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By David Drake


Although have existed for more than a century, many are unfamiliar with the services they provide, because of the high level of confidentiality their clients demand. While both banks and family offices can provide confidential services, family offices are far more personalized and also offer services in areas other than finance.

The level of services a provides varies depending on the needs and preferences of the wealthy families and individuals they serve. Unlike banks, there is no standard product or service that will fit with their customers’ needs across the board. For this reason, it is difficult to get the details about family offices’ past and current practices.
Old Tycoons, New Moguls
The difference between servicing the old and new rich clients can only be viewed in terms of the characteristics and cultural orientation of the different generations.

In general, the old clients amassed their fortune through perseverance and ingenuity. In most cases, wealth is created gradually through passion and hard work.

Early billionaires created and pursued opportunities to satisfy the needs of the society. Profit was never in Thomas Alva Edison’s mind when he developed electricity nor the Wright brothers when they invented the airplane. However, discovery and innovations are not without rewards. Once these are proven successful, society will reward them with patronage of these products or services at the right price. In short, early billionaires were entrepreneurs.

In short, early billionaires were entrepreneurs.

In the early days when banks are not yet in the business landscape, the wealthy stored the fortunes they amassed within the confines of their domain. Transactions were done mostly by barter until gold and silver were discovered and became the standard medium of exchange. When further complexity in trading transactions as well as transfer of value and ownership have expanded and became more complicated, money was created to establish a uniform medium of exchange. This gave birth to merchant banks. Later, other types of banks emerged.

With this development, wealthy individuals and families find repository for their accumulated fortunes in the banks. Thus, many early rich who amassed wealth through trade or industry found alternative sources for wealth creation without necessarily making their hands dirty. The banks just do the job of creating and increasing their net worth as passive investors, and this evolved to investment banking.


A symbiotic relationship between the bankers and family offices




A symbiotic relationship existed between the bankers and family offices earlier. The latter need the bank for their financial transactions. Banks, on the other hand, have become refuge for risk aversion, an image that banks have generally maintained until the 2008 – 2009 financial crises. The financial crisis, which hit some big financial institutions like the Lehman Brothers, still persist today, thus making the family offices rethink their present and future position.

Financially, it is a matter of shift in strategy

In terms of context, there seems to be very little difference between servicing the old and rich clients. The evolution in the financial market affects both, regardless of generation, but the need to create, grow and protect wealth remains the same, whether old or new. Financially, it is a matter of shift in strategy. It is not correlated to demographics.

Structurally, there are changes in the level of servicing between the old and new affluent. The second or third generation rich individuals and families may share the same mindsets as their patriarchs, which are totally different from new breed of millionaires who earned their fortunes instantly particularly those in media and entertainment industry, as well as sports and technology-driven software ventures.



Some encouraging development, in terms of investment preferences, has direct correlation to the old or new clients of family offices. New may not be appropriate as the survey results include wealthy heirs of old rich in the strata.

What is important is that this development could be the turning point of what Barry Howard Minkin has advocated in his book, The Future Insight. In his book published in 1995, Minkin wrote that financial market and currencies are bound to collapse as investment and wealth creation are more focused on speculative endeavors rather than creating real values that benefit society. Investment should be geared towards creating new or value-added products or improving efficiency.

The following excerpt from the U.S. Trust Survey report mirrors a very positive trend in ultra-rich shifting of investment preference.

In general, the wealthy feel strongly about putting their financial success to work in a way that is meaningful and will create positive social change. They rank “giving back to society” among the most important uses of their wealth, second only to providing for their own families.

Nine in 10 (89 percent) wealthy Americans say they would help foster greater income and opportunity in the country primarily by financially supporting programs that support employment and education opportunities, paying more in taxes, creating jobs, and/or supporting legislation to reduce regulation and taxes on small business and entrepreneurs.


WORLD TRADE CENTER and the American economy



This new outlook is a very positive development as it gives more weight on social responsibility that can provide long-term and sustainable impetus to economic resiliency, not only of the American  but also on the global landscape.

This is a positive response to what Minkin has espoused that investment should be put on endeavors that create real value. This will be boon to entrepreneurs, startups, as well as small and medium enterprises (SMEs). This, likewise, explains the phenomenal growth of and . But this is bane to the bankers and money brokers that stick to their obsolete business models and products or services.



Note: This article originally appeared on HuffingtonPost with this link on September 29, 2015.





TSL David photo


David Drake is the Chairman of LDJ Capital, a multi-family office; Victoria Partners, a 300 family office network; Drake Hospitality Group; and The Soho Loft Media Group with divisions Victoria Global Communications, Times Impact Publications, and The Soho Loft Conferences. Reach him directly at

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