After working for a third-generation family office in New York for more than 20 years, Wendy Craft became CEO of the Elle Family Office in Atlanta, which serves a first-generation family. She has been working to establish a structure for the office and engaging the teenage NextGen family members in family education and long-term planning. She talks about what she has learned:
Why did you join the Elle Family Office?
Usually with first-generation families, there comes a point where the wealth has increased and they don’t have the structure they need. At some point, you need a good structure put in. They brought me in to do that, and to educate their NextGens.
For the past year, I’ve been knee-deep in restructuring what they had into something more modern, from trusts to the technology portal.
How is the family office set up, and what is your role?
Like most family offices, we outsource. We have a full-time staff of about seven – a couple of them are bifurcated into the operating company, as is typical for a first-generation family office. I’m the general practitioner — I’m a tax attorney, but I work with two outside law firms. We have a CFO, but also have outside accountants.
Most of the family office’s investments are still in real estate, though that is changing as we put assets into trusts.
What steps are you taking to create a governance structure for the family office?
I’m doing all the trusts now with a trust attorney and the family – not just trusts for the children, but dynastic trusts, asset protection and all the things you need in a modern family office. Once that is done, we’re going to move on to governance.
I’m going to set up the governance structure, but I’m not going to pull the trigger on it for a couple of years, because they don’t need it yet. Once we are starting to upload the second generation, that’s where they are going to need to focus on ensuring the long-term sustainability of their legacy and family wealth.
For now, I’m running the family office and the parents are the principals, and they’re also running the business. That’s it as far as top-tier leadership. But if you have three kids, maybe someday they all want to run the family office. We need to say, ‘Here’s how we can all participate.’ We’re trying to address the critical aspects of governance now, while giving them a preview of what’s coming down the road.
We are starting with a mission statement and constitution. Along with it, I’ll start discussing the structure for the family office council: what that’s going to look like, who can be on it and whether we will have regular family retreats as the NextGens start their own families and begin moving away. We don’t need an investment committee at this point, but the next generation will.
What are the goals for the NextGen education you are working on?
The family’s wonderful daughters are teenagers. I will retire – hopefully when the girls are old enough and properly educated to seamlessly transition that shift whether or not they bring in an outside CEO. I have told them that it’s great to have a trust, but you need to understand it: If something happens with your institutional trustee that you don’t like, you have a say in that.
I want to turn out NextGens that are smarter than I am, better than I am and can carry it forward after I retire.
How have you integrated your family governance work and family education?
I asked the parents to let me work on the mission statement with the NextGens. Although it’s the mission statement of the family, this is the statement their generation is going to live by. It was a fabulous experience hearing where they were coming from and what is important to them now. I told them to assume that all of them will want to stay here and have a hand in managing the family. Then, as things change, we need to be able to pivot.
I’m really getting them to understand stewardship of wealth as opposed to spending wealth. This is one of the things we’re concerned about at the family office: losing everything in the third generation because we didn’t establish these ideas.
I started this conversation with them and they got into it — they’re sending articles to our group chat on different situations and how families have handled them. It feels like a group effort in a way that a lot of family office executives aren’t so blessed to have. Even though they’re already teenagers, they’re all in. It’s a pleasure.
What resources have you found for educating teenagers?
We have had a generational change in the way we consume information. Nobody wants an hour-long lecture on economic principles, unless you’re getting your MBA. If you’re 15, you don’t want that.
When I was trying to teach them, I realized they were bored. With real young kids, people often use charitable contributions to teach them about money. Many of the other resources I knew were geared to people in their early 20s. The whole 12- to 18-year-old group, they’ve just been left behind, which is a mistake because their minds are so good at grasping stuff.
These kids are going to school, they have hobbies, clubs — they have all this stuff going on. If you download a textbook on private equity, they’re just going to walk away. The information needs to be bite-sized and you need to follow it up with real-world examples that they can consume.
When I realized that talking at them was not going to be how this was going to go, I spent nine months searching for what I could use for that age group to get their buy in. I looked online and found some great resources, such as MyWallSt and Napkin Finance. Hands down, that worked, but other things didn’t.
How are you working with the family on using their family office to create a legacy?
It’s hard to teach stewardship if you’re not teaching the family values and the legacy.
One of the principals made a video 10 years ago about their life and just did a second one. We are going to get the matriarch to do the same thing. You can write as much as you want about ‘These are values and what we think is important,’ but when you see the matriarch and patriarch saying it, it’s easier to incorporate.
That’s such an important tool, especially as you start going down the generations. I have told the girls that they should do them as well — do one at 25, for example, and another at 40, looking at where they are and how they can stay together as a family.
