Robert Raich is president and chief investment officer of Abacus and Associates, a multigenerational family office that serves generations four, five and six of a large family that sold their business interests in 1901. He talks about leading the family office through generational and technological transitions:
How has the family office evolved since 1901?
The family office itself has been the family enterprise through almost all of the 20th century. While we are largely a wealth preservation office now, even after they sold the family business, it was a wealth generation enterprise for decades.
Today, we have 36 households and 75 family members, including spouses. It’s more of a family cooperative. None of them individually could have a family office because of the cost and scale. They’re sharing the cost and the expertise with their 75 family members. Our G3 chairman, who died recently, was at the helm of the family for 60 years.
Now, with this many family members, the wealth numerator is large and has grown, but the denominator — the family members — has grown even faster. Per capita, they’re not nearly as wealthy as their ancestors, but it’s still a significant amount of wealth on a combined basis.
What services do you provide for family members?
We have a private trust company, and that’s the fiduciary for the trusts. A lot of money is still either involuntarily or voluntarily held in trust. We have a family foundation and a philanthropy director.
We do tax compliance internally, which is a bit controversial in the family office world, but we have a great internal tax team that utilizes experts when needed. There’s a great example of the cooperative – they are paying a lot less than they would have for external providers and receiving better, more personal service.
Then, we do the investment allocation: We have an investment team in-house that is mostly allocating to the outside managers and managing some internal positions.
Personal financial advisory is the other really key function: buying a house, getting married, having a divorce, career advice. We also help family members with their personal budgets, which is different than the fiduciary function: It’s about how much spending you should be asking the trust company to allow, and how you should be allocating your resources to meet your goals.
I think a strong part of that cooperative is having professionals who know you. I have been here 25 years. If I’m speaking with a 35-year-old, I’ve known them since they were 10 years old. If I’m speaking with a recent college grad, I remember when they were born. Most of our team have a long tenure.
Lastly, we are the family memory. A lot of these trusts are so long-lived that they were typed on parchment paper. You have the original land acquisition papers from when they built their homes. You have historical data on the trusts that they’re still beneficiary of.
What transitions has the family office been through recently?
One was moving to a new office. We were in the same office for 40 years, and that office was built to be a receiver of paper files. Moving meant we had to be really serious about dealing with the paper: It had to be digitized and sent to offsite storage, or digitized and shredded.
We also went through a family governance succession. The last member of G3 was in control, from a governance standpoint, until roughly 2020. We planned the succession of family members for years. Once that succession was complete, we re-created the private trust company to be a more democratic, more generational, lasting structure. Part of that was having more family members participate in the governance structure. And key to that was our ability to access information and educate them about the history.
How has your technology changed with these transitions?
We’ve had challenges with having the right information accessible at the right time — we have a lot, because we have been around for more than 100 years and have so many individuals. I think we’ve done a pretty good job historically, but over time, small errors can grow into big errors. Deviations in whatever information hierarchy you’re using can really become unusable over time.
Implementing iPaladin, a cloud-based family office operating system, has been a big initiative for us.
We were pulling up important spreadsheets that someone put together in Lotus 123, a discontinued spreadsheet program, and they were no longer accessible. Or, we may have had a very strict system of where we put things, but someone inadvertently moved a document from one folder to another, it goes unnoticed for years, because no one looked for that document, but then you try to find it, and you can’t.
Additionally, moving from paper to paperless causes its own issues. It’s one thing to digitize a document, but then where do you put it? And how do you find it? With a paper file, you could flip through and find what you’re looking for, but with a digital file, if you didn’t tag it properly 20 years ago, it’s hard to find now. If I’m looking at a family member’s trust because of a financial planning discussion, and my trust officer is looking at it for a distribution decision, and the tax department needs it to prepare the tax return, how do I ensure we are all using the same version?
The structure of iPaladin was really important for me because of this reason. Other products that were pitched to us didn’t seem to replicate what you want in a family office system, which is a very secure and permanent file structured to our use case.
Today, our permanent records no longer exists on paper — they are all digital.
