Stuart Katz is president of Lido Advisors’ Private Wealth Management division, which provides customized investment, planning and family office solutions for entrepreneurs, executives, high-net-worth families, nonprofits and uniquely successful artists, athletes and entertainers.
Russ Alan Prince: What do Lido Advisors see as the evolution of the family office model?
Stuart Katz: As a starting point, it’s important to provide some context as to how the term “family office” gets used in the wealth management space. For years, firms have been selling the performance of their investments as the main reason clients should hire them. For the overwhelming majority of those firms, that value proposition no longer holds up. Most of the active equity managers to whom they allocate client capital have consistently underperformed the indices against which they are measured. These firms have moved to low-cost passive options, and as a result, they have been forced to come up with another story to justify their fees.
The story they use is that they offer “family office services” to their clients, with that term becoming a catch-all category for “stuff” other than investments. More often than not, these firms talk about services they don’t actually have the capacity to deliver; put another way, it’s marketing fluff without much to back it up.
Lido takes a meaningfully different approach. Our founder, Greg Kushner, ran a large single-family office before founding Lido Advisors. Jason Ozur also ran a family office before becoming CEO of Lido. They understand that running a true family office means creating a real framework to provide holistic and, most importantly, integrated advice across a variety of disciplines with the in-house expertise to consistently execute on that advice. Lido was built specifically to provide that family office experience to our clients with a focus on the following disciplines:
• Planning: Comprised of attorneys, CPAs, and Certified Financial Planners (CFP), our Advanced Wealth Planning team develops a complex understanding of our clients’ needs, values and goals and creates a custom financial framework to help them meet their objectives.
• Investments: Our investment platform leverages our family office network to provide our clients with access to unique investment strategies and opportunities that are typically available to only the wealthiest families or institutions.
• Tax: With the help of our affiliated tax professionals, our proactive approach to tax planning means we think, plan, and execute on our clients’ short and long-term tax needs.
• Estate: With the help of our affiliated legal professionals, we strive to create the proper structure to preserve our clients’ wealth and legacy.
We see the need for this model to continuously evolve to meet client needs in a changing world. Along those lines, we recently purchased a trust company so that we could be responsive to clients who need that service. We see this evolution continuing into bill pay, which we now offer, and other services so that we can continue to support our clients.
Prince: What are the biggest considerations that high-net-worth clients must address when considering protecting, growing and preserving their legacies for future generations? What are some starting points that often get overlooked?
Katz: We find that, too often, families don’t spend enough time articulating their values, aspirations for current and future generations, and philanthropic goals. In our experience, there are a handful of steps families should take to protect, grow and preserve their legacies. Below are just a few examples:
• Values Statement: Developing a common sense of purpose is critical and is best accomplished by creating a family values statement.
• Goals: After you’ve identified the values that define your family, it’s helpful to articulate the goals you are striving to achieve and over what timeframe so that an actionable plan can be created.
• Philanthropy: Encourage family members to share their visions for a better world. Then, work together on philanthropic projects.
• Education: Establish an ongoing family education program that enables family members to learn more about how things “work” (family business, investments, foundation, etc.) and create opportunities for them to be involved).
After we have worked with our clients to identify what is most important to them, we build a framework to help them succeed in fulfilling their aspirations.
Prince: What does it mean to blend access to alternative investment opportunities and more traditional strategies? How does this build a more successful strategy?
Katz: In our view, we would be doing our clients a disservice if we did not include carefully selected alternative investment opportunities in their portfolio alongside more traditional stock and bond strategies. Public markets are highly efficient, making it very difficult to outperform. Additionally, as economic trends increasingly affect asset classes in similar ways, traditional stock/bond diversification is not enough to protect clients.
Adding alternatives, which can include real estate, private credit, private equity and multiple other asset classes, to client portfolios accomplishes the following:
• Lower Volatility: Alternatives behave differently than stocks and bonds, as they rely less on broader market trends and more on the merit of a specific investment. This creates real diversification and less volatility.
• Enhanced Returns: Access to a broader set of investment strategies creates a significant opportunity to increase overall returns.
At Lido, we focus on leveraging our family office network and scale to provide access to unique alternative investments while reducing costs for our clients.
Russ Alan Prince is a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.