Connect Group: Guiding Family Wealth: Office Management and Succession

This article first appeared in ConnectGroup Insights on 22nd July 2024.

As the founder of Acorn Capital Advisers, Sally leverages her extensive experience in investment, banking, and management to provide strategic advice.

Acorn Capital Advisers offers independent advisory services in investment, family office, and philanthropy, acting as an outsourced Private Office for select families. Sally’s career includes roles as CEO of Kleinwort Benson, Lombard Odier (UK) Ltd, and Schroders Private Banking. She serves as Chair of Point72 UK Ltd and Vice-Chair of the Royal Academy Trust. In this interview, Sally shares her journey, discusses the challenges and opportunities facing family offices, and offers her expert advice on reputation management, philanthropy, and supporting female professionals in finance.

Q: With your experience in investment, banking, and management, what inspired you to find Acorn Capital Advisers, and how has your approach evolved since its inception?

I reached a stage in my career where I wanted a direct impact on clients. As the CEO of three private banks during various banking crises, my time was mainly spent on restructuring and refocusing corporate strategy. I wanted my next step to involve direct client work, making a difference, having fun, and staying engaged and challenged. Many friends, former clients, and family offices sought my advice on managing their financial affairs. This demand for independent advice from experienced practitioners led to the establishment of Acorn Capital Advisers. Over time, Acorn has evolved to include acting as an outsourced family office for select families, advising on vision, strategy, investments, philanthropy, and governance, all while remaining unconflicted by not managing any money in-house.

Q: What are the key challenges family offices face when trying to balance transformation with maintaining traditional values?

Family offices face challenges in attracting and retaining talent, managing rising costs, and handling succession issues, particularly with AI and the climate crisis being concerns for the next generation. Competing with private equity and asset managers for talent is tough, as they offer generous pay packages. Many family offices are rethinking their business model, becoming profit centres by establishing Family Investment Holding Companies and accepting outside capital. Succession challenges arise when the current principal, the wealth creator, is reluctant to hand over investment decision-making. Strengthening governance, professionalizing policies, and establishing independent investment committees are essential steps. Preparing the next generation with educational programs and appointing independent NEDs can support a smooth transition.

Q: How important is reputation management for family offices, and what strategies do you recommend for preserving and enhancing a family's reputation today?

In today's world, a good reputation remains invaluable. It offers protection in times of crisis, a competitive edge, and family unity. Treating the family’s reputation like a business asset is crucial. A strong reputation can attract the best investment deals and act as a shield in challenging times. Families should approach their reputation as a brand exercise, defining core attributes and ensuring a consistent message. Maintaining a robust digital presence is vital, as most interactions with a family office start online. Consistent investment in their narrative and vigilance against AI-generated falsehoods are necessary.

Q: With your involvement in philanthropic advisory services, how can family offices effectively integrate philanthropy into their overall strategy, and what trends are emerging in this space?

Family offices can integrate philanthropy into their strategy by developing a strategic giving plan aligned with the family's values and goals, involving family members of all ages in philanthropic activities, and integrating philanthropy within the investment strategy. We see a move towards fully integrated impact investments across all asset classes. Another trend is using first-loss or catalytic capital to de-risk early-stage investments, inspiring others to provide lower-risk follow-on capital.

Q: What are the most promising investment opportunities for family offices in 2024, and how should they position themselves to take advantage of them?

Increasing exposure to private credit funds and direct investments in private equity general partnerships are key opportunities. Private credit funds offer higher yields, lower correlation to public markets, and resilience compared to public debt markets. Many families plan to increase their exposure to private equity, focusing on building portfolios of direct holdings via minority co-investments with PE funds and investing directly into GPs. Leveraging their long-term investment horizon, family offices can bargain hunt and grow private companies.

Q: As a leading figure in the financial industry, what advice would you give to women looking to advance their careers, and how can the industry better support female professionals?

My advice to women is to find their niche, develop their skills and knowledge, build their network with a mindset of helping others, be confident, and seek mentors. The industry can support female professionals by promoting a culture of diversity, equity, and inclusion, offering mentorship programs, and ensuring equal opportunities for career advancement.

Q: Can you elaborate on the benefits of outsourcing family office functions for ultra-high-net-worth families, and how Acorn Capital Advisers supports families in this capacity?

Outsourcing family office functions allows families to manage complexities efficiently without the cost and operational risk of a single-family office. Acorn supports families by helping them set up or transition family offices, designing investment strategies, establishing governance and communication protocols, and creating bespoke philanthropic strategies. For those outsourcing entirely, we offer oversight of wealth strategy, investment management, legal and tax planning, and administrative support.

Q: With your extensive experience in various high-level roles, what do you foresee as the biggest challenges and opportunities for family offices in the next five years, and how can they prepare?

The biggest challenges are managing generational transfer and delivering investment returns to grow family wealth. Opportunities lie in leveraging the next generation's ethical awareness and co-investing discreetly. Family offices should prepare by hiring investment talent focused on returns, developing sector-specific expertise, and leveraging technology for investment decisions. Educating and mentoring the next generation and establishing dedicated next-gen portfolios can also ensure a smooth transition.