The “Why” of Your Family Wealth Strategy

Adam Hoffman
Family Wealth Strategist, Fiduciary, Entrepreneur
LinkedIn

Adam is a family wealth strategist. His prior experiences as a single-family office President and multi-family office CEO provide a unique perspective on effective family office design. Adam consults entrepreneurial families on strategy in order to match the family’s skills, interests and family legacy goals with the optimal family office ecosystem tactics. In limited circumstances, Adam acts as a professional trustee, executor and parent company Director.

 Kirby Rosplock

Welcome to the Tamarind Learning podcast. I'm your host, Dr. Kirby Rosplock. And today we're talking about the why, the why of family wealth strategies. And I've got a wonderful guest with me today. His name is the one and only Adam Hoffman, and he's joining us today from Calgary. So Adam, welcome.

Adam Hoffman

The one and only- thanks, Kirby. That's what you are.

Kirby Rosplock

Well, listen, Adam, the more I've gotten to know you over the last few years, it's been such a delight and joy, and you bring such a fresh perspective on some complicated topics, and family wealth is one of those topics. But tell us a little bit more about you, how you came to be doing the work you're doing with families, family offices, and advisors and what gets you excited.

Adam Hoffman

Yes, I'll try not to get too excited on this podcast, but I can really get excited about this work. I was a tax lawyer for the first leg of my career up here in Canada. A lot of owner, manager, and private client work, and I had a pivot moment. And with a really effective coach, I was sitting in this pivot moment. I h-d co-founded an energy technology startup. We brought in family office angel capital to conduct a big pivot. And my co-founders let me exit stage left gracefully, first of them all, which I'm quite appreciative of. So I had this moment and my coach kept pressing me, kept pressing me. My mind was telling me to go into venture capital, and he kept pressing, and my heart found the right answer, which is Jay Hughes. As you know, he wrote the forward to your book. So it sounds like you know Jay really well. His wealth philosophies are incredible, extremely important in our space. And rereading his book Family Wealth, which I hadn't read in eight or nine years, became the impetus to make the move into this family wealth space. And most recently, I was leading a single-family office for a fourth-generation family that built a wealth management platform. And so I got to see more around the family office, the integrated wealth side of the industry, most recently.

Kirby Rosplock

So it sounds like you got excited, not necessarily from the day-to-day tax savings that you might be able to save individuals and corporations and entities, but maybe more inspired by how you could help them in a bigger, more macro capacity. So that's a big jump, right? From a fairly analytical, technical, sort of relatively narrow space. I know you're doing a lot more work as a fiduciary and working in that capacity. Tell me how that sort of happened and why you decided to go in that direction.

Adam Hoffman

Well, I was raised spoiled, not spoiled rotten- my mom loved to say. I was an upper-middle-class kid here in Calgary. So going to private schools, I interacted with a lot of multi-generational wealth families and first-generation wealth families, which is common in Calgary. And so early in my career as a tax lawyer, I did a lot of trust structuring and occasionally agreed to be on the board of trustees, where I was a good fit, even as sort of a young planner, including one close friend who I've been on a number of their trusts over the years. And so I really enjoy that work. And you're right, as a natural generalist, it was a big effort and I learned a lot about myself putting my 20,000 hours into tax law. But I do enjoy that higher level view that the fiduciary seats the board of trustees and the board of directors provides. I really enjoy that value and that service to families.

Kirby Rosplock

Well, one thing that is so unusual about you is that you're actually super creative and you're also pretty visual in how you sort of see the world. And I'd love just to talk a little bit more about the why. And what is it about figuring out the why of somebody's wealth strategy that is so difficult? I mean, why do families have so many stumbling blocks right when they're trying to articulate or figure out what's it all for? Why are we doing this?

Adam Hoffman

I love this question and thanks for asking it before live now because I had to really think about it. There's a few things about the "why" that get my attention as a planner, and one that immediately springs to mind is there's something interesting about the family leadership's behavior after a liquidity event. They don't seem to treat the liquid assets the same way as something like a family business in terms of their leadership style. And they can kind of lose touch with the why in a business, there's no way that you could have a business without an effective strategy. But for some reason when you talk about family wealth, why, you get a lot of answers like, oh, I really like my wealth management advisors. I've got pretty good tax people. But that in business would be like saying, yeah, no, I don't need to work on my strategy anymore because I really like my sales guys and I think my operations people are really working effectively. So there's something about the liquidity event. And then I think that role modeling that from the wealth creation through into generation two and generation three, I think it's hard for the rising generations to find a "why" that can map to the overlapping family values. And so there's a lot of difficulty around the courage and the space to bring that why into their family wealth strategy.

Kirby Rosplock

Yeah. I find also that meaning-making with wealth is so much harder than when you have a physical, tangible business. Even if it's a virtual business, you kind of know why it exists, what it's there to do, and what impact it's designed for. But the why for families is a soul-searching kind of endeavor. It's not necessarily clearly laid out. Like you said, once there's a liquidity event, that doesn't give you a roadmap of why and what you're supposed to do next and how you're supposed to think about it, which maybe that's a great segue for you to share a little bit more about your genus model, which I think you're going to maybe show visually.

Adam Hoffman

Yes, I pre-recorded this to make sure it's going to go great. So thanks, Kirby. Let's watch this short video, and we'll come back and we'll discuss what you saw.

Adam Hoffman

All right, Tamarind learning community. Let's apply the Genius Model originally created by Simon Bowen to family wealth strategy. Family wealth strategy is a really important perspective to take because most looks at family office design, family wealth relate to the tactics, investment management, risk management. But before you can get into the tactics, you really have to get right your family's unique answer to the question, what is all this money actually good for? You have to take a strategic level view of your family wealth in order to apply the tactics well, and what the Venn Diagram points to at the center. What is most important for a family to get right is their why. Their unique answer to the question, so what is all this money good for? The three topics that are often looked at in family wealth are your risks and your resources. Risk management is, of course, a key part of family wealth strategy. And your resources are the wealth, the financial resources, of course, but also your time, and there are other resources to consider as well. We'll get to that later on. What is this third Venn circle? Well, of course, it's your people, whether it's your family or the other people that you care about, possibly community.

Adam Hoffman

But what are these? What are the overlap areas? These are the three categories that I have found each family's unique answer to the question, so what does all this money actually good for fall into? And to describe these three categories to you, I find Maslow's hierarchy of needs to be quite helpful. Maslow's Hierarchy of needs really helps people establish their own answer to the question, what's my success? What's my fulfillment in life? And in that way, I think it's very helpful for family wealth strategy. At the bottom of Maslow's Hierarchy of needs, often shown in the form of a pyramid, you've got your physiological needs, your basic human needs, safety, and up into love and belonging. I think the best category description for these level of needs is well-being. S.J Hughes is famous for describing the etymology of the word wealth is the Welsh word we all, which means well-being. So clearly, one of the three categories of family wealth strategy is well-being. Now, as you rise up Maslow's Hierarchy, as you seek self-actualization, self-esteem, and back into love and belonging, I think this category is best described as being each family member's flourishing.

Adam Hoffman

So family wealth strategy categories are at least your well-being and your flourishing. But at the end of Maslow's life, and he even published posthumously on this concept, he talked about another need that goes beyond your personal needs and relates to how your fulfillment is achieved by helping others. And he used the term transcendence, which is a fantastic topic to look at if you're interested. And I think the best way to describe this category of need for family wealth strategy is impact. So the three broad categories of family wealth strategy are impact, flourishing, and well-being. Where do they fit within the Venn Diagram? Well, I think when you're still dealing with your people and resources, this is for families that have less focus on the financial resources extending beyond the current lifetime. I think you're dealing with your well-being now. Once wealth gets trickier and you have to figure out all of the risks associated with generational wealth, that's where I think your people and balancing the risks relate to the category of flourishing. And once you've thought beyond your own people, once you're trying to determine how your family wealth strategy balances everyone that you care about, that's where impact comes into play.

Adam Hoffman

So you can see how balancing your people, risk, and resources by determining your why, your purpose, your unique answer to the question, so what is all this money good for? Will ultimately relate to your well-being, flourishing, and impact, which I have here now. The Genius Model really caught my attention when it was pointed out to me that the center of any effective strategy always comes back to the people and always comes back to the love. Because if family wealth strategy isn't ultimately about your love, your care, and affection for your family, then really, what is all the money good for?

Kirby Rosplock

That was awesome, Adam. Thank you so much for sharing that visual, because I think that's going to start to cement more in the minds of those listening and watching today, kind of what this model looks like. Tell us more how you use it. How do you apply this Genius Model to helping, say, a client figure out their family wealth strategy?

Adam Hoffman

Yes, I find it to be a really powerful visual in terms of putting your family and your why at the center of your family wealth strategy. So within family wealth design, I have about 50 subtopics that I like to approach. There's investment management, cash flow modeling. There's just so much family ownership, literacy. And so when you get into the topics without understanding that the why is at the center of all those topics, you can sort of get lost in the details. And I felt that way as a tax lawyer. There were times the tax tail wagged the family dog, and I wish that the families and myself had taken more time to put the why at the center. So that's how I like to use the first elements of the diagram is really trying to emphasize how important the why is at the center. And those three major topics, your well-being, flourishing, and impact.

Kirby Rosplock

That's awesome. And I know you've done additional work to expand this model. So maybe let's jump to sort of part two and sort of see how you fill out this genus model even further and expand on it.

Adam Hoffman

When I was first introduced to Simon Bowen's Genius Model, I really appreciated the three additional perspectives that added to the Venn diagram. The three ideas within each of these major topics of people, risks and resources, and how they interplay together to put your family wealth strategy, your family why your family's unique answer to the question, what is all this good for at the center of this family office ecosystem of this family wealth strategy? And of course, those answers, as we've gone over, will relate to well-being, flourishing, and impact. But let's dive into these three perspectives. Let's take a closer look at what I think are the three key perspectives within people, risks, and resources. And, of course, it all starts with family, as Jay Hughes would say, it's families of affinity, not families of blood because every family starts with two bloodlines coming together. Another big aspect of people to keep in mind with your family wealth strategy is your communities. Who are the additional groups of people besides your family that are important to think about, to consider in designing your family wealth. And another really critical group of people is your advisors and how they fit into what I call an advisor ecosystem because they don't work in silos, and how they work together is absolutely critical to your family wealth strategy.

Adam Hoffman

Now, within resources, of course, everyone thinks of time. Apologies. Everyone thinks of money, but our time is our most valuable resource. And so those two considerations are absolutely critical. And I like to highlight the idea of other resources. A good example is a family cottage. Now, that would not be considered a productive asset by any stretch of the imagination. But the way that it pulls the family culture together, the way that it can bring people together, is extremely valuable to your family wealth strategy. Now, finally, within risks, it's important to delineate between which risks you can control and which risks are uncontrollable. Now, an uncontrollable risk that is at the heart of every family wealth strategy is stewardship, is your family culture. And like a garden, you can sprinkle the ingredients, you can try and get the environment as good as possible, but you'll never know what the output is. You'll never know what your future stewards will end up like. And understanding that as an uncontrollable risk is really important to your family wealth strategy. And perhaps the most important perspective of all nine is the concept of trade-offs. The idea being that a great example is philanthropy strategy because there's always trade-offs within family wealth design.

Adam Hoffman

And if you're trying to make the biggest impact in your philanthropic strategy, well, you would have to be public about it. Your publicity would attract other families to your particular philanthropy strategy, and it would be a bigger impact. But the trade-off there is privacy. And so understanding the trade-offs that you make within your family, well, strategy is very important.

Kirby Rosplock

So, Adam, that was even more mind-blowing and so powerful. I mean, what galvanized you to want to add this additional element to the model? And what else do you think it teases out with respect to the family wealth strategy?

Adam Hoffman

I think with something as complicated as family wealth design, distilling those major topics into those nine subtopics is really helpful. That's why I went with three per section. And for me, the people very important to remember the family by affinity, not by blood. Your communities that you care about, and of course, your trusted advisor ecosystem, they're people too. But for me, it's really about that. I like displaying that risk management section. I really like showing there's controllable and uncontrollable risks. Make sure you understand which risk is in which bucket effectively. For example, family culture. There's a lot of elements of family culture that actually are controllable. And so understanding how you can make a very positive impact on your family culture intentionally, I think, is a powerful risk management tool. And then, as we've discussed before, understanding risk management trade-offs. It's a big part of any family office design.

Kirby Rosplock

Yeah, I love the risk and the resources at the bottom. I think for me, it also creates a very clear juxtaposition of that you might be able to do certain things that create certain risks, but they probably require certain resources to make them happen and vice versa. I know one that came to mind right away was just, for example, if a family has a business and they want to grow that business, and so they might need to take more concentrated risk and invest more in that business. So the risk is concentration and putting more eggs in that one basket, and then the resources are maybe it's going to take more financial capital, maybe more human capital, and that might shift people's ability to get access to dividends or distributions. And so I love the way this model can also take into account maybe family business scenarios, family office scenarios, and just bigger, broader planning considerations. So hats off on building those out even further.

Adam Hoffman

Yes, thank you, Kirby. And one of your pieces of advice that I love is focusing on resources is the idea that time is our most valuable resource. Financial capital is what people think of. But in that other bucket, you should be reminded of the different way that your resources can support your family. Why? And your comment on the way that the trusted advisor ecosystem is a group of people but also an incredible resource, is a really big game changer in where our industry is going. And wealth 3.0 and this integrated advisor movement is critical to an effective family y execution.

Kirby Rosplock

Couldn't have said it better. So, Adam, give me a few takeaways. Tell me a little bit more how you think this model could enrich clients, could help advisors, could just generally help our whole family wealth space.

Adam Hoffman

My personal mission is to empower entrepreneurial families to thrive for generations. And when I think about how this tool is helpful, I really think about that empowerment. I think that wealth stewards really need to be the heroes of their own journey, and a tool like this can really help them find their voice, in their conversations with their advisors. I think that's the biggest reason that I created the applied the Genius Model. Simon Bowen first introduced me to this model that he created, and he said, it applies in a lot of areas. Find yours. And so I love the model, and that's why I applied it to family wealth strategy. And, yes, I think that the most important thing is the empowerment, the literacy. The ownership literacy.

Kirby Rosplock

Yeah, I think that's really spot on. And I would just also add that a lot of folks don't know where to start the planning journey. Right. I get asked all the time, like, where do I start? And I think, actually, your model is a really powerful framework that could dramatically impact where you start your planning, what you're trying to execute on, because it's going to give a visual, but it can give real tangible, like understanding tangible risks, understanding tangible resources, and then obviously, the people that are central to your planning. So I love that. I think it really could help strategically jumpstart that planning process. And I'm so grateful for your wisdom, your inspiration, all that you're doing in our space. And I'm so thrilled you were able to be on the Tamil learning podcast with us today.

Adam Hoffman

Well, thank you. I don't know about wisdom. I love synthesizing our industry's wisdom. I think that one of the things I do best as a communicator is find all those great Jay Hughes and Jim Grubmans of the world and Kirby Rosplocks and integrate and communicate that wisdom that you have. And so thanks for your kind words. I post mostly on LinkedIn. You can find me there. And I have a newsletter, and I love working on this space. So the other creative people out there thinking about ways to empower wealth stewards, please come find me. I love to jam on this topic.

Kirby Rosplock

And we'll have a lot more. So you can find a lot more about Adam on his website, adamhoffman.net, and his newsletter. And a lot of resources are active right there. And, of course, we'll get you more information on how you can contact Adam if you have further questions about his model, the consulting that he's doing with families and family offices, and just generally about his interest in his work. So, Adam, thanks again so much for being here today at the Tamarind Learning podcast.

Adam Hoffman

Thank you, Kirby. That was great.

Visit Adam's monthly blog to find out more about the impact of money on family wealth here.