The number of Central Ohio family offices is on the rise as baby boomers take advantage of a financial structure that is attractive for transferring wealth to the next generation.

Reese Fields, who has worked with many of the area’s family offices for more than a decade, says that many local families are adding outside governance to aid their operations.

“I met with two of them over the last two weeks that have a board of nonfamily members and nonfamily chairmen that’ll run the family office or the advisory board,” Fields says. “If you can put some guard rails around the family and the family money, and you can put some processes, procedures and people around, you can hopefully protect your family from fighting over money once the matriarch or patriarch dies.”

Smart Business Dealmakers talked with Fields, currently a private wealth consultant with U.S. Bank Private Wealth Management, about how family offices operate, including balancing privacy with connecting to potential investments.

Under the radar

Family offices usually don’t advertise, and many don’t even have a website.

“The problem is once you do come into wealth, everyone’s coming after you,” Fields says. “Everyone’s trying to talk to you and everyone wants to be your best friend. A lot of the family offices rely on people to bring them deals, people that they’ve done deals with or people that have a great reputation here in town.”

These gatekeepers ensure the family office doesn’t have to vet requests that wouldn’t interest them.

“Most family offices, I’d say nine out of 10 of them, do not have the proper staff and the proper structure to handle going through 100 deals a month or 100 phone calls a month,” he says.

While some families in town have a website or have been around a long time and everybody knows them, Fields says there are also a lot of under-the-radar family offices. You have to know the right people to gain access.

Take Travis Smith, the founder and CEO of TribeVest, which provides a platform and the discipline to help like-minded people who share a common goal form a group and save together.

In many ways, the startup helps groups act like family offices, but on a much, much smaller level. The company hasn’t done a public launch yet. It’s focusing on onboarding clients from its 1,000-person waitlist.

Smith says when TribeVest did a pre-seed round, he would have loved to talk to some local family offices.

“I’m a little older and well networked professionally, so you would have thought I would have been in a better position to get an introduction to a family office, but I didn’t get introduced to one,” he says. “I didn’t know where to find them because I’m not in that network.”

However, today’s competitive market could be starting to change the desire for privacy, Fields says.

“There are some family offices locally that have started to hire people, so that they can actually be out there in the market and even do some advertising here and there,” he says.

They might send people to trade shows to look for deals or hire a multifamily office service like U.S. Bank’s Ascent Private Capital Management to handle the back-office tasks that come with greater visibility.

Quality over quantity

Fields has helped family offices find private investments — primarily in the Midwest — focused on manufacturing, distribution and real estate.

The majority of family office funds are tied up in brokerage accounts with stocks, bonds and mutual funds, but anywhere from 5 to 25 percent of their net worth might be in private companies, he says.

“When you’re building a company, most entrepreneurs and business owners that I know, 90 percent of their net worth is tied into their business,” Fields says. “Then, it switches. They end up selling and they can diversify a little bit and not have all their eggs in one basket.”

Family offices also operate differently than private equity firms because they aren’t subject to outside investors. There are no time constraints with regard to buying and selling companies, and making money often isn’t the only goal. Family members may like taking a more active role. They give back to the community and help entrepreneurs, while utilizing their experience to influence a company’s success.

Most family offices would rather do one quality deal every year or two, versus doing five deals a year and having a bad one that’s a financial and emotional drain, Fields says. They might take a year and spend time with a company, perhaps serving as a board member, before making an acquisition.

PE firms must deploy their funds in a timely manner, or risk losing them, and charge a management fee when they buy a company. (Many family offices don’t charge management fees.) This can mean PE firms are willing to pay more to buy a company, he says.

“Family offices, they have the ability to be choosy and only do what makes sense for them and their family and what makes sense for that company,” Fields says. “So, if all the boxes aren’t checked, they’re not going to buy that company because they don’t have to.”

Business owners need to weigh all factors when looking for investors, he says. The right partner who pays a little less might be better for the company over the long run.

“You really have to get to know people and make sure your intentions are aligned, so that you truly can grow a company together and be happy doing it together,” Fields says. “Take time to get to know your potential acquirer so that you choose the correct partner for you and your company. This will ensure that you preserve the culture, mission statement and legacy of the company that you have built over time.”