Blake Pendleton has been immersed in the family office world for most of his life — and this deep expertise has helped shape his own career path.
As a fifth-generation member of the Pitcairn family, he gained exposure early on to his own single-family office. In the early 1990s, his family also founded the CCC Alliance, a global peer network group that now includes more than 140 families with single-family offices.
After college, he went to work for another single-family office that was launching a venture investing program. “I learned what it’s like to work with a family that’s not your own, and the complexities there,” Pendleton says. “It was a great experience.”
He then began a career in the multifamily office space. “I know what it’s like, being part of a family office. I know a lot of the areas that can keep these families up at night,” says Pendleton. “I draw from my family’s own history — mistakes we’ve made and things we’ve done well — and then draw on the perspective of other families that I know: their stories of what has worked and what hasn’t worked for them.”
As he educates other families on how to work with external service providers to meet their needs, several core lessons come through:
1. Strong governance, family education and succession planning form the backbone of the family office.
“From my experience with our family and the experience that I’ve garnered from other families, the ability to make it past that third generation and set up an enduring, long-term family office is not necessarily going to be driven by investment returns,” says Pendleton, who now works at Pathstone. “It’s going to be driven by the softer stuff: the ability of the family to stay together and be fully functional while also being very organized and business-like. That stems from well-thought-out governance and succession planning around the family office, rather than investment returns being the driving focus. The other critical element is educating the rising generation. First-generation wealth creators often make the mistake of preparing the money for the family, but they don’t prepare the family for the money — and an unprepared generation can rapidly destroy the wealth they inherited.”
Pendleton’s family set up a private trust company — which exists alongside the family office — in 2015 as a way of creating a structure for long-term succession. The trust company administers more than 300 trusts on behalf of the family. Family involvement in the trust company is primarily handled through the three managers, two of whom are family members.
“We keep things very vanilla and lean,” Pendleton says. Family members are more active in the family office, including sitting on the board, which Pendleton does. He previously served on the investment committee. “People are able to lean in as much or as little as they’d like from a participation standpoint.”
Pendleton has learned how important it is for a family office to find its long-term identity and organize around that.
“We used to offer more tailored investment approaches for every family member — then we realized that wasn’t scalable,” Pendleton says. “We really optimized for our goals and priorities, which were more around governance and succession.”
When the family is faced with an event such as an unexpected death of someone in a key operating position, a strong governance and succession plan can help manage both the family dynamics and the complexity of the family office operation.
“When you have unforeseen events that happen within the family that could cause the family to fall apart, having that governance and succession in place is so important,” Pendleton says. “It can make or break the family for the long term.”
2. A network of like-minded families is invaluable.
Exposure to the CCC Alliance was invaluable for Pendleton.
“I had the advantage of growing up inside my family office as a youngster — taking summer internships within my family office, building knowledge around what a giant operation it is to operate a single-family office, and the complexities of wealth — and then combining that with the ability to meet other families and network,” Pendleton says. “Although these families made their money in different areas, they share a lot of the same pain points. Being able to interact at an early age with other families that deal with the headaches and the complexities of wealth was extremely helpful.”
3. Family offices should outsource non-core functions.
Interacting with other families in the CCC Alliance has given Pendleton a broader perspective on how family offices operate, and how that has changed over time.
“In the early days of the CCC organization, we had a handful family offices that were outliers. These were large, billion-dollar families that significantly outsourced to providers,” Pendleton says. “In those days, most large family offices would just build everything in-house.”
Today, though, the picture looks much different.
“Now, with the offerings that are available, it makes much more sense to focus on core competencies and outsourcing other facets of the family office,” Pendleton says.
Tasks like reporting, concierge services, risk management and tax work, for example, can often be done very efficiently by outside providers.
“Finding and retaining the talent that wants to work your family office — built around a family that has different generational needs — is hard,” Pendleton says. “So for the most part, it doesn’t make sense for a family to build everything from scratch themselves.”
Pendleton’s own family has taken this advice to heart. Rather than devoting a lot of time to investing, the family office outsources most of the investment function and focuses on “areas that drive more long-term value, like governance, family education and succession planning and well-thought-out structures,” Pendleton says.
A key lesson is that most family offices don’t need a huge staff to be successful.
“Life is short, and you might as well spend your time focused on the things that drive the most value and are the most meaningful to you and your family,” Pendleton says.