Family Office Mistakes That Can Cost Millions

Richard C. Wilson records a module in his mini series on starting a family office after teaching a workshop to ultra-wealthy families.

Richard C. Wilson reviews costly family office mistakes drawn from his clients' experience. He covers weak focus, startup investing, luxury home purchases, deal structures and planning before taking action. He presents the module as part of a series on starting a family office.

In this video: Richard C. Wilson (Host and teacher of the family office module)

What they said

1. Support and specialist advisers. Richard says families can lose focus by spreading time, energy and money without building a platform. He suggests adding proactive specialists, such as a tax planner or a family office quality legal advisor, alongside existing providers.
2. Startup investments. Richard says his firm avoids startup investments and looks for businesses already making money. He describes a strategic investment in a familiar niche, where the family already has assets, as the exception.
3. Luxury home purchases. Richard says buyers may want to move again and may end up owning three to five or seven homes at once over time. He says super luxury homes can fall by 3 to 5, even 10 million dollars in rough economies.
4. Deal structures and negotiation. Richard says families can negotiate custom fee and legal structures, including separate LLC share classes. He calls failing to customize fees and legal terms a multi-million-dollar mistake.
5. Richard on the family office dashboard. Richard says families should define their values, objectives, mission and direct investment buy box before taking action. He also recommends deciding which brands, managers and company types they will trust.

In their words

"We look for things that are already making money, that have learned how to crawl out of the ocean, walk on their own"

"It's really important that you don't start taking actions until you fill out your family office dashboard"

Why it matters if you are building or preserving great wealth

Richard ranks custom deal structure as a bigger mistake than buying a luxury home at the top of the market. In his view, the terms set at entry can outweigh even a dramatic property loss. That puts deal structure ahead of purchase price as a decision point for families considering a joint venture or co-GP role.