Josh Kanter, a lawyer by training, is president of Chicago Financial, the family office he has run for almost 25 years. He also works with other families on governance and family dynamics issues. He talks about how he got into the family office business and what he has learned.
How his family office got started
If I go back 25 years, I would not have said we were operating a family office. I would have said we were three guys with the same last name working together. When I came out of law school, my dad and my brother were running a couple of venture capital funds together. My dad, Burton Kanter, was a world-renowned tax lawyer. I was a corporate and securities lawyer and ended up representing our venture funds, some of the portfolio companies and the family.
In 2000, my dad got cancer, and we knew he was going to pass away. I left my practice to essentially help my family navigate losing our patriarch. When I came in, my brother was running our venture portfolio. We were basically direct venture investors. (My sister is an artist. My mother was still alive but not involved in the business.) We were embroiled in a then 22-year battle with the IRS that ultimately went to the U.S. Supreme Court and took 33 years from start to finish. I spent 18 months trying to learn from my dad everything I needed to learn about this family enterprise.
What he learned
I became the family governance and dynamics expert. I was in charge of the family’s estate planning and insurance planning – all these things that family offices do. Our tax department was filing 750 tax returns a year for our family.
I had taken my dad’s estate planning course in law school, and I had 18 months with him. But when he passed away, what really shocked me was that within minutes of his dying, people started asking me questions that I couldn’t answer – including why we have 750 entities.
We became a family office out of the level of complexity, not necessarily out of the size of the balance sheet. Part of my goal was to simplify the structure and move us to a structure that was more economically efficient. That move was also what allowed me to hang out my shingle and help other families by applying the intersection of my legal career and the knowledge of family dynamics and governance.
How the family office is set up today
The three branches of our family are still completely aligned and work together: me, my brother and my sister. There are seven grandkids in the next generation.
My brother and I have a very collaborative relationship, but we also have complementary but different skill sets. His is investing, and mine is everything else, especially everything legal. He would come to me and say, ‘Here’s this medical device deal.’ I wasn’t going to ask any questions about the science, but I would ask questions about the deal structure. There are a lot of things where we consult with each other but give tremendous deference to each other’s skill sets.
As the years went on, we more formally created an investment committee. My sister is on that, as well as an outsider we brought on.
Looking to the future
My brother’s primary function is really direct venture investing, which we are doing less and less of — I’m the baby of the family, and there’s not a lot of infrastructure built around him to carry on a direct venture investing program if you’re talking about signing up for the next 15-year cycle.
We have been a very transparent family. We have been having family meetings for 30 or 35 years. My kids, from the time they were pretty young, were invited and began to be exposed to it. Our next generation runs from age 18 to 38. They are flung across the country. Those that are launched have their own careers. They are engaged in conversations about the family’s wealth and goals but haven’t expressed any interest in running it.
Part of what we have been engineering over the last decade is the simplification of the family office and bringing in advisors that we can all rely on. We’re moving toward more of a virtual or multi-family office environment because there’s not a family member that’s going to step in.
What really defines a successful family office is that all of the pieces are being coordinated.
I wake up every day thinking, ‘What does the Kanter family need?’ I mean: How do you coordinate all the different kinds of insurance — and how do you do that when you’re thinking about all the trust structures you have in place, or about how much liquidity you have? I don’t think there’s any multi-family office that can do that. When I think of outsourcing to a multi-family office, the thing I’m most concerned about is that I don’t know how to get rid of the last 20% of me.
I’m a big believer in optionality. If all of a sudden one of my kids or someone else says, ‘I’d like a career shift and I’d like to step in and do that,’ that’s great. If a family member decides they want to come in and do that coordination, they may not need specialized training. If the next generation says, ‘Let’s go hire a SFO executive,’ that’s fine.
