In this video and podcast, Randy Johnston and Brian Tankersley, CPA, discuss strategies needed to efficiently run a family tax and accounting practice. Watch the video, listen to the audio podcast below, or read the transcript.
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Transcript
(Note: There may be typos due to automated transcription errors.)
SPEAKERS: Brian F. Tankersley, CPA.CITP, CGMA, Randy Johnston
Brian F. Tankersley, CPA.CITP, CGMA 00:00
Randy, welcome to the accounting Technology Lab sponsored by CPA practice advisor, with your host, Randy Johnston and Brian Tankersley,
Randy Johnston 00:11
welcome to the accounting Technology Lab. I’m Randy Johnston with co host Brian Tankersley, we are going to talk today about family office strategies, and we are so fortunate to have a guest, Brian Weiner, who is actually founded the family office resource group. Now, family office Resource Group provides all sorts of support services for family offices, and we thought that you may have an interest in learning what they could provide, in addition to some fundamental family office strategies. So Brian, we welcome you. I think you’re coming to us from Florida today. So again, very glad to have you along as guest. Would you like to give our listeners some background on yourself?
Brian Weiner 00:57
Certainly first, thank you, Randy and Brian, for inviting me and having me here with you and to your guests. I have worked as a family office professional for over 25 years now. I started at a big institution city, Smith Barney, and after three and a half years of working in the family office space at the institutional level, my clients seated me to start a family office consultancy in Los Angeles, California, where, where I’m originally from, and for the last well, since then, I spent that eight years, and then I I sold that company, and then I started it up again, because when you work with successful people, they want to continue working with you as best they can. My model has always been, I’m not an RIA, I’m not a CPA firm, not a law firm. I do have a legal background, but I do not practice we tend to be in that unique space where we play nicely in the sandbox with everybody, and we’re helping to integrate the family and the advisors in a way that ensures successful communication, certainty, more certainty of execution and accountability, and those are the key strategies when I formed and founded family office Resource Group A year ago, it was to address the opportunity and the need of the explosion of family office services and the need and demand with this enormous transfer of wealth that’s taking place over the next decade or two, to help professionals and wealth managers to better service their clients, whose needs are evolving and changing as the generations are switching over and empowering advisors with the resources That Forge is offering. And so that was the goal, and is the goal of family office resource group. And it’s a pleasure to talk to you today about what we do, and perhaps some insights that I can share after being in this field for now over a couple decades.
Randy Johnston 03:19
Yep. No, we appreciate that very much. And Brian and I have both done family office consulting strategies. I believe the three largest family offices in the country are all direct clients of mine, but I think that the opportunity for firms to assist high net wealth individuals with their family office operations is kind of a big deal. You’ve seen far more than I have in this area. But as I’m asking you the question, I’m just thinking about scenarios that I’ve been asked about by family office groups. Because when I’m involved, it’s usually for technology support and it’s the ability to report out and to I’ll just use the word governance, because I’ve been writing governance materials in the last 48 hours. But you know, family governance is a tough thing to get right. You know, so much of the time, families kind of get at each other in a structure that you know was predefined, that maybe doesn’t fit their interest today and so forth. So, you know, my, I guess my, the nature of the question is, if CPA is are providing family office strategies and don’t have either one enough resources or two, the expertise in the area. What type of things should they do? And maybe the first question should have been, what do you consider to be core family office offerings?
Speaker 1 04:51
Certainly. Well, the other challenge I think CPA have is they’re overwhelmed right now with the volume of work and activity. Community, and it makes it challenging, besides the fact that they may lack certain expertise or resources internally to address the services that families are requiring, I think just the overwhelming nature of their work these days makes it very challenging for CPA is to be proactive with their clients, even with tax planning now, it becomes challenging. And so what I think that some of the key services are that we’re looking at and we’re finding you, you touched on one big one, which is governance and family education, not just financial literacy, but but but talking about building resiliency with inside the next generation and the family communication dynamic between the matriarch and Patriarch, and then also with the family’s advisors. Not often do the do the next gen? Are they prepared and integrated in the conversations with their family’s advisors until perhaps later on in life, or in certain cases, on the spot? And there’s no process that is around the integration between family and advisor and well, to add to that, you have Jen aziers. You’ve got millennials that are highly technology driven. They think differently than the matriarch and Patriarch who created the wealth. And so what we have found in statistics are showing 87.5% of the next gen are choosing different financial advisors and advisors than their parents have. That’s not a good statistic when you think about it, for the current advisory community. And so things have to be done differently, I think, in terms of how we’re introducing the family members, the next gen, in particular, to the family advisors, whether it’s the CPA, the attorney or the financial advisor, and then the structuring of that. I’ve been a believer that we need to do that as early on as possible, and integrate the family members as early as possible into the conversations, and tie them with the advisors, so the advisors have that connection, and then empower the advisors with the tools so many people of a certain generation are not tech savvy, and again, everything’s on our devices now, and that the texting and the WhatsApp messaging, there’s so many different programs for that now, and I think that one of the things is that we provide tools to the advisors we work with, and a safe space to communicate whether it’s SOC two compliant or otherwise, through governance, training and leadership and creating that framework, I think the other I find to be important is relating to we’ll call it passing the baton and succession planning and building independence, sometimes from the family’s wealth. That there’s a family business, not all the family members may want to be in that business. So what does that mean for how are we going to work with those family members differently than family members that are staying with inside the family business, which family members are going to be communicating with the advisory, with the advisors and and who are not? How do we create that framework and establish those ties in the right ways? That’s where, where we come in to help create that, whether it’s the use of technology for communication or the governance framework itself, and then the curriculum which we created, called seed for success, that allows both the CPA, the financial advisor and the lawyer who are the primaries to communicate with the family, both current and next gen, in a safe space and on topics that CPA lawyers and wealth managers may not be educated in. For instance, substance abuse, bullyism, getting into the right college without paying for it inappropriately. And then, of course, you know, investments, starting a business, starting a business, investments in tax that falls into the lawyer in the CPA box gives a great opportunity for interaction and for empowering both the advisor and the next gen. But as it relates to the first things that we’re talking I was talking about and referencing where you have mental health and substance if you. For instance, that’s an almost every single family office situation I’ve ever worked in, there’s a family member that’s struggling with that. Most advisors listen to the family member that is struggling with it, or their spouse or their parent and so forth, but they’re ill equipped. They’re not therapists or doctors. So what do you do? Then you just, you know, commiserate, you empathize. But that’s not enough, and the reason it’s not enough Randy and Brian is because the other statistic that’s alarming is there’s only about 10% of the wealth that’s getting past g3 right now. That’s a failing grade for all advisors. It’s not just the CPA or the lawyer or the it’s all of us. We need to be doing things differently. We have to be thinking out of the box and innovate. And we need that’s what family office resource group is, is empowering others to do. We’re innovating. So
Randy Johnston 10:59
Brian, you know, as I’ve been listening to your explanation, I was reminded of the grit book by Angela Duckworth. You know, on resilience me. And you know, I’ve been fortunate enough that we have a fairly complex set of generation skipping trusts in place for ourselves. And you know, I’m just thinking about the various families around the country. I’m picturing one in New York right now, where there’s 150 family members inside the structure, and how that’s been handled. And so there are so many things that you have either helped create or observe, just like we have observed through the years, and the issues on the high net wealth individuals are substantial. You know, the nowadays, a million dollars, not a lot of money. In fact, I think before we started our conversation today, Brian and I were talking about the substance abuse that occurs in high net wealth individuals, and our concern for them on that. And I believe that you had mentioned that you know your target was individuals of about 30 million in net worth and above.
Speaker 1 12:19
So that’s where you start to get Randy, the complexity, where you might have some generation skipping trusts, agents, you know, complex estate plans. And if the rule of 72 still does apply, that number of 30 million is going to double every seven years or so. So soon they’re going to be at $100 million or more that aside, when you’re dealing with wealth, you’re dealing with issues that are unique. They call it the burden of wealth. Now most people might say, I’d love that burden. I’d love to have means to be able to travel and not have to worry about keeping my lights on. On the other hand, there is a burden, which is related to the next gen on how am I going to develop myself independently from the family’s wealth, what is expected of me, or even in some cases, how can I live up to what my dad grandparents created and be respected? And I’ve seen so much of that, and that can lead to substance abuse, and then when you have mental health on top of it, like you described, these are the issues that for 25 years I’ve seen in eight years ago, so I created a program, an inpatient and outpatient mental health program, With a family that was struggling with these issues. It was called Manifest recovery, and I saw firsthand the impact on not only the individual, but the entire family, ecosystem and unit, when one family member is struggling with substance abuse or mental health, making decisions, holding people accountable, sensitivities. The entire family unit is disrupted and disturbed when that happens, and it throws everything off, and it makes it even more difficult your estate planning and CPA out there are figuring out ways to plan around it and isolate the problem child or the problem person for the benefit, or, excuse me, for the sake, of the other family members and for the benefit of the one who’s struggling with either mental health or substance abuse. These are very difficult issues, but we at family office resource group created the first of its kind, in my experience, a specific program dedicated to working with professionals who are not trained CPA lawyers and advisors with their clients and other trained professionals in a safe space to work with the family member and. And the family themselves on addressing the challenges beyond simply changing the trust and making sure that beneficiary is isolated, those are things that happen. On the other hand, other things need to occur, because if one family member is a problem or a challenge that affects everybody, the sister, the brother, the daughter, the mother, everybody needs to be needs to have their issues addressed as a result. Yeah,
Randy Johnston 15:27
and unfortunately, having dealt with the oxycodone, the opioid issues where I’ve been on the front line with the treatment centers, you know, or alcohol abuse, you know, a very minor but common problem, and can be highly disruptive and so forth. So we’ve got all of those type issues. So Brian, what I’d like to do for our listeners also is differentiate in your mind where perhaps the CPA firm should be providing the services and where they might need to get additional help. Because, you know, one of the concerns, and I’m going to use that word judiciously, is that if a provider is an ra, ra, I’ll get it out RIA or a BD. You know that there is a fiduciary conflict of interest, potentially. Likewise, you know, if a provider is both a CPA and a JD, you know they there are some very, very good planners that I’ve seen of that style, but you can’t know everything. So what do you consider to be accounting core competencies, legal core competencies, and a few examples of family office strategies beyond that.
Speaker 1 16:51
Well, sticking to the topic of dealing with family dynamics, whether it’s substance abuse, mental health or the like, for regulatory reasons, the SEC, FINRA, AICPA, the American Bar Association, limit significantly what the professional community in that space or in those spaces are able to do. No one wants to have their emails auditable by SEC or FINRA when you’re talking about little Bobby or little Susie that are struggling with a particular issue. And so what we do is advisors will bring us in to help them and empower them when they identify that is an issue, and they want to be a part of maintaining control over their relationship and not worry that they’re going to lose the client or they’re going to lose the opportunity, because that’s what every advisor is concerned about. I don’t want to add complexity to the relationship. I can just keep doing their taxes, giving them advice and and so forth, and not not do anything. But again, like we’ve said, We don’t want the status quo isn’t working, so that’s not going to be possible if we’re going to be successful at turning statistics around.
Randy Johnston 18:13
That’s number one. So I at the risk of interrupting there, but to help put that in the context of our listeners. You know where we’ve talked in prior accounting Technology Labs about advisory services, we’ve suggested and coached you that advisory services should be client centric, that you have to do personal planning first, and then business planning seconds, and then the other advisory services flow from that. And one of the things we continue to be concerned about is fake advisory and fake family office services. And we know those of you listening to Brian and I have a long history of understanding that we are as authentic, genuine and factual as we can be in these situations. And you can hear Brian Winers trying to help position some of these advisory services in a landscape that has a lot of complexities, much more complexities than most of us are used to. In fact, I’m I’m smiling as I’m asking, letting you get back to your comments, Brian, because I’m thinking about a family office dealing with an, you know, a wild party, and the expenses related to the yacht and the catering and and allocating that, and, you know, and so forth. And that’s just one example of what I’d consider a daily experience that most of us just don’t have.
Speaker 1 19:44
Well, you’re exactly right and and you know, let’s even take a step back from him. What is a family office and what are family office solutions? Unfortunately, as most of us have heard, family office now the term. Itself has become bastardized where it now or a multi family office is viewed as an RIA, an asset management firm that might do some bill pay and tax planning and tax mitigation with either a CPA in house or with the CPA or the family. That’s not what in my definition of family office is, and my definition a family office is a group of professionals who are acting as fiduciaries for the purpose of working with the family to ensure the successful transfer of wealth and values to multiple generations. That’s what a family office is supposed to be and the solutions around that, which we offer 12 different ones, is sure, there’s bill pay in accounting, there’s CFO services, there’s governance, which we’ve talked about, philanthropy, but cyber security, protecting one’s information reporting in a custom way. We do it in different font sizes all the time, because people need to understand and really understand what their financial information, tax information, is telling them. And then we look at Trust Services. That’s always important, right? And then we’re looking at certain concierge services. They have planes, they have boats, second homes, nannies, house managers. We do 70% of what I just described internally. The other parts. We are not a cyber security firm, we are not a Trust Company, but we have those capabilities, and we are not a concierge service. We do work with specialists in those regards. Nevertheless, we are a full ecosystem that allows advisors to pick and choose when they need those services to work with us. We’ve been focused Randy and Brian on governance and working with the next gym. I want to keep that theme, but from a different lens philanthropy. Okay? I believe that if we’re going to transfer wealth successfully, we need to focus on health, transferring good health. And I define health as physical, mental, emotional and societal, if we do not teach the family and the family members to transfer health within the family, it’s not the wealth is not going to transfer successfully most of the time. That’s been my experience. So how do we help families to be healthier? We can do that in lots of different ways. It starts with good communication, like we’ve been talking about. So let me give you the example of marrying technology and communication between the current and next successive generations and the advisors. So let’s say you have 100 as you said, Randy, 150 family members in the family tree now, and you can aggregate all of that information and the communication on philanthropy with the family and their advisors. So now there’s the gifting network, whom we work closely with, and then there’s leaf planner. We work closely with them as well. We have strategic partnerships. They have portals where family members and their investments are linked their donor advised fund, their foundation and all the advisors can see what interests in giving, what varying interest in giving each family member has. The family member can ask questions now of the CPA of the financial advisor in one safe environment on donating to a particular charity that they think is the right way, and the charities are listed there that are on Guide Star and in an approved area. And again, we’ve seen it where in the area of health and wellness or environment or homeless, or pick your your charity, a family member can can interact with the advisor and ask questions like, hey, I want to do venture philanthropy. Because I don’t. I don’t like to just give to the American Cancer Society. Go to the dinner and and be honored. I want my money to directly impact the cause the millennial generation, Gen Z and success, younger generations are gifting and giving differently, and so we need as advisors to evolve the way we’re engaging with them, and these portals technology are allowing advisors to do that and helping advisors. And this is what forge family office resource group, does we create the help create the business plans with the advisors who may not have the time to do it, the life plans and the philanthropic giving programs so that they want to do venture philanthropy and micro lending and things of that nature. It can happen because, again. And the CPA and the lawyers are burdened with time. They’re overwhelmed. They have a lack of it. That’s where forge can come in and not only empower the advisors, but increase their bandwidth, so that what does forge do? We do it on a white label basis, even we don’t even the client doesn’t even know that family office resource group exists, and we can be an extension of the firm without the burden of cost and overhead. They were to pay a person like me or my team, it would be six or seven figures of cost to them. Now there’s a subscription fee, and you only pay for the service that you need. That’s it. It makes it really easy to plug in.
Randy Johnston 25:44
So Brian Weiner, as you can tell, list dear listeners who we could go for a long time, and we haven’t even begun to scratch the surface. So you know, your insights and expertise, I think are very valuable. You know, Brian Tankersley, I know many times, in fact, this year, you have been a dominant voice on this, but you’ve been standing by. So I think Brian, what I might ask you to do is, for our listeners, summarize what you think you’ve heard. Because you know, Mr. Tank you have done that many times. So I think I’ve got a list here, but as we’re kind of Wrapping this one up, what, what are you thinking? Are the key takeaways? Brian, well,
Brian F. Tankersley, CPA.CITP, CGMA 26:30
the first thing I would say is that when you get, when you get a big client that that has a huge amount of wealth, they’re going to have a lot of problems, and you should not try to, you know, a lot of times as CPA and accountants, you know, we try to control the relationship, and I think it’s critical that you get the right resources in place so that you can do good for the family. Because there’s going to be a lot of complexity, there’s going to be a lot of technical challenges that you’re going to be concerned about, but they’re going to be a lot of just life challenges. You know, I think about the times when I’ve worked for, I worked for a family that had a couple of families that had a family office in the past, and I can tell you that the governance problems are legion, because we’ve got, we’ve got, you know, this brother that’s in charge of this, and this sister that’s in charge of this, and the staff don’t know who the boss is, and they’re just terrified all the time because they they don’t know. And the the dysfunction can, can, can really be a lot more than you expect, because it’s not what you because it’s not what you see as the outsider that’s used to dealing with the parents. It’s the it’s the stuff behind the scenes that you don’t see. And you know, never forget that this you’re trying to not only help this family have wealth for the rest of their life and help them be successful and help them enjoy each other. You’re also trying, trying to help them have a good Thanksgiving together in here and and to to be able to share those resources adequately. And so there’s, there are beyond just the technical issues that we have to deal with. I think sometimes it’s it’s going to be very important to have people that can help with mental health issues and substance abuse issues, and that have ideas and have seen things with larger organizations. Because in many cases, these are going to be your biggest clients, and they’re going to be very important to you, but you don’t know what you don’t know about serving clients of that scale in many cases, and I think it’s good to have have somebody that’s on your side, helping you make that relationship work.
Randy Johnston 28:39
Well, Brian and Brian, I think I’ve learned enough this morning that I’m going to have a hard time processing it all is probably the best way to think about it. But I think some of the key takeaways we’re going through a period of magnificent amounts of transfer of wealth, much of which is not getting to the second and third generation and beyond properly. Number two, that there are so many dynamics that may be beyond your skill set. When I learned of family office resource group and of Brian winer’s work, I thought it would be helpful for you to learn of that as well. So if you have high net wealth individuals that approach you and you need resources, I might suggest that there are resources around that can still appear to be from your firm, and you can provide the client service that the client deserves and that the family deserves. So with that in mind, we are very much appreciative of you listening in today, and we look forward to speaking with you again soon in another accounting Technology Lab. Good day.
Brian F. Tankersley, CPA.CITP, CGMA 29:50
Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor and. Have a great week. Bye.
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Tags: Accounting, Firm Management, Technology