Defining Family Office Excellence: Pioneering Approach to Holistic Wealth Counsel

Welcome to Legacy Builders, strategies for building successful family enterprises. Brought to you by Beacon Family Office at Assante Financial Management Limited. I’m your host, Cory Gagnon, Senior Wealth Advisor. And on this show, we explore global ideas, concepts, and models that help family enterprises better navigate the complexities of family wealth.

Today, we welcome Tom McCullough, Chairman & CEO of Northwood Family Office. Tom is a distinguished figure in the wealth management industry, frequently speaking on issues relevant to wealthy families. He co-founded Northwood Family Office in 2003, which has become Canada’s leading multi-family office, consistently recognized by the Family Wealth Report Awards. Tom is also an accomplished author, co-writing “Wealth of Wisdom” and “Family Wealth Management.” He serves as an adjunct professor and Executive-in-Residence at the University of Toronto’s Rotman School of Management. Recognized for his thought leadership, he was awarded ‘Best Individual Contribution to Thought Leadership in Wealth Management’ in 2020. Tom is deeply committed to his professional and philanthropic endeavours, balancing his impressive career with active community involvement.

My goal is to be the most curious person in today’s conversation with Tom McCullough, where we explore his wealth of experience in guiding families of wealth through complex decisions and multi-generational challenges. We’ll discuss how Tom’s pioneering work in establishing the Northwood Family Office has led him to reimagine the role of the family advisor, focusing on active listening, goal alignment, and a deep understanding of each family’s unique circumstances and aspirations. Together, we’ll uncover the importance of patience, empathy, and a willingness to challenge preconceptions in helping these families navigate the complexities of wealth preservation and legacy planning for generations to come.

Now let’s dive in!

Cory: Welcome Tom! We’re excited to have you here today to share your wealth of knowledge and experiences with us. Let’s dive in, shall we?

Tom: Sounds great.

Cory: Tom, imagine you’re delivering the commencement speech to the graduating class of 2024 and you have the chance to inspire them with your story.

How would you begin your speech to convey the incredible lessons and expertise you’ve gained along your career?

Tom: Well, I love a good story, so I would tell them 3 stories about myself. I would tell them that when I was young, I would ride my red 2-wheeler bike to the local grocery store, and I would buy a bag of caramels.

If people are old enough to know what caramels are, they’re little plastic-wrapped chewy candies made by Craft back in the day. I would bring them home and I would set up a store in my garage and the cost of the caramels was probably half a cent apiece and I would sell them for 2¢ apiece, so wholesale to retail.

I did this kind of thing all the time. I sold things door to door, seeds, and all sorts of things, and so I didn’t realize that I was kind of this business guy at 8 years old and service, that kind of thing.

Ultimately, I worked as I worked for years at Dominion Securities in the investment world serving people and then I ended up starting a business myself as an entrepreneur which is a family office. I think the conclusion I’d take from that for myself is the advice I’d give to people is to find your passion.

And it’s just amazing how much when I talk about the things that I do, I’m passionate about them. I think of all the people in the world who do a job but have never really had a passion for it, they just do it. So, I encourage people to not everybody gets to do this, but if you can find your passion, it’s a beautiful thing.

There’s a great tool called “Ikigai”, which is a Japanese word and some people will have heard of this, but it’s the intersection of things that you’re good at, things that you love, things that the world needs, and something you can get paid for.

If you can find that in the intersection of those things, that is beautiful. So that’s the first thing I’d say. If you can find your passion and follow it. The second thing I would say to a group of graduating students is to enlarge your map. If you think about a map as a certain size and if you go outside of that map, you take a bit of a risk and you go outside of that map, your map is bigger.

If you do it again somewhere else, your map gets a little bigger. So, I would encourage people, and I guess I’ll just tell my story. I spent 20 years at Dominion Securities. I had a great experience there, a spectacular firm, and I took a gamble on starting this thing called a family office.

People had no idea what it was. Back in the day, they asked me if it was like birth control and family counselling, and I had a tough start. It didn’t work out very well. I didn’t know what I was doing. I often think to myself, it’s a good thing that entrepreneurs are not either that smart or don’t think things through all the time.

Because if you did, if you thought through everything, you’d come up with all sorts of reasons not to do something, not to enlarge your map and it’s a great thing that entrepreneurs go for it.

Maybe it’s a combination of the two, passion and enlarging your map. I would encourage people to take those risks, travel to that place, and make that change to enlarge their map. The third thing I would say is that I have this crazy story that sticks in my mind, and I don’t know why it sticks in my mind so much. I was in downtown Toronto where I live, and I was about to cross the road, and there was a fellow in a large pickup truck turning the corner, and a woman, and the light that I was going to cross was yellow.

A woman stepped off the curb to cross the street. The yellow light was yellow. The guy was turning into her lane. They didn’t hit, but they were both mad at each other and he leaned on his horn, she gave him the finger, and the whole thing was about 8 seconds or 9 seconds, and they went off, both of them mad.

He screeched his wheels and I just thought to myself what happened to those people that day or possibly in their life that made them so mad about that interaction? And so, the takeaway for me about that is you just don’t know people’s whole story.

You see the tip of the iceberg, and the real rest of their story is down below. The conclusion is to be kind, and show grace. You don’t know the whole story of where people have been and what’s caused them to react the way they do. I’m not saying I do that all the time; I’m saying I believe in that. I would like to do that all the time and I’m working on it.

Cory: That’s awesome, wow!

Tom: Find your passion, enlarge your map, and be kind.

Cory: I love that. And so, let’s pick up on Ikigai because I actually own a book, and the reason I bought the book is not out of recommendation, but because I searched that word after reading a chapter in one of your books.

That book and that concept were introduced to me, not today, but previously. I think it’s fascinating that you pull that out because so many people don’t have that chance to live that passion. So, tell me in your experiences and the work that you’ve done with people, Tom, what does it look like in others when you’ve seen them come to that intersection?

Tom: I would say and first of all, this is the chapter you’re referring to in our book is, it’s we’ve got a series called Wealth of Wisdom, and this is the second book called Top Practices for Wealthy Families and Their Advisors, and each chapter is written by a different person.

This chapter was written by Dino Petrone and Keith Michaelson. It’s chapter 7 in the book and it’s called using the “Ikigai Model to Foster a Legacy of Meaningful Engagement”.

I find that Ikigai is often most useful, not exclusively, but most useful to young people who are trying to figure out their lives.

I thought of that particularly because you’re talking about a commencement speech, and these are people who think about the word commencement. They’re about to commence the rest of their lives, the second act of their lives.

But oftentimes, they don’t know what to do, and they’re told by so many people that they should do this or do that or you have to make money or and some people, want to follow their passion, but how do they know where to go? What do they do? And, money often complicates things.

Money is an amplifier of all things, it amplifies the good in terms of opportunities but it can also amplify the bad. People feel they don’t have our purpose and don’t have to do anything and it’s confusing.

What is my purpose? So, I have used this many times with young people in the families that we look after to help them think about ikigai means means a reason for being in Japanese.

“What is my reason for being?” It’s just in the book, Keith and Dawn go through an actual exercise that you can use as an individual or to help an individual go through this questioning process and get to a conclusion that is helpful.

I mean, nothing’s ever a silver bullet but this is a way to help them find their passion, their mission, their vocation, and their profession. I just think that if somebody has direction and purpose, you could just imagine all the benefits that come with that including self-worth, which we know these days is such an issue for young people in particular. I do think the issue of money can cloud that issue of self-worth, frequently.

Cory: I love how, as you mentioned, the definition of ikigai, the reason for being. Recently, I was on a webcast with Jay Hughes, and he brought up the meaning of the word wealth. It comes from the words well-being.

It’s very similar in that if you go to the root and really, money complicates things. As you say, self-worth is such an item there that not even young people struggle with but..

Tom: For sure.

Cory: All people and so, Tom, let’s talk a little bit about the books because I view that as an ikigai for yourself. The fact that you were able to bring all of these amazing minds together and that second book that you mentioned, 62 chapters, a lot of them co-authored.

We’re talking about many more professionals than that and Keith was able to bring them together. How have you found that experience and come to the point where you are in your career and you’ve had the opportunity to bring these amazing stories out to families and their advisers?

Tom: Yes. It’s an interesting way you asked the question because, in some ways, it’s not like why you wrote the book or what you think about the book? It’s has been a fascinating journey mostly because well, a couple of reasons.

In fact, it’s interesting you asked this question because just an hour ago, I was on the other side of the microphone interviewing my co-author of this book or co-editor of the book as part of our podcast series and we were just talking about the legacy of the book in our own lives, not to mention that it’s been helpful for other people.

What has it been like for us? Because it’s not an odd book, but it’s a bit of a curiosity because the first book is called the Wealth of Wisdom, The Top Fifty Questions Wealthy Families Ask.

We started with that because both of us have been in the business of helping families of wealth for many years and there are some common questions. And so we thought, well, what if we could gather those questions together and put them in a book for people and bring some answers?

So, there was a labour of love, giving back to the community is the goal in this whole process. They say you should write the book you want to read. I thought I would love to read a book like that, what are the most common questions?

If I haven’t thought of them, I’m sure I’m going to think of them at some point in time. So why not, save time and see what other people are thinking?

I love the idea of questions. I mean, you need the answers sometimes, but I do like questions because there’s a humility to questions that open the door for further conversation as opposed to closing the door with an answer.

Actually, I’ll just take a little parenthetical pause here and say that when I started, before I started a family office, the reason we started is because I was looking for one for our own family and couldn’t find it.

I went to my father’s accountant because my dad was looking for some help, and I asked him if we needed some help thinking through our estate planning and our family plans. And he said, well, you can do an estate freeze or you can do insurance.

Like a lot of professionals and a well-meaning guy, nothing wrong with him, but he jumped and what he could have done was ask me a whole series of questions like, tell me what are you thinking?

Why don’t we have lunch, the three of us? You and your dad and me. Why don’t we talk about this? What are you hoping for? Who else did we talk to? In many ways, I’m glad he didn’t do that because what it led me to do is start a family office myself because they say the best entrepreneurs are frustrated consumers and that’s what I was.

I thought maybe, I’ll just go and do this. So, anyway, it led to that and so this the first book really was about all these questions that people had been asking over the years and then we thought, we don’t have all the answers.

We’re not we’re we could have written the book. We have experience but we’re not the only people. There are many voices out there. What if we brought in other voices? For each question, how do you run a an effective family meeting?

Let’s get Mary Duke to write that one. What about, Ikigai? Donald  could write a great piece on that. What happened in this whole process is it became this community in some ways. Community of us, the people who’d asked the original questions, the writers of them, the people who read the book and then reacted to it, who probably have interacted directly with some of the contributing authors.

It’s ended up being this community that many people have been part of families that have been part of it, and they also get the benefit if they’ve got advisors who are reading books like that and interacting with these kinds of topics and contributors.

It’s been a wonderful experience for Keith Whitaker and myself as well. I’m sure I know other people have enjoyed the book but for us too, it’s been fantastic.

Cory: Absolutely. And just that community, as you mentioned, it really does build out as you connect with those people and the people they’re connected to. It really broadens that network very quickly.

Tom: Yes. It enlarges your map too.

Cory: It enlarges your map and that’s actually where I was going, we’ve talked about starting the family office and all the reasons that, as you say, people don’t take the leap in life. So in the work that you’ve done and the families you’ve worked with, what do those leaps look like?

Because sometimes the leap is the wrong leap, but oftentimes, it’s just needing somebody to get them to that point where they knew that they were going.

Tom: Yeah. That’s a good question. I have to think about that. I mean, there are bad leaps, no question. Sometimes, those bad leaps are obvious. Sometimes they’re only obvious after the fact, for sure.

What I’m thinking about is when you come to the edge of something and you think, I’m a little scared of that or It’s new or It’s different or I’ve never done that before, I think that’s what I’m thinking of, with just a little gentle nudge sometimes or encouragement.

Sometimes people can step out of their little map and into just one little town next door on the map and it just you go, I did that. I could do that, maybe I could take a bigger leap. Maybe it’s going away to school. Maybe it’s taking a job you just weren’t 100% sure of.

Maybe, for example, I mean, it’s a very small example, but I was at a course about, “How to Be a Good Trustee”.

I’m a trustee of a number of trusts and I took a course on that. One of the speakers back in 2017 was Keith Whitaker, who is the co-author of my book. He and his partner, Susan Massenzio were both presenters at this conference and through a whole bunch of serendipities. We ended up sitting together at lunch or dinner and we ended up being on in the same group, the green team, I think it was, for some personality group where I think it was the annoying people all got put in one green segment.

And, anyway, we were sort of like the 2, 2 guys from the Muppet show up in the balcony in the corner. But in any event, I thought to myself, this is a very sharp interesting, thoughtful, incisive guy I already had this idea for the book and I thought, I should, I wonder if he would want to write this book with me.

Then and then, I had arranged to talk to him about something else and we arranged to have a conversation and then I got kind of shy because I thought, it’s kind of weird. I don’t even know the guy very well and I’m going to ask him if he wants to go on this massive journey of writing a book.

But guess what? I stepped out of my little comfort zone and well, I almost didn’t. I was concluding the conversation. He said I thought you said there was something else you wanted to ask me.

I said, yes. He gave me that little gift of that little nudge. I wonder if he hadn’t said that, might I not have asked? Because I thought it was a little bit too much maybe. Anyway, I asked him and he got back to me a week later and said I’d love to.

And so, it’s about 7 years ago and look at all the things that we’ve done together that if I hadn’t taken that little leap or step, maybe it wasn’t even a leap. I think with families, a lot of the way I think about that with them is helping them, think through the issues and say, why not?

Sometimes it just needs somebody to do that, to give you permission in some ways because there is some chance of failure. Even if it’s small, but a little bit of permission to say, why not? It’s okay.

I think that’s a really important role that we can play. We can all play in each other’s lives, but, certainly, we play in the lives of the families that we work with.

Cory: Absolutely. Tom, Northwood Family Office was born because of frustration, which is fantastic that it was born and where it is today. The landscape has changed dramatically over that time and there are more people asking questions instead of coming up with solutions.

How do you think it would have been different today if you were asking those questions relative to your father’s accountant and how that…

Tom: I see what you’re saying. Well, that’s a very good question. Maybe more of those people would have taken some training and or seen what was going on and learned about active listening and those kinds of things. It’s possible, I don’t know.

There’s still lots who are who would jump right to solutions. I don’t know if you’re just being accountants. I’m talking to, really, any of us. It’s a skill that you learn. I think people who spend a lot of time learning a trade or I mean, a trade or a profession or they’re experts.

It’s the curse of knowledge that you’re so knowledgeable about these things and people are paying by the hour in some cases or you want to deliver value, so you jump to the answer.

But the answer is not all people aren’t always even asking the right question. I used to teach an MBA class called The Management of Private Wealth. I’ve taught it for 14 years at the University of Toronto MBA course. One of the first questions, one of the first stories I tell him is about a person who called me up years ago and said, not a client and said, my money manager is terrible.

The investment manager is awful so, should I fire them? I asked the students, well, what questions should I ask this person? They ask the traditional questions about how long have you had the money manager and how they do relative to the index and what kind of manager was it?

I said, okay, those are questions I said, would it matter how old this client was? Would it matter how experienced they were? Would it matter how much they spent? Would it matter what their history with money was in the past? Would it matter if they were supporting other people?

What you and the more we talked about it, what we realized that this particular person, real issue they had was that they had a spending issue. They were spending a lot of money and were concerned.

We ended up doing the research and it turns out their money manager was a very bad period, and their money manager even did slightly better than the index. They were asking the question they thought they should ask but the more you dig, we dug into the conversation with the person and got the information, and we kind of realized that was the wrong answer for the question.

If we jump in and start to answer the questions that people ask, they don’t even know the right question to ask sometimes. Part of our job as a really good adviser is to gently probe and to help them figure out what the right question is, and then together, we can sort that out.

I think advisors, maybe on average are better but I think we have a long way to go. I think we all met many people who jump to solutions very quickly and I find it just amazing but it’s awkward. It can be awkward but if you count to 10 sometimes before you respond, it just seems like an eternity.

It’s amazing. Sometimes people continue their sentence or they have thought for 5 or 6 seconds and then say something that’s gold in the relationship. There’s some kind of disclosure, there’s some kind of realization they’ve come to.

There’s some kind of issue that they’ve never told anybody else before, but it’s going to be central to solving their issues. If we can wait, have the patience, and withstand the awkwardness sometimes to wait and or ask questions that elicit more.

I think it’s just really powerful and so your question is, is it better today than it was? Probably, yes but I think we all have a long way to go.

Cory: Right. Now on that topic of investing and the theme of do-overs, you have another book that is in its second edition. You had the chance there to make some edits and improvements. The book that you wrote with Mark, tell me about that and how that plays into the world.

Tom: Yes, that book is called Family Wealth Management, 7 Imperatives for Successful Investing. So, that’s a book about investing. The other books are really about issues that families of wealth have.

This book was written in 2013, and the only reason for a second edition is that it was 11 years later. The world changes and we wanted to update it and make the graphs charts and references more current.

But the principles absolutely stayed the same and I think the main message of that may be threefold. One is that it’s got all the work we do has to be focused on the client. It makes me think of Galileo or probably Copernicus, one of those people, and the debate was does the sun rotates around the earth.

Ultimately, they realized, no, it was the other way around and I think that’s the thing with investing. I think people rotate around the market. Sometimes the stock market and clearly that if you really think about it, that’s not true.

If you could reorient yourself to say the stock market or investing, like many other tools, is a tool to serve the family.

So, what does the family need? Then you have to think about investments in service of the needs of the family, not how does the family jump into the double dutch skipping rope and if trying to figure that out, I think that’s just a wrongheaded approach.

The book Family Wealth Management is very much focused on “What are the goals of the family”? Often, people don’t know what they are. They’ve never calculated the cost of the goals.  They’ve got their goals and their portfolio are completely separate from each other.

The second thing the book focuses on is the area of I’ll say, a disciplined approach. I think a lot of people take a very ad hoc approach to their investing and I think something that is disciplined and documented, t’s much easier to follow in behavioral science terms when things go wrong. That’s the problem. That’s when you need this discipline.

The 3rd area I would say that the book focuses on is the need for integration. Investments alone don’t make sense. They make sense in the context of goals and they have to be modified by the other things of life. What are your plans for passing on money after you die? What are what are your tax implications? What are you thinking about kids versus philanthropy? What are you thinking about ease of administration and management fees?

It’s integrated and unfortunately, the world has been typically organized by vertical silos based on people’s expertise, not a horizontal structure that is based on the client’s needs which are all connected. They’re all integrated, they’re all mixed up.

A client doesn’t know which professional to go to half the time. So, I wrote a piece in the Journal of Wealth Management last summer called The Rise of the Integrated Advisor and it’s a piece that says, it’s I think it’s becoming a separate profession.

This general contractor role is different role that of electricians, plumbers, painters and drywallers. Not a better role, just a different role. It’s a conductor versus a first violinist on an oboe player.

This general contractor, coordinator integrated adviser role is coming into its own as something different and that’s the job of some people and probably not other people. It’s as I say, it’s not better, but it’s a different role that and I think people have cobbled it to clients, families have cobbled it together themselves because this person there wasn’t this person.

They’ve got an accountant and a lawyer and two money managers and an insurance person with a philanthropy adviser and the client is in the middle of all this. How do you pull all that together?

The book, Family Wealth Management, while it is an investing book, puts investing in the context of all those things, goals, discipline, and other things that need to be integrated into that.

Cory: Now going back to the integrated adviser and that piece that you wrote, if we were here 15, 20 years from now and where you think the world is going and we looked back on that. What do you think that integrated adviser would look like and where they would occupy as far the adviser to the family? What do you think that’ll look like Tom?

Tom: Well, I mean; to be frank, I think it looks like a multi-family office. That’s that is our role. When I started this business 21 years ago with my partner, we wanted to be Wayne Gretzky’s getting to where the puck is going to be.

We knew the puck wasn’t there because people thought we did birth control and family counselling, spent 21 years pushing a rock up a hill trying to explain to people that you probably wouldn’t build a luxury home without a general contractor or architect.

You probably wouldn’t just randomly choose trades and organize them yourself. You’d probably have a game plan and somebody who’s done this 20 times, 50 times before, not you doing it your first time. That has begun to resonate with people, and now, guess what? Everybody has a family office, it seems. It’s an interesting time to be in this role.

I was lonely before, now, it’s a little less lonely but it’s still a bit confusing for clients because we haven’t sort of settled out as to what is the definition of whatever it is, a family officer or an integrated adviser.

But I think it’s somebody who you can see, I won’t go through the details of the article, people can pull it up. It’s actually on our website even though it’s a journal article. It’s on the northwoodfamilyoffice.com website in case people want to have a look at it but it talks about the details of what we think the definition of an integrated adviser is and the role it plays in the lives of families.

I think, I mean, everybody can get better but we play this role where we are objective, we connect all the dots, we don’t have a product to sell, we’re our goal is to help clients. They’re the only ones that pay us.

Nobody we don’t get money from other people and we provide advice across a whole wide range of areas of their life that’s all connected. I think that’s really what an integrated adviser is.

I think there are more and more people as they realize what it is are going to want it. Right now, it’s mostly available to those who have money. I’m sure somebody is going to find a way to take down the market to more average people, it’s hard to find for the average person.

One of the most common questions I get is if we talk to somebody and our minimum is 15M liquid assets, which is typically about 30M net worth. There are loads of people, great families, who have less than that and still need this help, and we can’t do that.

But, there’s a growing group of people who are going be able to do that and the need is going to be there. I think, there’s the research tells us there’s about 12,000. It’s probably a couple of years old now, so maybe it’s 15,000 people in Canada who are worth more than $30M. That’s our target market. It’s a tiny target market but there’s many people who got less than that, but still the complexity that comes with wealth that needs this integrated advice and I’m looking forward to more people getting it.

Cory: Absolutely. Now, I want to talk about the interaction at the intersection of the road, the people having a bad day. As you said, you don’t always know people’s story and you’ve seen many people where if you judge that book by the cover, you’d have it so wrong.

Even the life as a trustee the intimate moments in that. How do you implement that into your way of thinking Tom, from a professional and as you said, it’s not an always thing, but it’s an intention. So how do you implement that way of thinking and how does that benefit the families you work with?

Tom: Well, it certainly benefits the families. That the easier part. It’s always good to be understood. I think nobody wants to be judged by their cover or their last outburst or the mistakes they’ve made or the things they’ve done.

Everybody wants to be given grace. Most people would like to be known and understood and go. We’re human beings. We show the part that we’re okay showing. Above the waterline is the part that we’re okay and proud of or confident in but so much of us is buried below and it never comes out.

One of the things that happens in our practice I find is that because of the way it’s set up and there’s no product to sell but clients feel aligned I would say, and even just the approach that we take in our meetings, it becomes clear early on that we are there to be helpful to them.

We don’t know exactly what it is that need yet, we’ll learn that over time, they’ll learn that over time. They may not even know but we’re sort of opening things up, and it’s back to my comments about allowing time.

We ask when we start our conversation with clients at our discovery phase, we ask many questions but one of them is what are the best three things you’ve done for yourself and your family in the last 12 months?

Then we wait, I would say, an uncomfortably long period of time until both, if it’s a husband and wife, until both of them answer the question.

It’s actually hard, it’s hard to think about but we wait and allow them time to think. Sometimes it’s funny when there are a few that are the same between the couple and sometimes they’re different.

But, as you would as you would imagine, the answer is rarely numbers. I got 18% of my portfolio. I lost £20 or we got the whole family together for the first time, all of us, since the end of COVID.

I spoke to my sister for the first time in 2 years, we’ve been estranged. Then we say to them and then we wait and then we say, how do you want to answer that question 12 months from now?

Then we wait again and it’s not easy and it’s not immediate but the more you wait and give time for people to think and respond, it is common for people to dig down deep and get things that are important to them.

It’s common for people to say, I haven’t told this to very many people but it’s something that it’s important to them. It might be a challenge with a family member or a personal challenge or something. We hold those things very tenderly of course but it can be helpful in us helping them over the years ahead.

You think to yourself, some days, people think we’re in the investment business. After you hear that it’s like, wow, that seems crazy. Yes, of course, we do those things. But we’re in the business of helping people figure out the things that are good for them and their families that they want to do.

That’s very different than the technical work that we also do. Then somebody’s got to make that happen and you use the tools of investing or tax planning or estate planning or whatever it is to make some of those things happen.

But some of them need to be funded and some of the goals don’t need to be funded. How can we be a supportive partner to you as a family to help you, do the things that you want to do? We do integrate it into our practice and I try and integrate it into my life.

You hear somebody’s story. Even somebody who seems brash and self-confident, I often think to myself, I wonder what their story is. There’s something deep down behind it. It’s not like you’re trying to get at it either. I find that with people who are annoying. I find lots of people annoying, but I try to think of the other side and think, I wonder what their story is that brings that out.

Because I have, we all have this. We all have a life below it. It doesn’t have to be some weird cryptic thing. It just hurts and the struggles and trials and failures and all that kind of stuff that we often keep below the waterline, but it’s part of us too.

We try and I do my best to keep aware of that but I trip up often for sure.

Cory: Well, and as you say, people want to be seen and heard, and oftentimes, that’s it. You might find them annoying, and all they want to do is be seen or their story to be heard or what their concerns are or, what’s causing them pain. Or at least not written off, maybe just that.

Cory: Absolutely. Tom, as we near the end of our conversation today, there are a few questions that I ask each guest before we wrap up. Are you ready for the tough ones?

Tom: I’m ready. Bring them on.

Cory:  Number one, what is the one key strategy you believe is the most essential for building a successful family enterprise? 

Tom: I mean, how do you narrow the thousand things down to one? Well, let me just speak from experience, my own experience. One of the things that we have tried to be is trustworthy. In a business like ours, you could imagine being a fiduciary for families.

I mean, trust is perhaps doubly important. But we have tried to build a reputation of trust, fair dealing, literally putting clients first, you know, doing everything with quality so people don’t have to be worried that there’s some other thing going on.

And I don’t know if you ever come across or your listeners have ever come across the trust equation that I saw in the book called The Trusted Advisor by David Maister, Charles Green, and somebody else (Robert Galford).

It’s the equation is trust, which equals C plus R plus I, all divided by S. T is trust and what is C? C is credibility. So the person knows what they’re talking about.

One of the reasons you trust somebody is that they know what they’re talking about through education, experience, knowledge, and so on. R is reliable, they do what they say they’re going to do. I’ll have that to you by Thursday, not Friday, not Saturday, not a month from now. I’ll have it to you by Thursday because I said I’d have it to you by Thursday.

It’s a funny word, It’s intimacy and really what that means is sort of a relatability. This is a person I could talk to and I feel like I could disclose to and trust enough to have that I’ll call it an intimate conversation.

And guess what? If you go back to multiple to your arithmetic, division is more powerful than addition. All are divided by S, which is self-orientation.

If it’s all about me, even though I’m reliable, I’m credible, and have intimacy or relatability, If it’s all about me and I’m trying to get something out of it, it really ruins trust. I think I just think I teach this to my MBA students. We talked about it with the staff.

I think trust is a foundational element to any kind of relationship inside a family enterprise between if there’s a family business, you know, their customers and their their clients and their staff.

I just think it’s so fundamental, and we know the people we trust.  And we know and we know the people that we aren’t sure about and if you look at those reasons, if you deconstruct the lack of trust, it’s sometimes related often related to those things.

Those C plus R, the C and R, and I and S. So, anyway, that’s what I would say, trust.

Cory: Awesome. That’s great and I love the equation, and it’s a good reminder. I’ll have to pull that book off the shelf and go back through that one because it’s been a couple of years.

That’s awesome. The second question is what is the most common challenge that you see family enterprises encountering when it comes to wealth transition and generational continuity?

Tom: When there’s a book called the top fifty questions people ask, it’s not surprising that people say, well, what’s the best one or what’s the most common question?

I get that question all the time and the most common I’ll cheat a little. The most common set of questions is about children and money. That is the most commonly asked topic.

There are probably 5 or 6 questions related to that. When do we disclose to kids about money?

How do you make sure kids are raised and not have money affect them negatively and those types of issues and so I think their people are right.

I think that’s one of the trickiest topics and it’s very interesting to me. It’s a conundrum that you’ve probably, your listeners have probably heard the idea about the idea of preparing the wealth for the heirs and preparing the heirs for the wealth.

And guess what? There’s a lot of money spent by families, a ton. Preparing the wealth for the heirs, investment management, tax planning, estate planning, etcetera.

But how much money and time do families ultimately spend preparing the heirs for the wealth? That’s education, that is guidance, coaching, EQ, self-esteem, all the psychology of money issues and money is tricky.

It’s an amplifier of all things as we’re saying. The positives in terms of opportunity but also in terms of the back to the icky guy, the self-worth issues and people not launching because they’ve had access to money in ways that are not helpful.

I would say one of the things that comes out of one of the common challenges that you’re asking me to comment on is this idea of parenting with your wallet. I always think that money and power can solve issues for kids too quickly.

So the classic story of somebody going off to college, they’ve got a budget for beer for the month, and halfway through, they’re out of money, they call up mom and dad, and guess what?

Mom and Dad are really busy, so it’s really easy to E-transfer some money and solve the problem. But rather, do you wait and say, buddy, I’m so sorry.

It’s going to be a dry couple of weeks. You’ll get your budget money next month but not this month. Yeah. Because otherwise, what are they learning?

I think the idea of parenting with your not parenting with your wallet, is hard to do but it’s really important. Just one little thought on that it’s very interesting to me to think of talking to entrepreneurs who often talk about the challenges in their life as being the place where they learned the lessons, built character, learned the lessons.

But then they become successful, they have money, and guess what they do with the money?

They use the money to help their children avoid all the challenges or many of the challenges that help them develop their care that help them themselves, the entrepreneur, develop their character.

So it’s this weird thing that we do and we’re human beings. We want good for our kids. We want you and we have the money, and so it’s a really interesting challenge.

One of the authors in one of the chapters of our book says, that the 2 things that you can, get that you want to give your kids are roots and wings and roots are the sense of self-esteem, love, support, stability, and wings are enlarging their map and having to figure out the beer money on their own and making you become an adult.

If you are if mom and dad play this role in your life, kids, you know, have the risk of not becoming adults. I think that’s one of the biggest challenges and I think more and more families are aware of it.

I think probably doing a better job, but it’s a challenge every day for people with money.

Cory:  Absolutely. I love that. The roots in the wings and so often people don’t put any effort or attention into preparing the errors because it’s the hardest thing to do.

Money can solve those things. You can hire great advisers who can help prepare the wealth, but, that work needs to be done by the family to prepare the family for that.

Tom: There is help but there are advisors in that area as well, but it’s it’s mushier, isn’t it? It doesn’t seem like there’s an outcome.

But on the other hand, we talk about it as being so important. What’s the most important? Family. Nobody’s going to say money. Everybody says, family but do we how much do we invest now?

Where do we put our money where our mouth is? Often, we don’t. 

Cory: No. And Tom, in your experience, what are the top three qualities that successful family enterprise leaders possess?

I wonder if it’s different for leaders in family enterprises than other leaders. I think there are some common elements of leadership across the board.

The things that come to my mind, I think this applies to all leaders a clear vision and communicating that clear vision. I think people need a picture painted for them, they need inspiration. They need somebody to say, this is where we’re going to go.

Otherwise, it’s hard for people to self-generate but I think successful enterprises of any sort have somebody who’s got this vision.

I had the vision because I was looking for this thing myself and saying, surely, this must exist and if not, surely, we can create this. Our vision was quite has and it was quite clear from the very beginning because it was a narrow thing.

We want to help a particular group of families integrate and and, you know, develop, figure out their lives and help somebody help them manage it, and and that was that was clear for us.

Second, I think maybe, this has a family enterprise connection too, but I think, it’s all about people, so you have to have strong people skills.

Choosing great people, care, empathy, authenticity, and the complicating factor in family enterprises is the 3 circle model that many people will be familiar with because it’s not just a transaction between an employee and employer.

It’s those people who are family too. So you’ve got to have an extra dose of family ability when you’re leading a family enterprise, whether it’s a business or wealth commonwealth together, and it adds complexity to it and I think, they’ve got to be more skilled.

And then the last one sounds boring, but it’s some kind of focus on execution. You can have all sorts of vision. You can have happy people who are well-understood, but you have to deliver value.

You have to deliver value to the client every day. You have to get the details right. You can’t misspell the client’s name. You’ve got to deliver on what you promised.

It’s part of that reliability, part of the trust equation. I mean, there’s many factors that go into great leaders but those are the ones that I think about all day every day as a leader.

Cory: That’s great and before we conclude our discussion today, I’d like to highlight where our listeners can engage in more of the conversations you’re having or the conversations that you’re listening to.

Tom: Could you provide us with where they can find both of those? The conversations that we’re having now, I’m not sure if you’re talking about our books and podcasts.

Cory: Exactly.

Tom: I mean, booksl, there is a site called wealthofwisdombook.com that highlights the 2 wealth of wisdom books and then just links you to Amazon or whatever book, purchaser, you want to do.

You can if somebody wants to order a lot for a company or a family, you can get them through the publisher, which is Wiley, but I think you have to order more than 40 to make it worthwhile.

I personally just ordered them off Amazon myself. I have to pay for them too and it also that site also lists our podcasts. There are almost 100 podcasts, with the author contributing authors of the various books but that’s also available on Apple and Spotify and various other podcasts and it’s just called the Wealth of Wisdom podcast.

The new thing in our book world is the second edition of Family Wealth Management. That’s the book that was written originally in 2013, but it’s been fully updated for, the current world. That’s available on Amazon as well.

For some reason, it’s the paperback is quite a bit cheaper, so you might want to opt for that because all the same stuff, just no hardcover.

Cory: How about conversations that you’re listening to? Are there certain organizations or thought leaders at this point? 

Tom: If you’re to check out my book. There are all these amazing thought leaders. I mean, I’m part of an organization called the Ultrahigh Net Worth Institute, uhnwinstitute.org.

It’s a think tank, I guess, nominally out of New York City and I’m on the board of directors, full disclosure, and I’m one of the faculty. It has been around for 4 or 5 years but it is in the business.

It’s not for profit but in the business of helping bring clarity for ultra-high-net-worth families and it’s almost all volunteer and it is the sharpest group of people I know in the industry.

We are having leading-edge conversations about how an integrated adviser, can clients sort through family sort through the cloud of fog to figure out what they need.

One of the fellows, Greg Rogers, who’s a part of that talks about families finding advisors and he says there are two jobs. One is to find the right airport and two is to land the plane.

People often families off, because they don’t know any better, and jump in and try to land the plane, which is sending me all your investment information and before they’ve even figured out which airport they want to go to.

Part of what we’re trying to do as an organization is bring tools and clarity to people and so that’s one of the places that I’m meeting, fascinating people and engaging in good conversations, all with the end goal of helping families be better and find better solutions.

Also, there’s tons of stuff, by the way on the Northwood Family Office website; northwoodfamilyoffice.com. We’ve got a I’ll just mention one thing on it.

There are tons but one of them is there’s a self-assessment survey that you fill out and it has a statement and you could say, that’s true for me, no, it’s not true, or I’m not sure, and it’s just a great tool. I find for families to figure out where they’re doing well, where they think they’re doing well, and where they think they’ve got gaps and how those might be addressed.

It’s a great tool and you can choose to do with it whatever you want once you’ve completed it, but it’s a very helpful tool to get people focused on what the real issues are and how their lives could be much better as a family. 

Cory: Fantastic. 

Tom: And I’ll make one last plug for the Ultra High Net Worth Institute. The 10 domains of wealth, for a visual for our listeners.

Cory: We’ll link to everything that you’ve mentioned, but we’ll also put a link there because I think that visualizes a lot of what we’ve talked about today and some of that integrated adviser as well.

Tom: Absolutely. Great call.

Cory: I wanted to make sure that we covered everything. Is there anything else that you’d like to share with our audience that we didn’t get a chance to touch on?

Tom: I can’t imagine. We’ve covered the waterfront. It’s been fantastic. I’ve enjoyed the conversation and appreciate you uncovering and what’s the word, facilitating this type of discussion.

I think it’s really important for families to get away from sort of the traditional approaches and get focused back on what their needs are. 

So, I applaud you for leading and facilitating these types of conversations. I appreciate it.

Cory: Well, thank you, Tom. I appreciate you taking the time today to share your expertise and insights. It’s been valuable to me and I know that your contribution will be valuable to our listeners. This will be a great episode to reference for years to come. I appreciate it.

Tom: Super. Thanks so much for the time.

Cory: Alright. Thank you.

As we wrap up this episode, we invite you to reflect on the invaluable perspectives Tom has shared on the nuances of family office management and the importance of an integrated, holistic approach to serving families of wealth.

Whether you are part of a family enterprise or provide consulting to family enterprises, Tom’s insights underscore the transformative impact that can be achieved when we prioritize the needs and goals of the families we serve.

Throughout our discussion, Tom talked about the critical role of strategic planning and adaptability in ensuring the long-term sustainability of family enterprises. Tom’s insights also explored the Ikigai framework – the intersection of what you’re good at, what you love, what the world needs, and what you can be paid for. By aligning the family’s collective Ikigai which translates as “reason to live”, he underscored the need for families to approach succession planning with a forward-looking mindset, balancing the valuable traditions of the past with the evolving needs and aspirations of the future. Ultimately, our conversation highlighted the immense value of professional expertise and open dialogue in navigating the unique challenges and opportunities inherent in family-owned enterprises, safeguarding their legacy for generations to come.

For those seeking additional guidance on navigating the complexities of family wealth management, Tom McCullough and the team at Northwood Family Office are ready to assist. You might also want to pick up your copy of the Wealth of Wisdom series, and we’ve included the information together with additional resources in the show notes to support you on your journey.

Disclaimer: 

This program was prepared by Cory Gagnon who is a Senior Wealth Advisor with Beacon Family Office at Assante Financial Management Ltd. This not an official program how Assante Financial Management and the statements and opinions expressed during this podcast are not necessarily those how Assante Financial Management. This show is intended for general information only and may not apply to all listeners or investors; please obtain professional financial advice or contact us at [email protected] or visit BeaconFamilyOffice.com to discuss your particular circumstances before acting on the information presented.