Artificially Intelligent with Sam Maule and Maia Bittner

The Modern Family Office: Digital Tools and Historical Lessons

• Sam Maule, Maia Bittner, Rachel Morrissey

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What if the secret to preserving family wealth across generations lies hidden in the history books? We venture back to the roots of family offices, drawing lessons from the legendary Morgans and Rockerfellers.  Hosts Sam Maule and Maia Bittner share compelling personal stories and historical insights, setting the stage for a deep dive into the evolution of family offices. Our special guest, Simran Kang, founder of MyFO-Tech and former PwC strategist, provides a rich perspective on how family offices maintain intergenerational wealth amidst alarming attrition rates. 

Ever wondered how the ultra-wealthy manage their vast fortunes? Join us as we explore the sophisticated ecosystem of family offices in the U.S., which oversee billions in assets. This chapter uncovers the complexities of targeting affluent individuals with over a million dollars in assets looking for diverse investment options.  Simran shares her expertise on the critical role of professional management in family offices and the importance of technological tools for seamless operation. We also navigate the murky waters of regulatory challenges and the risks that come with poor management practices.

Imagine replacing your chaotic Excel sheets and notebooks with advanced digital tools for wealth management. This episode reveals the transformative power of specialized software in organizing family and business documents. We discuss the integration of AI to simplify legal complexities and the emotional resistance people have towards abandoning traditional methods. Lastly, we touch on the impactful role of philanthropy and collective giving in managing family wealth. Tune in for invaluable insights and practical advice that bridge the gap between old-school financial management and modern technological solutions.

Hosts: Sam Maule & Maia Bittner


Sam Maule:

Hey everybody, welcome to another episode of Artificially Intelligent brought to you by Money 2020. I am one of your hosts, Sam Maule.

Maia Bittner:

And I am your other co-host, Maia Bittner. Welcome back.

Sam Maule:

And this episode is going to be fantastic because one my dogs are just wandering around like crazy so you can hear the pitter patter of two adorable paws that are going on. And then Maia is. You know Maia's being Maia. Oh yeah, I showed up wearing a tiny baby.

Maia Bittner:

I also have roofers here. I hope you don't hear them in the background. I'm finally getting my roof fixed. It's been broken since we bought this house over three years ago and I've been busy, so I am grateful that they're here, but I hope that we can make the recording sound good.

Sam Maule:

It's amazing how life just goes on right. Sun comes up every day, no matter what we do. So there you go, Maia. Did you know that I actually hold two degrees and one of my degrees is in history? Would you have ever guessed?

Maia Bittner:

that I did not know.

Sam Maule:

Yeah, my intent was when I used to work for Northern Trust back in the nineties and I had an ESOP everybody that Sam Maule is going to retire very rich in the thirties, when he was in his thirties and he was going to be a history teacher and that panned out so well. Let me just tell you great planning, but I love history. I love studying history.

Maia Bittner:

You're not surprised by that. I especially love history.

Sam Maule:

Just that's my jam.

Maia Bittner:

When you got facts, you know and how all the pieces of things connect to each other. I'm not surprised you hear that.

Sam Maule:

I love that part. So when we were prepping for today's show, because I love that part, so when we were prepping for today's show, because we're going to be talking about family offices, I did a little bit of history on this and our guest is probably going to correct me on this, but this is the Sam Hall test. See how well I did that. The concept of the family office actually dates back to JP Morgan and his family in 1838. So when the Industrial Revolution and the titans of industry popped up in the United States, this concept of managing the family assets JP Morgan yet another thing we can credit that family with. And then the Rockefellers, around 1882, are widely credited with establishing the first full service single family office in the US, Because at the time his fortune stood at $1.4 billion, which seems not that much. Oh, it's the equivalent of $255 billion today. There you go. Elon Musk was like that's nothing.

Maia Bittner:

There you go. We know the Morgan Library is one of my favorite places in New York. Have you been to the Morgan Library?

Sam Maule:

I have. I'm a library fanatic, me too. I love books, me too. There's nothing better than a great library. If you really want to understand the importance of wealth management, go to the Biltmore Estate, because it's amazing how that family went from that type of wealth and built the Biltmore Estate in Asheville to I think it was two generations later, more or less, being broke. So, hey, everybody, a family office concept is very important, and hence our guest today, which I have known, Simran, for ages. Simran Kang, how are you?

Simran Kang:

How are you doing Great, yeah, nice to see you again.

Sam Maule:

It is great to see you. Do you mind telling us a little bit about your company and why this concept of a family office is so important?

Simran Kang:

Absolutely Well. First of all, I want to tell you you're correct in your history facts. So those are the two families that are often credited with founding the concept of a family office, if you don't think about royal families and lineages and how they've done it. So yeah, you are a history buff, I'm also a history buff, so yeah. So my company is called MyFO, my Family Office.

Simran Kang:

The concept came to be a few years ago. When I first met Sam, I was still playing around with the idea and it was because I was working with a lot of family offices and advising them on how they actually protected their wealth. You gave the example of the Baltimore estate. Often families lose their wealth by the third generation. So the second generation usually sees a 70% attrition and by the third generation it's a 90% attrition. So these families that you see that maintain intergenerational wealth. There's actually a lot of work that goes into maintaining that and a lot of planning, and as I was learning that, it seemed like something I should actually help the masses learn and it shouldn't just be gatekept to a certain number of families, and that was kind of the concept behind it, and I thought the best way to do that was actually to create technology around it because it's scalable and accessible.

Sam Maule:

You actually spent, if I remember right, going back in how old does Sam all remember history? You actually have a pretty strong background with PwC, right? Didn't you spend a significant amount of time with them?

Simran Kang:

I did. I was there for almost a decade and the last kind of five years of my career there I spent working with their family office clients and generally you'll find accountants end up being trusted advisors because they're doing estate planning, due diligence on deals and so I ended up having this unobstructed view into the inner workings of family offices because you are somebody that they trust and they come to for decision making.

Sam Maule:

So a quick question on my part. I was shocked. When I did a little bit of research. There's between 6,000 and 7,000 family offices in the US. I didn't realize there were that many. That's a great team, by the way.

Simran Kang:

Oh yeah, and that's actually probably an underestimation of how much wealth there actually is, because it's really hard to track it, because it's in holding companies, trusts, multiple ownerships and, if you think about it, that threshold for that 6,000 is about 500 million to be categorized as a family office. And so you think about the TAM. Underneath that of all the millionaires there are. Who's actually servicing them and how are they protecting their wealth and creating intergenerational wealth, especially when you look at the wealth paradigm in today's world, people look different. They have different backgrounds. They're not, you know. They're often building their wealth and this is their first generation having wealth and they're not coming from those traditional family offices where you maybe have an infrastructure in place to protect your money.

Maia Bittner:

That's what I was going to ask is like, who are you really targeting Right? Is it the like software for existing family offices that have been running their business in a different way, or is it sort of expanding the market to include people who might not be traditionally served by a family office? And and yeah, I don't know if you think about personas or anything like that, but is there who is your like ideal customer profile? What kind of assets do they have? Help us kind of calibrate.

Simran Kang:

Yeah, so our ideal customer persona is really someone that's accumulated wealth, like over a million dollars, and is looking for ways to invest it in alternative ways. So they're not traditionally looking for just public equities and private equities, so they have more complexity around their wealth, and so that's where we're trying to help people. Obviously, going to market directly to those consumers is really difficult, so when we do sell directly to single family offices because they don't really have the digital tools to actually run a sophisticated family office and so we're often just competing with Excel, dropbox, so basic banking is what you're saying yeah, yeah, yeah, Banking, banking infrastructure is Excel, Um and so, uh, so that's what we're competing with on that side, and then for us to actually um reach our thesis and our end goal, which is to actually make this accessible.

Simran Kang:

We we licensed the product to advisors and large institutions so that they can actually use it for a wider breadth of their customer base.

Sam Maule:

You know, one statistic that stood out to me and I was very surprised by this that only around 10% of family office CEOs in the US are actually family members. I was surprised by this this is going. I bet the Rockefellers and JP Morgan would have hated that, but that was surprising.

Simran Kang:

You'd be surprised how that's actually a really good statistic, because you really want to run your family office like a corporation. So it doesn't necessarily mean that somebody within the family is the right person to run the family office. And so you know children grow up. You have different interests. You might not want to be a CIO and look at private equity deals and venture deals and benchmark your investments in an Excel spreadsheet. You probably have better aspirations, like maybe you're a history buff and you want to get your PhD in history, and so there's actually like a lot of work that you know different professors and universities do around this, and John Davis came up with the three circle model.

Simran Kang:

So in every family office you're either an owner, manager or a family member, right? And so where do you sit in that? Those three circles and that Venn diagram is really important because you could be a manager, but that doesn't necessarily mean you have to be a family member and you can be an owner that is maybe a family member, or even maybe management earns some equity, right. And so when you think about management, you're really thinking of it as a stakeholder, as a family member. If you are an owner, which is, am I the best person to run this, or if I had like. You have to think of it as, like I have a lot of stake and share in this business and so if I was a major stakeholder in, you know, tesla, does that necessarily mean I need to be the CEO? Yeah, maybe you would be a better CEO than Elon Musk, but that might not be the right answer. So you want to hire the best person to actually operate your family office and that can actually lead to longevity and building governance and strategies around that.

Sam Maule:

So either Maia or I are going to ask this question and we'll get it by his face. I've got to ask the regulatory oversight because I don't know. So where is this? What does this fall under? Because, again, if I'm not mistaken, these aren't like massive organizations. This is very small right, Maybe under 10 people or even five.

Simran Kang:

So what's the? Oversight for this in a regulatory side there isn't much right Because it's private.

Simran Kang:

It's private wealth right, and that's where the risk of this attrition comes into play, right. If you don't know how to hire a manager or you are the manager and you don't actually know how to vet investments and do due diligence, you can lose that wealth very quickly, like you can't outperform bad planning right, and so that's a huge risk factor for family offices. And when regulatory compliance becomes an issue is when you are actually co-investing governance around family offices so that you can have decision making matrices to protect your well.

Maia Bittner:

Well, no, I actually like. I mean, I also think it's like I'm just thinking about from a regulatory perspective. Mostly, regulators are like in all of our financial kind of like investment regulation is about protecting like mom and pop or like dentists or like people on the street right, and it's like these people have a lot of money. Um, I feel like our regulation is almost intentionally not that, not that worried. It's like look, you've got money to lose.

Maia Bittner:

Um, we assume that you're sophisticated. This is what right, like all of our accredited investor qualifications and even the qualified purchasers. It's sort of like we're going to let you do what you want with your money and you know if it loses them. Or the governance perspective that's okay, like that's not the top priority for regulators.

Simran Kang:

Absolutely Like. We see that across the board, financial education within family offices is a huge issue and so even when we built our platform, we built it investment agnostic, so we're like we don't want to sell product, I don't want to broker anything. I really want people to come on here and learn how to manage a family office and learn best practices, like the amount of time and energy that family offices have to put in to actually do financial education within their family. It's quite expensive. They spend a lot of money trying to do that and not every family member is going to go get their MBA. That's an unrealistic expectation that they're all going to become finance experts, right?

Maia Bittner:

And so how that makes so much sense. Yeah, finance experts, right. And so how that makes so much sense, Right. And how do you scale that education and who's sort of leading the charge like? Who's a champion within the family for that?

Maia Bittner:

I just finished listening to the Acquired podcast. I don't know if you guys listen to it, it's a favorite of mine. I love Acquired. And they did a deep dive onto the company Hermes. And Hermes is a family-owned company. Like all, the leaders of Hermes have generally been part of the family and they very nearly lost the company due to a sophisticated hostile takeover attempt from LVMH. And it's because they just approached individual members of the family, offered to buy their shares, their stock, and nobody really realized what was going on. There was no right, that governance, that central planning piece. It was just unsophisticated individual family members selling their stock for a great price to a nice guy. And they very nearly lost total control of the company because of it and had to do this heroic last-ditch effort to recover it. So interesting story First time I had heard of it Illustrates the problems that you're talking about and I also recommend, yeah, listening to the advice.

Sam Maule:

You know, Simran, one of the things I remember when you first showed me the product and I, you know we were laughing about Excel, right, but come on, you must run on Excel. One of the things you showed me that made me laugh was the vault component. You have Just basic documentation and the issue you run into when you're running something like this. Can you talk about that component a little bit and why you built the vault app?

Simran Kang:

Well, I actually think every family needs that no-transcript. Somebody has thought of this, of linking the two together. Because I was manually doing it. I had spreadsheets for families and then every time a document was missing they would call me and they're like do you know what our last trust distribution policy was? Where's the last edit of the letter of wishes? Or where's this? And even with my own family I was like I have no idea who my dad's lawyer is. If anything happened to him I would be scrambling.

Sam Maule:

It's in that safe in the back of the closet, that little Costco safe you bought. Yeah, that no one remembers where the key is, so you just leave it unlocked.

Simran Kang:

It's there, yeah, it's in there and it's like five years outdated. If you're lucky, right. And if you think about that, that's planning that families think maybe own. Like we talk about mom and pop businesses that own a business that could be the backbone of a community, right, and then that business probably doesn't have a proper shareholder agreement, doesn't have succession planning and these are things people don't know.

Simran Kang:

Like I worked with a family at one and they had a hundred million dollars in real estate assets and we were doing some governance around it and I said can we look at your shareholder agreement of the holding company that holds all the real estate? And they said why do we need a shareholder agreement? And so you and those are like basic things and having. I remember when I showed Sam the vault, it was just like we just had pre-populated folders of the documents you should have, based on the list of your assets and your estate. And people were like, oh my God, this is.

Simran Kang:

I had a family office that, before I built the product, paid me just for the list of the folders they should have. Because they were like, yeah, that makes sense to me, yeah, we want a completeness check. And then now, like with AI coming in play, we've incorporated that into the platform. So I'm like get AI to review that shareholder agreement and explain it to you in layman's terms. Like don't spend $50,000 with a lawyer trying to understand something you're too scared to ask about, right?

Sam Maule:

The old auditor in me. Yeah, I'm part of this, Maia. I was going to tell you, did I have?

Simran Kang:

to tell you what my first banking job was Maia.

Sam Maule:

I was a SAS 70 auditor.

Maia Bittner:

No.

Sam Maule:

We can all laugh now, because if anybody knows me, and my ADD.

Sam Maule:

You're like you have literally no attention span, but my first job was as a SAS 70 auditor for Northern Trust. So that list and that audit component kicks in my mind and it almost seems like a product of let me give you a my office score, let me give you a family office score, right To be able to go in and say you know how protected are you actually for this? I mean, it's like I said the first time you showed me that I was like, oh wow, never thought of that.

Simran Kang:

We have a lot in common. I'm a recovering auditor too.

Sam Maule:

I apologize, I started an audit at PwC.

Simran Kang:

Yeah, I'm so sorry.

Maia Bittner:

Right Everything you know. The status quo is just so shockingly manual. I'm part of this WhatsApp group of people who have over $5 million in liquid assets or something like that and they chatted recently like how do you track your investments where they are, your net worth, stuff like that and one or two people use software and everyone else I mean beyond Excel, everyone else was in Excel. Everyone was like this is what works for me. Once a month, I log into all of my accounts and pull the numbers and update the things and go from there. Some people had hired personal assistants or things to do the once a month pull, but it was surprisingly manual given the tools available.

Sam Maule:

I'm not shocked whatsoever from that.

Maia Bittner:

When I was with 11FS when I worked with 11FS, when I was with 11FS.

Sam Maule:

We worked with FNBO, so out of Omaha Massive Bank, but we were taking a look at building out a digital banking product for them. So we did jobs to be done and did a ton of interviews across the country with people and it's rather funny how we fell into this. But we were basically asking people how do they save toward goals? And there was the number one and number two answer. I didn't care where you lived in the US, your age, your wealth status, where you're at on the scale. It was either a notebook or Microsoft Excel, and they were all proud of it and would show us how they were tracking. So I am not shocked whatsoever.

Maia Bittner:

Well, hold on a second. I'm interested in that. So proud. I think the emotional component is really interesting here. I don't know if you saw just today, I believe but recent Patrick no, not Patrick, patio 11. What is his real name? I don't know. Patrick, no, not Patrick Patio11, what is his real name? I don't know. Patio11, on Twitter, posted an article going into credit card rewards and what he said is that anybody who has the Excel skills to gamify credit card rewards, optimize the signup bonuses, figure all that stuff out. He's like they could be making three times as much money from the finance industry by doing something else. Right, like, if they have those Excel skills, it's such a low leverage point to put them towards optimizing credit card bonuses. Rachel, our producer, thank you, patrick McKenzie. That's his real name. I think of him as Patio11. I bet he answers to that. I don't think he's offended Great shout out.

Maia Bittner:

So right.

Maia Bittner:

It's like if you've got those Excel skills and it's like you should put that, you can make more money putting them to something else.

Maia Bittner:

And when I saw that I thought he's so right, like it is such a low leverage thing to put your time and attention towards. But I don't think it's just about the money. I think for a lot of people it is a form of entertainment and recreation and for a lot of people they're kind of proud of it. You know there's something interesting there and I wonder if you know we're sort of it's kind of a naive, techno-optimist viewpoint to be like we should automate all this stuff with special purpose software, when it's like you know the people might be, they're proud of it and they might be interested in it. And I do think if you spend a lot of time using like either pen and paper, even Excel, like entering things and reviewing things, you sort of train yourself to get this like embodied cognition and understand things on a really deep level that you can sometimes lose if software automates it all or does it all for you.

Maia Bittner:

So it depends, not everyone is interested, as right Simran talked about you know they're forcing financial education down people's throats and they don't get you know. So it's a mix, but for some people I don't want to like encroach on one of their favorite I I I'm with you on excel.

Simran Kang:

I used to I like, even when I was an auditor, I'd have these like goodwill analytics that we would do, and I was like I wish there was a museum. It's like a work of art. I want to print it and it is people to admire my excel.

Simran Kang:

But it's it, is it? It's actually so. It's like the number of times we have a family member, spend half of our like discovery meeting with them, walking us through their Excel spreadsheet. It's like it's like a limb right that they've created. But what ends up happening? And and so what was funny is I always used Excel.

Simran Kang:

My co-founder, alice, had a notebook. She was a lawyer, so she didn't use Excel, so she kept a notebook of her investment. So every so often she'd be reconciling it. But what you find is in those family offices.

Simran Kang:

And the reason you have this problem with maintaining intergenerational wealth is you, not everyone is great at using Excel, right? And then, even if you are good at using Excel, gathering that data when you don't have data automation is really cumbersome. It's prone to errors, and oftentimes, if you're putting an Excel spreadsheet together every couple months, that information is a few months outdated, right? So you're not making real-time decisions. And so I do think everyone should be proficient in Excel, and they should be proficient in Excel and they should be proficient in finance, but the reality is they're just not, and so what ends up happening is the ones that are proficient in those things move so much further ahead and it leaves behind people that don't have that skillset, and those are the people we want to be able to use a tool like ours and actually be able to catch up and spend very little time doing that.

Sam Maule:

Yeah, another component of this I was just thinking about. I was thinking about Mackenzie Scott, so Jeff Bezos, ex-wife who's given away the philanthropy side of wealth, which is a big part of you know, folks with a lot of money and what all goes into tracking that right and that component of it. That has to be a significant part too, doesn't?

Simran Kang:

it. Yeah, we actually have a whole component of managing foundations.

Sam Maule:

Thank God I was going out on a limb everybody. That was me just tossing one over the fence hoping that was you.

Simran Kang:

No, because like some families, like they will have, like some of the like iconic American families we talk about, those are families I've worked with and they are families that have put all their money into a foundation, or most of it in a foundation, and then the family is actually just stewarding a foundation.

Simran Kang:

So when they think about their wealth, it's like they feel the sense of ownership over the foundation, and foundations have specific rules and mandates of how often are you spending that money, how much liquidity do you have?

Simran Kang:

You're still investing it before you're deploying it and giving it away, so you're growing it and so there's a whole method to doing that. And even in smaller families, what you'll find is and these were some of the families we were interviewing as we were building the product is, you know, maybe the family collectively, as a few siblings, they're worth like 10, 15 million and each of them is writing two $300 checks to different foundations and doing donations. But if you aggregate it all, you're like you're actually donating 10 or $20,000 a year. Maybe if you did, you could give one big give that can have a larger impact. So, thinking about your wealth and the power that it has and the impacts that it can make. It's not just about growing it and being richer, it's also about giving it away, and so the definition of wealth is different for everybody, and how they want to manage it is different for each person too.

Sam Maule:

I just want to hear the baby make noise again, because I just made my day when the baby could, so I'm being, I'm being quiet, my, so the baby will say something you want the baby again.

Maia Bittner:

We definitely got to work that into the podcast. She's, she's sleeping, oh, but she's oh grunts and makes those funny newborn sleeping noises all the time.

Sam Maule:

I absolutely love that. Well, Simran, thank you. It's amazing, when we've had a history lesson, that we actually got right. We've actually identified a massive market which, again, I think most of our listeners had no clue. There's 6,000 to 7, thousand family offices in the US, so where can the listeners learn more about one? Reach out to you, but then also learn about the company. What's the best place?

Simran Kang:

Our website, myfotech, is the best place to go. You can also find us on LinkedIn. Our entire team is pretty active on there. Our entire team is pretty active on there. And then if you do have cohorts, like Maia, the one that you're in we have like a Michael Light version for customers like that. So if they want to beta test it or use it, happy to share that with them. Yeah, we're really excited to just give people access to these tools.

Sam Maule:

Fantastic. All right, hey, mackenzie Scott, there you go. We'll make sure we'll pass along the link to you. Everybody thanks for listening this week. As always, please go out and give us a review. It really helps draw in listeners. You want to reach out to me with ideas for a show? Linkedin always is great, or Twitter, Maia, how about you?

Maia Bittner:

Hey, twitter is the best place to find me. I'm at Maia B If you ever DM me about family offices, tech opportunities or what you are most proud of having built in Excel.

Sam Maule:

Amen, Thank you everybody. Thanks for listening.