Coordinating between all the vendors and providers that a company has to work with can be difficult work, but there are a certain subset of companies that have made it easier to do the work. Family office servicing companies can be a huge relief on the shoulders of your company when it comes to dealing with all these external providers. Evan Jehle is a partner at Flynn Family Office and LVW Flynn. He talks to Bob Roark about his experience working at a family office servicing company, and what these companies can offer you. Could this be the best way for your business to move forward?

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How to Use Outsourcing to Create Your Virtual Family Office

We have a guest away from New York City, Evan Jehle. He is a Partner with FFO and has a unique perspective and service offering that I thought was extremely important for us to go over. Evan, tell us a little bit about your business and who you serve. First, I want to say thank you for having me. FFO is a family office servicing company. What we do is we are a single-family office service provider to multiple families. That's the key to what we do. We're virtual. We can work with a client anywhere they are in the world. There's a lot of different providers that a family would have that they're dealing with, their investment advisor, their attorney. We coordinate between all of those people to make sure that the family is getting whatever services they need. We're essentially the COO and CFO of their personal lives. That's what we're striving to be. If you were to look across your clientele, what is a client of yours look like? What industries or pursuits do they entail? We've got an eclectic client group. We do have an entertainment and sports team group of clients. That's probably 20% of our business, but 80% of our clients are business owners. All first-generation wealth creators. It's the actual wealth creator of the family. We don't have multiple generation family offices. We do have some first generation that is now working to pass wealth down to the children, gen two, which is an exciting part of some of the things that we're doing for them. Teaching them about managing money and how they do that. It is across multiple businesses. We have people that are in fashion, we have people that are in the food industry. It's business owners that have a lot of money and need help on the financial side on how to do it and managing all the different vendors, projects and things that are going on. It's eclectic. What's your background that got you into this field? Weren't you in a family office at one point? I started at Rothstein Kass, which was a public accounting firm out of Roseland, New Jersey. I did an audit for a couple of years, which was fun. I knew it wasn't going to be my entire career, but I love the firm and I didn't want to leave. I was lucky enough where Rick Flynn, who is my partner in FFO, was a client of Rothstein Kass, then he joined as a partner and started the family office practice. I volunteered to move out of the audit and into the family office group and hadn't looked back. I came up with an audit background where you learn analytics. Why did this change? What's the reason? You're trying to figure those things out. That served me well because when I'm doing budgeting for a client or I'm doing long-term financial planning with their investment advisor, I'm coming at it from an audit mindset. I'm asking questions, "If you spent this last year, what was the reason it was less this year or more this year? What's going on?" This way, we can help the client understand that. You and I are familiar with the family office. Some of the readers may not know what a family office does, mean or is. The best way I can explain it is a single-family office is when one single-family that's ultra-wealthy has its own edit. I'll use me, I work for one family and one family only. I'm their CFO. I'm running home purchases and anything that they do runs through my office and me and all the staff. We only work for that one family. A lot of billionaires, that's what they have, single-family offices. A multifamily office is when you as the billionaire, or the almost billionaire, lets a few of your friends in, "You can't afford to have your own single-family office, but you're my friend. I'm going to let in 3, 4 or 5 other families, which helps me mitigate some of my costs for the single-family office. It allows for the other families to get those services from the team." It gives them a little bit of growth and learning because you're not working for one family. We are neither of those because we work for a lot of different families, but we're a multifamily office that is working with many different families and we're not formed by a one-parent family. We've led in a few friends. We come from the accounting firm world. We have a client. They're all of our clients and they'd come in. What a family office does is everything financial that you would need, paying your bills, making sure your taxes are done. The single-family officers, you have a tax accountant that's working for you. You have tax preparers, you may not use an accounting firm. Some people will still use the outside accounting firm because you've got technical expertise. A lot of them have tax staff in-house and they do everything internally. It is having all of your financial aspects as if you were a business, having your finance department fully housed under you. That's the core of what a typical family office does. The higher-level service that doesn't get talked about at parties is the hard part, which is project management. There are always projects. There's always something that a family needs. I'm buying a house, we're building a house, we're buying a house and tearing it down and building a house. All these different real estate scenarios, “I want to buy a plane. I need to hire a nanny. I want to fire my chef." All the HR-related functions that go around having multiple homes. I need to know what I am spending in this home versus that home. We’ve got a client once, mainly because it was a husband and wife and the husband wanted to show the wife that she was spending too much money on clothes. The wife wanted us hired because she was saying, "You spend more than me." Guess what? She was right and we won. It was great. It's interesting when it's about solving the problem that the family has. What's the reason they're in the room? That's what a family office is supposed to do is solve those problems for the family so they can go on and do what they want to focus on in life. [bctt tweet="People that seek help from family office servicing companies are an eclectic group of clients." username=""] If for a person reading goes, "How much money do you need to have to make a standalone family office, economically viable?” There's no magic number. Don't hold me to this, but when you go into the industry and you talk about it. It seems when you start approaching $1 billion, $750 million, then you've got the assets and you've got income that's coming in that you can afford to do it. It doesn't mean that, "I'm worth $500 million. I can't do it." The costs of having a single-family office can be quite large. We've seen single-family offices, they have their investment team. They have their tax team. They had their accounting and bill pay team and finance team. It could cost $2 million, $3 million, $4 million in payroll for all those different people. When you look at it that way, you want to make sure you're not someone, "I make $10 million a year." You probably shouldn't have a single-family office and have a $4 million payroll because you're not going to be able to eat. It's balancing, but the industry looks at $750 million starting to approach and being able to do it. It also depends on liquidity. I'm worth $750 million, but it's all in my business and I only make $250 million a year. I can't even afford an outsourced family office model. It depends on a lot of different factors. I go with $750 million. For you guys, you function in what for me is somewhat a unique term, a virtual family office setting. Let's compare and contrast that in the family office.  Let's use a single-family office model. A single-family office would have Evan all to themselves. They would have a CFO, maybe even a president that's in charge of running the family office. They might have an investment team and the president or the COO of the family office has all those people in their office runs down the hall. "We need this for a family meeting yet maybe info." That's the single-family office. The virtual family office, we do all that coordination as well, but the investment advisor is knock down the hall from me. It's a matter of managing all the different professionals and all the different locations and making sure that the family is getting whatever it is that they need. I'm not going to say it's easier because it's harder in that you're dealing with multiple different people in multiple different locations. It's a little bit easier because we're all professionals that are hopefully agreeing to play nice in the sandbox. Whereas if it's a single-family office, everybody's a professional. There's usually one boss where they may be a family member. It may be the president of the family office and everybody drops what they're doing to please that you and one person may end up having an issue. "I didn't get this from the family member because I was working on this for the other family member." In multifamily offices, it could be an issue too. I'm working for the main family that needs something done. I'm not going to work for family number two that may be more urgent because I have to please the first family that I'm working with. I think about competency. If you're a family office, you have the talents that you have. If you have a virtual family office, they may have a cross border. Who the heck knows, maybe I want to buy an Island somewhere else and you go, "We may not have that expertise in-house?" That's one of the reasons we've seen single-family offices like tax as an example. Still, using an outside tax firm is how much expertise can someone have inside of a single-family office? They're only as good as what they've seen. It doesn't mean they cannot go to seminars, webinars. It doesn't mean they can't go to other professionals that they know. They can. If you're inside of a firm and there are more people to go to get that resource, it seems to be a trend that we see more and more. They are outsourcing some things like that. The virtual family office, you're not relying on me to be your investment person. I can't be your investment person. It's not what I do professionally, but I'm able to work with many different investment professionals. Find the right one that makes sense for the client or if the client is working with someone, then, "They've never seen this issue. We have other resources that we can go to ask questions on tax issues, legal issues that come up.” We're able to work with any and many different professionals. It comes and keeps coming back to the root to get the client what they need and that's ultimately what our main goal is. Whatever the clients are looking for, whatever their pain point is, our job is to make it go away and resolve the problem. As you talk about project management and skillsets, you guys can bring to bear several options or solutions allowing that person to make the absolute best decision with the data at hand. When we started the practice and we were talking about doing bill pay at a public accounting firm, they're working on hedge funds and doing sophisticated planning. We're talking about the best way to pay a phone bill. You're looking at that and that doesn't sound sexy. You're paying a bill. What's the big deal? The truth is it all starts with bill pay. If I see all the money that's coming in because I'm getting your bank statements, I'm doing your bank recs, I'm paying all of your bills and I see all the money going out, what's the bottom line? I get to see how much you're saving. I get to see how much you're spending. I can help your budget to save more. That allows that money to go to the investments, to different purchases that you may, "I want to buy a car. I want to buy an Aston Martin." [caption id="attachment_4841" align="aligncenter" width="600"] Family Office Servicing Companies: A family office servicing company helps the family deal with all their providers, and ensures they get the services they need.[/caption]   Based on this, we're going to put money away from your savings. In a few months, it's a technical term. We call it bucketing. What we do is we create buckets for clients and we help them plan, "You bought this home and you've now got this debt. We're going to bucket." When you get your paycheck, we're going to take that paycheck. This covers your regular expenses. This is going to go into investments, but we're going to take this piece and we're going to put it into your home debt repayment bucket. That bucket is still with the investment advisor. It's being invested, but those funds are going to be able to be used so that at some point, you've got enough to pay down the debt. It starts with that is if you don't know what's coming in and going out, you can't do any of that future planning. About the horror stories we've heard, they make a lot of money and they have houses all over the place or they had no idea about their cashflow and they wake up broke one day. For you guys, about the accountability on cashflow and alleviate, for the sake of argument, it starts with bill pay. What's the first question that you typically get when somebody is thinking about using you for bill pay? What do they ask? The first thing that they should ask is what your internal controls are? How can I be sure you won't steal from me? That is not the first question I get asked. Honestly, a lot of times, I don't get asked it. We volunteer it because we grew up in an accounting firm. We have that internal control mindset and we built those controls so that no one individual can push anything out. What do they typically ask? Usually it's, “How are you going to pay the bill? I'm seeding control. That's the fear is I'm giving you control. How can I be sure the phone bill gets paid?” It's talking about the process. How are we going to get the bill? I want the bills to come to my home. Inefficient because of this. Here's what happens. The bill comes to your home, then you send it to me once a week. A week has gone by, we process it. Maybe it takes a week because we're getting it on a Monday. We put it in, we pay your bills Thursday. You may end up having late fees and then we're calling in and dealing with that. It's about building the right process for the client so that they feel that they still have the control. The good thing about technology, we couldn't do this back in 2002, 2003 when we started our practice at Rothstein Kass. Now, we can. The clients can log into the app, approve all the bills and have them go out. They don't have to give over signing authority to Rick or me. They have full control. Not every client wants that because they don't want to have to go in and do it. Some clients want the control, but then they don't go in and push things out and then things are late. It's about the process. Every client is different and you have to work out how it is going to work for that client. I'm that client that signed up. I've now been using the bill pay service from you guys for 4, 5, 6 months. What are the typical responses that you hear from that client once they've signed up and they have you do bill pay? What do they typically say to you, guys? The biggest thing that we get is, “I've gotten my time back,” which is great. That's ultimately what we're trying to do is give you your time back. Let us do the administrative part. That's something we get a lot from clients, but it isn't about the bill pay. Most clients, they're not worried about, "My bills are on auto-pay." They come out and get paid. It's about budgeting. What they're asking is, "Over the few months that you've been paying the bills, what am I spending? What do I look like? What am I saving?" That's where the budgeting comes in. We do get people that have a lot of bills. Those people appreciate getting their time back. I'd say the most common response to us paying the bills is, "That's great. I'm not worried about the bills. What's going on with my budgeting? What's going on with my spending? How do I look?" We're able to help them back to planning. That's the reason we do it. Shifting gears a bit, about the skillset and getting your time back. We only get so much time issued. If I'm a business owner and my client helped business owners. They've sold their business and they come to talk to you. What would that conversation be like? Here's what we can do for you as a post-sale business owner. The interesting thing about when you're selling your business and you've sold it is what's your next move? What's your next life? Are you staying on in the business? I'm still running the business but now I've taken some equity out. All of a sudden, I've got a lot of liquid cash. What am I doing with that? I'm going to give it to my cousin. He's an investment advisor and I'm going to give it to him and he's going to manage it. I don't know if I would recommend that. I'm sure your cousin is good, but that's where you want to help them understand. You came into some money. What do you want to do with it? The phrase shirtsleeves-to-shirtsleeves in three generations always seem to ring true unless a family does good planning. What you don't want is the owner who is sold to say, "This money is going to last me my lifetime and my kids, their lifetime, and stop there." What we want to work with them on is this planning, this money that you earned depending on how much it is. This money, we want to see how we can make it last for generations, multi-generations and help them set it up for long-term planning. That's not easy. Not everybody can do that. That's why we're working with different advisors because some people have that experience and they've done that. The first thing we want to understand from the client is what their goal is, depending on the amount. Some clients have come in and said, "My kids aren't getting any of that. I'll give it all to charity when I'm gone or I'm going to spend it down." "Okay, great." Here's the plan for that individual person, "I want to be able to pay for my great-grandkids to go to college." The money has to last longer. Here's how we're going to do that. It's the power of compounding. It is immense when you're trying to do that planning. Leave the money in the account because...