member of the 1%, as defined by the Occcupy Movement, I am not a member of the UHNW club. I have never been a member of a private club. Yes, I do have investment accounts, but I do not have the umbrella type of service known as a family office or a private bank. I live on an upper-middle-class street in a smallish home. I did go to a private school starting in 7th grade; I went to an elite college and an elite graduate school. I have deliberately kept my distance from other wealthy people. Therefore, my experience with UHNW people is nonexistent. I have a few acquaintances who could be described as living at the low end of the High Net Worth (HNW) range.

For several years in the mid-1990s I interviewed close to 100 HNW individuals, and possibly one or two UHNWs. Other than that, the information these posts will provide comes from books, newspaper reports, and articles posted on the internet.

My next post will be a primer of the various types of instruments (listed above) that provide services to UNHW individuals and families.

“Money in our family is affection and weapons,” she says. She knows that her father married her mother for her money, and she has witnessed countless family struggles over money.

Unlike the inheritor who exclaimed, “Ugh, more money!” (read the previous blog post), Maggie doesn’t dislike her money: “I really depend on feeling special because I have money. It feels very safe. I feel very different—on a slightly different plane. I almost want to use the word ‘elite,’ but that is not quite right. I just feel safe, removed from something that is scary in everyday life.”

Paradoxically, this sense of safety Maggie is the flip side of an overwhelming paralysis. In her late twenties, she can’t seem to take hold of life. She can’t figure out what it is she wants to do. “People have told me, ‘You have everything! You should be able to do anything! Follow your dream.’ But I am just rooted to the spot; I don’t even have a dream to follow. There is a kind of frozenness that extends so completely throughout my life that when people ask me, ‘What have you been doing recently,’ I think, ‘Oh my God! I don’t know .Don’t ask. I don’t do anything.’”

from “The Legacy of Inherited Wealth: Interviews with Heirs”

One inheritor  told The Inheritance Project:

“I had inherited money ever since I can remember. I get dividends from my grandfather’s trust. They come in the mail periodically. To give you and idea of just how out to lunch I am about this, I never know when those checks are coming. And I never know what the amount will be. . . . I actually remember saying dozens of times, ‘Ugh! More money!’

The feeling I had was that the money was already such a burden and a weight, and when another check came, there was even more! Often I wouldn’t even deposit those checks for weeks.

“I’m quite unclear where the money actually came from. I let other people handle it, and I hardly know what I have. . . . It is very fuzzy and hazy to me. I have kept myself in the dark because it has been too overwhelming, too intimidating, and too much of a painful area for me.”  (from The Legacy of Inherited Wealth: Interviews with Heirs)

With inheritors, ambivalence and ignorance often go hand in hand. This woman is a member of an “old-money” family, which means that the wealth goes back at least two generations. Most often in these families, the source of the wealth—the resource industry, for example, or the large holdings in land exploited for pulp and paper—have been sold. The profits have been invested and managed by professionals, maybe by a family office or a private bank. The second or third generations of inheritors may not even have met the financial professionals who manage their wealth. Almost all wealth managed and distributed in this way is tied up in trusts, often irrevocable trusts, adding a further layer of separation (and control) that distances heirs from their money.

There is so much more to say on this subject that I hope to keep at it for a few weeks. Stay tuned.