Ep #345 – Richard Wilson – The Family Office Expert

Here is some of what you will learn:

What is a family office
High net worth individuals
Components of a family office
The value of pitch decks
Mistakes on pitch decks
How to impute value
Transparency vs control in family office
How to develop family office relationships
How to be number 1 in the mind of investors

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Full Transcript Below:

Family Office – Interview with Author Richard Wilson (Ep345)  

Intro: Hi! I’m Rod Khleif. Each and every week I record an interview with a thought leader that I know you’re gonna get a ton of value from. Now here on YouTube are the video versions of my podcast, Lifetime Cash Flow through Real Estate Investing. Now to make sure you get the latest information please subscribe and hit the notification bell. Let’s get started. 

Rod:   Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I’m thrilled you’re here. You’re really gonna enjoy the value you’re gonna get from the gentleman we’re interviewing today. His name’s Richard Wilson and I actually went to one of Richard’s events guys has probably been four or five years ago. Richard is the founder and head of the Family Office Club. It’s the largest community of family offices globally you know and he does live events. He does 25 live events plus a year, over 6,000 participants and Richard is also the CEO of Centi Millionaire Advisors which provides performance-based family office solutions to hundred million plus net worth families yes you heard me right a hundred million plus net worth families. Now he speaks all the time he’s got the number one best-selling book in the family office space and he’s got the most listened to podcasts in the family office space. And I’m just were real lucky to have him on the show. Richard, welcome to the show brother

Richard: Yeah thanks for having me around appreciate it

Rod: Absolutely so yeah like I told you before we started recording you know I went to one of your events in Miami and you know there were people there with you know they’ve managed a billion dollars and I was frankly a little bit intimidated and you know I was trying to network and and it was a great event and really enjoyed it but you know for those of my listeners that don’t know what a family office is can you just speak to it you know what it means?

Richard: Yeah sure so a family office is essentially a wealth solution for someone who’s ultra wealthy. So it’s simple as if you’re worth 10 million, 20 million net worth, you need a different solution than somebody who’s worth you know a hundred thousand dollars and likewise the level of complexity and opportunities just grows exponentially when you’re worth 50, 100, 400 million so you know I’ve had clients that have four private jets or six homes or a hundred different LLC’s for their own operating businesses and you know if you’re just a normal high net worth individual probably don’t have that level of complexity. So it’s not as easy to make mistakes and the mistakes are less expensive. What are you gonna lose if you make a mistake at 100k net worth in might cost you a thousand bucks might cost you 5k. Otherwise if you’re ultra wealthy it might cost you the amount that would have taken to get a full-time team to serve you, defend against those mistakes, and help you proactively invest more intelligently

Rod: So you know from my understanding a family office is really it’s if you’re setting up a business effectively with the legal component, with an investment component, maybe with an asset management component, maybe even a security component, to help high net worth individuals with all these different aspects of their financial life and sometimes probably even a little more personal than that. Is that accurate?

Richard: Yeah it is accurate and there’s really just two types there’s a single family office which would just be for yourself like you build a 10-person team. They’re just serving you or you can go out and hire multifamily office that has 20 other clients or 100 other clients and many times ultra wealthy families need a little bit of both and want some dedicated team members to help them say source multifamily deals etc. but maybe they’re gonna want a multi-family office for traditional wealth management services, cash management, trust services, etc

Rod: I see okay. Now you know I know you do these conferences throughout the year and I’m on your email list and I get emails about these things and some very interesting stuff that I want to talk about but you know do you get of people at your conferences looking for investment monies for different either different business opportunities or real estate opportunities

Richard: Yeah we do so out of the 25 live events we do per year you know roughly a dozen a little bit more than a dozen of them are these workshops and their investor relations workshops will go through 35 strategies in a single day, do small group exercises, have worksheets you complete, by the end of the day you have a new approach to how you do that part of your investor you know engagements or capital raising. The other events we put 30 investors on stage in one day as you get to hear a lot about the structures, they want the fees they want to pay etc and then we’ve got maybe four or five sponsors that will speak. But mostly it’s investors on stage. We did that because when I got started I was speaking at other people’s events and I did so 150 times and I realize most people running those events don’t work in the family office space and we do and that’s the only space we work in and then also when I’d go to one of those events I just hear from sponsors the whole day and for people raising capital and I just thought you know if you’re gonna go to a family office event then through the family office club you just can hear from mostly investors on stage it sounds like a logical thing but you know a decade ago that’s what we saw. There was a gap in the marketplace and I think the most exciting thing is that if you are someone raising capital for the first time you might have enormous knowledge and your niche real estate whatever it is but many times you know you can’t go to school to raise capital you have to learn it the hard way, it’s frustrating, so just a little bits of strategies can save you months of time or a lot of money

Rod: Sure sure no, that’s an incredibly valuable resource I know you also do pitch deck so you have this pitchdecks.com where you’ll actually create in in in our space it’s really an offering memorandum or it’s just a PowerPoint deck to entice investors to your deal and you know what a great service that you want to speak to that for a moment

Richard: Yeah if you don’t mind I’d like to share to some of the mistakes almost everyone makes on their pitch stack so even if they don’t want to engage us at pitchdecks.com they get some value from hearing about and not just you know just to mention. So the first thing is that usually when people get their marketing materials together, their pitch materials together, they’ll go and spend a thousand dollars on the logo perhaps, ten thousand on a website, and the pitch deck and they’ll do it two or three different providers usually they guide on your websites not the guy doing your pitch deck etc some people make up their own logo with clipart images or don’t have one and there’s some things I’ve learned about that one, is if you can go to a single source I like to put together it just makes it more clean. Two you need to go to someone who actually knows a lot about raising capital otherwise here it’s gonna make it look pretty but it might be abstract and not attract investors at all. Also it found that a good rule is to try to spend 0.1% of the amount you’re raising on the materials. If you’re raising three million dollars maybe at least have a three thousand dollar budget for making it look professional or if you’re raising 10 million maybe spend ten thousand making the materials professional. Another rule of thumb is that no one’s gonna take your offering more seriously than you do yourself. So if you don’t care enough to put together a five-page website, have a logo, have a one-liner, have a one-page or teaser, have a pitch deck, why should someone care to read it if you don’t even care enough to make it look professional? And like Steve Jobs said that he would design something so it would impute value upon the phone and that way people would buy it at a higher price point than the competition because of the design and the aesthetics of it. Well everybody’s pitch deck everybody’s website logo is imputing something upon the first impression of you it’s just is it a good first impression or is it not doing you justice? And it’s hurting your ability to raise capital by having subpar materials and things are just not professional concise and focus for the investors you’re trying to attract so we talked about this for six and a half hours at one of our workshops. So I’ll stop there so I don’t go on and on and we can get to whatever your listeners would like

Rod: No this is very valuable Richard and guys you know in my workshops we talk about branding and this ties right into that conversation you know the website, the professionalism, and really you know branding yourself as a real operator in this business. And then you know of course whenever you’re presenting a property you’re gonna do one of these decks. He calls it a pitch deck week you know it’s got lots of different names but bottom line is it’s a power point of you know talking about the area the sub market, the demographics, the property that you’re looking at the financials, the expected returns, and how that looks is very very important. So that’s fascinating and what a great service you’re providing. So you know let me ask you this now so I know you represent family offices in one of your businesses as well personally and I know you counsel family offices that’s what you do for a living. How should let’s say you know I’ve got an operator listening that would like to go after at either equity or debt from a family office for a project that they have, how would you recommend they go about doing?

Richard: Sure. Well since most people are stuck in the equity line of thinking, I think it’s smart to try to first explore debt approach. I think some of the more sophisticated families out there are open to debt approaches. I don’t get to see as many of them and when there’s hard cash flowing collateral behind a piece of debt, if you like they’re being smart especially at this point in the cycle depending on when you’re listening to this. So I think that considering the debt first and putting that forward first it’s probably something I would consider doing if your lender allows you to have debt be part of the structure that you have on top of maybe agency debt or something. So that’s one thing. The second is I would try to target a very niche type of investor so at pitchdecks.com we have one client who’s made a lot of their wealth in the multi-level marketing world and they happen to start raising capital there for real estate investments and we’re helping them rebrand around that space. So that it’s really dialed in for the people that are in that audience but still makes sense for investors that they would attract otherwise on top of that we have seen that many people when they are going out to reach out to investors, if they’re in a crowded space like multifamily it all sounds the same to the sophisticated investor that they’re getting a bunch of pitches all the time where people say they’re upgrading workforce apartments from C level to B level at 10k per door and they’re gonna provide a 17% IRR etc and it just gets old over times I think coming up with a very unique one sentence one-liner that’s targeted the very specific type of family offices and investors you’re gonna go after is really important. And then try to figure out where that very specific type of investor congregates, where they go, how to get a list of them, how to be in their communities, how to do something more even natural connection with them all the times. I see way too many people raising capital from everybody versus oh well used to be a dentist I own a dental practice and I got into real estate investing because my back was killing me or something. Well you know go to dental associations and raise capital there you’re gonna talk their language you’re gonna know you know so I think that a lot of people miss that and they come out the come out of the gates with a generic approach they sound like everyone else except for they don’t have the track record, they don’t have the team, they don’t have the credibility yet, they don’t know what to say at the meetings. And then it’s hard to find leads because even you talked to someone you don’t get the best reception because it doesn’t sound unique and it doesn’t sound dialed in to what they specifically are looking for so I think that’s the most important thing

Rod: Let me ask you this, now do different family offices I would guess the answer’s yes but I don’t want to assume prefer different investment types?

Richard: Yeah for sure for sure. And I think that one way to think about it is where did they create their wealth? What background? What industry? Is it first-generation wealth? or second? Third? Usually by third or fourth generation which is harder to find but by that time they’re usually playing a defensive game, diversify into the extreme, first generations usually very entrepreneurial maximise control for a good part of their portfolio and second generation that depends first-generation is still alive or not or if they’re passed on those entrepreneurial genes but it can be a little bit in between. But a manufacturing family that’s worth twenty to forty million dollars you know if you talk to five of them and they’re all first-generation they’re gonna act in similar ways typically if it’s their investment portfolio just like a billion dollar plus you know office building type investment family. So I think that that’s one benefit of focusing on one investor type is you can really get dialed into what they prefer because some group might say we don’t want to be your LP investor we want to be your co-GP partner. We want to be your JV equity your systematic LP equity

Rod: That was one of my questions actually on you know if they typically you know if there’s one of the other do you see do you see you know I’ve heard you know I’ve not done business with the family office yet but I’ve heard you know want some control if they’re putting in a big chunk of the money, equity company would is that is that an accurate statement?

Richard: Yeah or at least they want transparency if not control. So they might be okay with less control if they have the debt because then they have the collateral in a worst case scenario where they might be okay with no control if it’s an independent sponsor structure and they’re choosing things investment by investment instead of a blind pool. The hardest thing is if you’re just starting out a relatively new team, relatively new track record, and you’re asking someone to invest at industry standard fees and you have a blind pool fund. It’s like you’re not really helping yourself out there

Rod: Not gonna happen okay now I think he answered this question is fascinating what you just said about first second or third generation. First generation being that you know the entrepreneur that built them that made the money you know I guess it would only make sense that they would invest in what they’re comfortable with or familiar with or in that direction. Now you know would you consider family offices specialists, opportunists, or generalists as it relates to their investments?

Richard: I think what’s most important when I hear you say that is to know that they only want to work with specialists. So they want to work with people who are pulling their craft over a long period of time you’ve done senior living for 42 years or you have done you know and even if you haven’t done it for 42 years maybe it’s been six years they can tell by how you act and talk and your lack of distraction that you’re always, that you’re honing your craft and you’re fully committed and you’re in this for the long term. And if they sense at any point that what you’re saying is not aligned with who they are and their long term sense of what matters, then they’ll usually just kind of you know turn off and go dark on you if they just think there’s no alignment and they might do that based on something that how a waiter is treated at a restaurant or just in a how current an email is. If you’re too impatient on following up with them they just little things and then like you know you’re basically dead to them if you’re not because they’re so busy so many people are pitching them you know they can only afford to work with a small percentage of who approached them but you only need one or two per year and it could transform what you’re doing and raising capital. So it’s not like you need to close 40 a year, you’re talking to 10 or 15 and you close one of the 15 or something so I think that’s important but in terms of are they generalists and specialists, I oftentimes find on a family gets liquid I often advise them that when that happens you need to really think how much in control do I really want to be? Yes you’re an entrepreneur if you didn’t make your money in the stock market you really want to be picking stocks know you don’t like and if you didn’t make your money in real estate do you want the transparency of independent sponsor type deals at least. So you feel somewhat in control and eventually you might trust someone with their fund after you’ve done a lot of deals directly or something or do you want to go and hire property manager and invest absolute directly with your own strategy. And I think that it’s a personal question for the family but typically I try to guide them to hey focus on you know in the direct investment area, focus on where you created your wealth and what your strengths are and fine best-in-class people in the other areas because you can’t be a control freak about everything or it’s just gonna all go sideways

Rod: Oh that’s good advice, that’s sound advice. So I mean I know you’ve got tremendous resources with your infrastructure. What advice and feel free to sell those resources and in answer to my next question. So what advice would you give developing you know for developing relationships with the right people at family offices and where can people get that information?

Richard: Yeah sure so I think that um the best advice I have on that is an 80 page answer actually that we don’t have time to go over here but if that capital-raising.com and we basically have a five step system for how to best attract investors to you based on the unique qualities that you have you know any generic advice, it’s not a principle, is not going to work as well for John and Chicago doing self storage as it will for like Susan doing apartment buildings in Singapore right so but based on your background in your local market and what your target investors want you can follow this five-step system to figure out how to most effectively work with the investors but a lot of it is about figuring out how you can be number one in the mind with local investors or a specific type of investors in a consistent fashion. So that they’re calling you, they’re emailing you, you’re getting word-of-mouth referrals from people that haven’t even invested with you yet perhaps because of your ability to serve a very specific type a family office. So we have that book at capitalraising.com we also have a free book at familyoffices.com, if you’ve never heard of a family office before you can download our book there and you know get to know the industry

Rod: Yeah guys I’ve had his book I don’t know when this thing’s been I said at least four or five years that I’ve had this just selling about the single-family office that is very informative – what that you know what is it what is a family office how they should they invest and it’s got great advice for you know if you’re listening and you qualify you know you’ve got your fairly liquid what would you say is the minimum that somebody would want to think about considering a family office Richard?

Richard: Well if someone’s raising capital you know they could raise capital as little amounts maybe two hundred or a hundred thousand and they might do a test investment and then they might you know do a follow-on investment of half a million or a million and they might want to eventually grow it into a five million dollar allocation across your properties perhaps if you’re raising capital from family offices. If you are of a net worth though yourself that’s at say seven to ten million you might want to employ a multi-family office and make sure you’re working with people who was family,

Rod: That was my question, thank for talking about the investment first but yeah my question was at what point should someone consider you know engaging a family office themselves and thank you you answered both questions. So you could share family office and get investments of as little as a hundred thousand dollars for them to test you out and that makes sense that makes good sense. So can you speak to, I know you do these events for operators to become you know to get around investors and things like that would those be the best events for one of my listeners to consider to tap into equity and debt from family offices

Richard: Yeah I think so I think that you know at family offices comm we’ve got our 25 events coming up over the next year that you can see there and what’s interesting is that people really like to come to the private investor summits because they see it as, oh this is the direct line to the private investors I must go to this event and many people join to come to that event but the workshops are just as valuable if not much more because it doesn’t matter if you get in front of a lot of investors if you’re not exactly sure how you’re unique from the competition, how to position yourself, how to have a superior structure, what fees to charge, what your material should look like, how to follow up with them, if you don’t have context or any of it it’s gonna be kind of worthless to get investor contacts. The main value that I think people misunderstand when they go to a lot of events is not hearing from 30 investors on stage you can try to close ten of them maybe you’ll have a natural connection with one or two, maybe do business with somebody there that you meet on accident in the audience but hearing from 30 investors in a single day allows your brain to take all that information and all the little subtle clues and repeated advice and kind of burns them into your brain of like for sure I need to do this. I was right about thinking maybe that structure is wrong. Yeah let’s not do the blind pool fun and spend 60-thousand setting that up if we are going to exclusively go to the certain type of investor and I think it’s the combination of instructional workshops like yours with hearing from a lot of investors that just allows you to evolve faster. And last people miss that they hear of events they hear family office club private investor summits, okay good we’ll go there. We’ll try to close an investor this month from that event and like you know a lot of the value is just getting so many investor inputs in a single day that your brain can like digest that and you change how you act in front of all the other investors you reach out to. And I just want to mention that because it’s not surface level obviously

Rod: I’m going I’ll tell you right now on one of your events. This is no question that there’s incredible value there. Well listen Richard, you’ve added a tremendous value and there’s a very short amount of time we’ve had but so you get I’ll have make sure the websites are in the show notes could you repeat them again I know this pitchdecks.com

Richard: Sure yeah pitchdecks.com plural version and then capitalraising.com is our free 80 page book on capital raise it’s just about an hour read you want to print off that PDF for a flight you have coming up or something and then we also have that familyoffices.com the event scheduled membership details for family office Club as well as a free book on family offices. And it includes 30 interviews with real family offices with their real names in the book where we just kind of show what’s going on in the industry and where it’s going next

Rod: That’s the one I have yeah love it thank you thank you Richard

Richard: Yeah thank you Rod

Rod: All right my friend take care

Richard: Take care. Bye

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