Agreus Group: Key considerations for emerging Family Offices

In this episode, Ryan Loehr, our Brisbane-based Partner, and Private Wealth Advisor speaks with the founders of Agreus, Tayyab Mohamed and Paul Westall. Also joining them is Pierre Pineau, the head of Agreus in the APAC region. This marks part II of our podcasts with Agreus and is focused on identifying the key considerations for families, considering establishing and resourcing their own family office. We explore the different types of family office models; key planning issues to get right beforehand; minimum running costs; how thematics like Artificial Intelligence and cybersecurity are impacting hiring needs; and how to fairly remunerate or internalise family members in the business of the family group.

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Please see the trasncript of the show below -

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[00:00:00] Ryan Loehr: Welcome to the exchange podcast by EWL. As advisors to some of the most successful families in the country. Craig Emanuel, Tim Whybourne and I, Ryan Loehr, draw upon some of the best minds in the country. We believe that by exchanging ideas, we can deliver better advice and better outcomes for the families we worked for.

[00:00:32] Ryan Loehr: Now, we're inviting you on this journey. In this podcast, we interview some of the country's best investment managers, business advisors, bankers, and founders to share their valuable insights. And our hope is that with better information comes better decisions, helping you to achieve more financially.

[00:00:52] Ryan Loehr: Welcome to another episode of the exchange by EWL Private Wealth. My name is Ryan Loehr and I'm a [00:01:00] partner and advisor out of our Brisbane office. And in this episode, I catch up with Tayyab Mohamed, Loehr and Pierre Pineau from Agreus Group. Agreus is one of the world's preeminent specialist recruitment firms, which are dedicated to serving family offices and some of the world's most successful families.

[00:01:22] Ryan Loehr: This is our second podcast where we cover the different types of family office models, key considerations for emerging family offices. We cover the expenses and general running costs or minimum running costs of a family office. We touch on topical themes like AI, cybersecurity, and also how to fairly remunerate or incentivize family and business.

[00:01:47] Ryan Loehr: These conversations always go too quick. I find them fascinating. And I hope our listeners enjoy this episode. Really pleased to be here again today with Paul Westall, Tayyab [00:02:00] Mohamed and Pierre Pineau from Agreus, a global family office recruitment firm. This is actually part two to our earlier podcast.

[00:02:09] Ryan Loehr: There was so much to unpack really in our last podcast that we actually needed to agree to, to a second one. So here we are in 2024. Guys, thank you so much for joining me. 

[00:02:18] Paul Westall: Thank you for having us. Good to speak to you again. 

[00:02:22] Ryan Loehr: So there's a few things that I wouldn't mind just recapping for listeners and maybe is a good starting point for our conversation.

[00:02:30] Ryan Loehr: When we think about a family office, it's, it's a pretty broad term often, when I'm having conversations with. Various parties in Australia. This concept of family office can be, true family off the single family office where it's, 500 billion plus to, the term loosely thrown around where, it's just a high net worth individual and people, throw that that term around a family office.

[00:02:54] Ryan Loehr: But it'd be good to unpack for listeners what are each of the different types of models or [00:03:00] categories for, family office and, where does Agreus primarily play?

[00:03:06] Paul Westall: I think you're right. I mean, there's so many different types of structures and there's so many different reasons behind it.

[00:03:12] Paul Westall: Often, like you said, it's driven by where they are in the stage in that process and where they are in the world and the evolution of family offices. So I think. You've got differences in that from being maybe a region such as Australia and Singapore to maybe a more advanced like the U. S. There could be very big differences.

[00:03:29] Paul Westall: And and also there's the other factor of purpose. What is the purpose of that could drive it? So talking about the first instance, I'll probably say Yeah, typically you like in a market like Australia, families may make their money, have a liquidity event, and they're obviously sitting on this cash. It may not be a full exit, but they may have sort of taken some money off the table.

[00:03:50] Paul Westall: And at that point, they're probably thinking about what I don't want to give all this money to the bank to manage. I want to have some control in it. So they start sort of doing this hybrid model. So they'll [00:04:00] they'll have a small structure. Maybe one or two people that are like overseeing things and being their point man to control the advisors and start outsourcing part of the investments to, people like yourselves or other advisors.

[00:04:13] Paul Westall: They might work with tax accountants to manage things and they'll just orchestrate that and manage the sort of administrative side inside. And then as they get more comfortable, they might start bringing more in and say, actually, I think the fees for the accountants are a lot. I think we could, and also we need a bit more control on this.

[00:04:29] Paul Westall: Let's do the first layer of accounts in house and we'll have a financial controller. And then it sort of grows and grows and grows. They start getting more comfortable bringing more and more. Actually, I think we want to get involved in private equity. I can't, we need some specialist people inside. And then there, then that relates to actually, okay, well, we need some compliance and accounting and type.

[00:04:47] Paul Westall: Administrative staff to make sure the right KYC forms are being sent the right documentation. So it's sort of it's an evolution and it grows and grows and grows. Whereas in somewhere like the U. S. that's been maybe mirrored more [00:05:00] advanced, they've already gone through that journey. Yeah. And they'll have a bigger team potentially where they're running everything in house.

[00:05:06] Paul Westall: Obviously the costs. Occurred inside obviously a lot more significant, but obviously they're not been paid as much outside fees to, to advisors. So it's that balance in, in the journey, really. 

[00:05:18] Ryan Loehr: It's super interesting because, we've had a few instances within our own businesses and the clients that we, we work with where they've had a very substantial liquidity event enough to justify a single family office.

[00:05:32] Ryan Loehr: And the logical step for them was we've got economies of scale. We can go straight to building our own single family office. And, Craig, Tim, Ryan, thanks for your support. We're going to give this a crack on our own because, post post exit, I need something to, to build again because that's the kind of personality the founder is.

[00:05:51] Ryan Loehr: And, I think sometimes. You can evolve too fast. If you go straight to running or trying to run a single family office, [00:06:00] but you don't have the structuring expertise, you don't have the investment expertise, you don't have, the administration support all the reporting. And, in particular for this conversation, you don't know where to find those people because you don't have the network or you haven't worked within those industries.

[00:06:16] Ryan Loehr: Like, we all have becomes problematic. Whereas that. Evolution that you mentioned, Paul, where, maybe you already have, or you previously had a wealth management or an advice relationship but having that equity event means, you can start to internalize a little bit. So you, you move to more of a hybrid model.

[00:06:36] Ryan Loehr: Maybe, you move you continue partnering with your private bank. Maybe you've got a more specialist wealth management firm to sit alongside that. They help with the governance. They help with investment policy formulation. They, start to bring on trusted advisors and the next generation and, iterate on that and, post a three, four, five year journey.

[00:06:56] Ryan Loehr: When you get comfortable with how things operate, how the [00:07:00] ecosystem works, then that can be a good time to actually start to transition and evolve to, to, a single family office. But probably links to the next question, which I don't know who's, who's best place to take this one. But just around compensation and, and putting into perspective for listeners or for.

[00:07:18] Ryan Loehr: Australian families who are thinking about taking that step. I mean, if you look at or if they were to think about their five most important hires, and clearly it's going to be different from family to family that each have different experiences. But, what, what would be the kind of five first hires generally speaking?

[00:07:36] Ryan Loehr: And I say that as a, a very loose statement that and what would if we're talking about salary benchmarking on a global standpoint, what would it take to basically remunerate those five key hires? 

[00:07:50] Tayyab Mohamed: Quite a broad question, but like, again, it's usually when families get their first few, the first hire, They have some [00:08:00] sort of an idea in terms of what that builder profile, we call them builder profiles, the first profile.

[00:08:06] Tayyab Mohamed: So they would say, look we, we, we already have various banking relationships, we already have trusts created or whatever, and we want to formalize this into a family office. So they'd say, but with someone who understands the inter, the, the innate workings of trust and everything. So they, they might not be ideally the first hire we want to make might be.

[00:08:26] Tayyab Mohamed: Someone who comes from that world. So it might be like a trust practitioner or something like that, a senior level who's done that before, or it could be a legal person or clearly could be an investment professional because they like, they feel like they need someone to help them identify how to deploy that capital, if they're doing it in house versus outsourcing and everything like that.

[00:08:49] Tayyab Mohamed: So usually they'll give us a slant. Towards the direction of what they want. And based on that, of course, that predominantly dictates the compensation. If you're looking at a [00:09:00] global averages of CIO, I don't know if it's like an investment sort of a professional, I could be I don't want to be a bang on perfect on this, but I think it'd be safe to say it's close to the 300, 000 markers.

[00:09:13] Tayyab Mohamed: I would say it's a global average for, I'm talking about US dollars here. So 300, 000 US dollars globally is a safe bet for a CIO. I'd say around 250 to 300 would be again, similar for a CEO without an investment angle. So someone who's, Done taking on more like an operations role in the family office who orchestrates all the investment piece with the trust piece and all the other administrative functions and knows about tax and optimization and everything like that.

[00:09:42] Tayyab Mohamed: So that's so between that, I think slightly more than half a million. And then, then if you say, if you get like. You don't probably you probably don't need a CFO, but you know, you might do some people start off with the CFO kind of a profile. But if you have these two kind of senior profiles, you might go with an accounting [00:10:00] sort of a finance professional.

[00:10:02] Tayyab Mohamed: Or might be, let's say, we go with someone a junior. I was qualified or something like that. So say close to 100, 000 or something like that. And so so see that that you that's. I know it sounds, it's, it's still a lot of money, but that's the kind of money that you'd need to, to, I'd say, to have the skeletal formations of that initial key talent, but of course, I'm only talking about fixed comp here.

[00:10:26] Tayyab Mohamed: There'd be benefits on top of some form, whether it's medical, I don't know, regionally they vary some places like in the Middle East, you offer the medical, you offer them schooling. So that adds up to the pill, and in the UK, it's just a basic salary generally, or you might have health.

[00:10:41] Tayyab Mohamed: Benefits in Australia. I'm sure it has its own benefits on that. There's the bonus package, which is usually a discretionary bonus package. As a global average now, again, so 72 percent of family offices globally pay out bonuses in the form of discretion, but I think what's changing is [00:11:00] the senior or critical people are starting to get some form of longer term incentive plan in place, which, which, which needs a bit more commitment.

[00:11:08] Tayyab Mohamed: This is to ensure that once you get that team and they get it right for you and they've done a good job, you retain them, you don't lose them and then they feel they feel they have some skin in the game. 

[00:11:18] Ryan Loehr: If we work backwards from that which I think, it's important for listeners to understand.

[00:11:24] Ryan Loehr: Those figures are in U. S. Dollars, which, if you're looking at global talent pool certainly, U. S. Dollars is kind of a base currency for, global talent pool. But I mean, in Australia, in terms of what that Then looks like minimum for a CIO in Australian dollar equivalent, given the exchange rate that works out at, sort of half a million dollars, 500, 000, roughly CEO role or CEO overall then, sort of 400 ish, and then you've got, some juniors 100, 120, 000 depending on, their experience where they've come from and often.

[00:11:59] Ryan Loehr: If you [00:12:00] hire mid level analyst there's performance incentives and, um, additional benefits, part of their remuneration. If, if they're coming from a, a bank or another wealth firm. So you're looking at just based on, this first five hires, as you said, tie up over a million dollars, probably closer to 1.

[00:12:17] Ryan Loehr: 2. So then if you're working backwards, what level of capital makes that You know, viable. If you're under 100 mil at the very least, even 100 you're over, 1 percent in fees. And that's not, that's before you're, you're perhaps still working with a, big for accounting consulting firm investment managers with product fees.

[00:12:39] Ryan Loehr: If you're still with private banks or you've got custody arrangements outsourced. So these costs can quickly add up. So I think, for us, it's always thinking about, is the family Ready in terms of the governance in terms of the experience to run this type of business, which is quite distinct from running, an operating business.

[00:12:59] Ryan Loehr: If you're a [00:13:00] tech founder, or, you've got a history and mining resources, whatever it may be this is quite a different space. So if they don't have the experience the governance and the, kind of the right people is you mentioned, then it's going to be a challenge to get there.

[00:13:12] Ryan Loehr: But that hybrid hybrid. Family office arrangement can be a good first step, and it's also going to be more economical if you don't quite have, that scale whereas once you're talking about, 200 million or 250 million plus, if you've got those five highs, then, you start to get truly that that economy of scale.

[00:13:31] Ryan Loehr: And I think there's just a big misconception of. Well, how much is enough to justify that internalization? And, don't get me wrong. 50 million, 100 million is a huge amount of money. But it's still not enough to attract the best quality talent in this, this industry. So definitely, tricky.

[00:13:50] Ryan Loehr: As Paul said, I mean about evolving the family office it starts at that. And then it's, well, actually, Hey, we need a private equity expert or, one, another example we have [00:14:00] now business was, I'm so busy trying to figure out the reporting and, the investment piece. But we've also got a huge amount of funds that, as a basically been set aside in a private auxiliary fund, a private charity how am I going to get the time to go out there and find out which charities deserve the money and, where they're, Where the money actually goes and what outcomes it delivers and how to measure those outcomes.

[00:14:22] Ryan Loehr: So, hey, we actually need to go to market and find, like a philanthropic expert who can help with that. And you just think about, the objectives of these families that they're equally as ambitious as when they're in business running and operating business. To when they're out of it. So to continue reinvesting it's critical for them to be able to achieve those things, but equally, has, has, has a big cost in terms of.

[00:14:49] Ryan Loehr: I guess thinking about the, the global talent pool where is Agria seeing the highest growth areas? Is it, is it simply everywhere? Because you've got, wealth [00:15:00] and innovation occurring all around the world, or is it, more skewed towards Asia or the Middle East or any particular region?

[00:15:07] Ryan Loehr: Where is that growth coming from? 

[00:15:09] Paul Westall: It's everywhere really, because I think, going back to the last question, regardless of you've got 100 million and you've got assets and you've got investments, you're going to need someone to help you. It doesn't necessarily, you might need a family office, you're going to need some form of family office.

[00:15:20] Paul Westall: If it's a hybrid, we're working with you and you need some help. Otherwise you're going to do it all yourself. And some principals will do it themselves, but then it becomes their business. Their job, they spent their whole life creating wealth and then they suddenly they go into retirement, but their retirement is actually managing the wealth they've made and that becomes stressful.

[00:15:37] Paul Westall: So you need some sort of of help. So, we see growth in, in all the regions. So in Australia, there's big pockets where there's, there's well being created and then they're like, okay, well, we need to manage this and same in Asia, and again, that's maybe driven by tax breaks. So people think, about coming to places like Singapore and Hong Kong because they, they've got significant wealth.

[00:15:56] Paul Westall: They want to manage investment structures. They're going to do it in a place that's more tax [00:16:00] effective in places like the U. S. Obviously, I think we, we, we read, recently the report, he's still the biggest place for billionaires in the world. I think 37 percent of the billionaires are still there.

[00:16:11] Paul Westall: I think I read and so there's naturally going to be more and more family set up and we're seeing again. a bit of tax, in people are moving to places like Houston and tech in Texas and Dallas because they've got better Nevada. But, there's still, there's still need to, there's still argument.

[00:16:28] Paul Westall: They need to be in New York. They need to be in places where they've got access to all the advisors. So it's just, there's lots and lots of pockets popping up, over Europe, London is still. Albeit with potential change, political situations, Brexit, but it's still a place where families want to be.

[00:16:43] Paul Westall: And then the nom dom situation written about that we discussed before the call, it's still not really putting a lot because again, you need to be somewhere where all the experts are. So if you want tax advice, legal advice, investment advice, you need, you don't want to have to always travel for 10 hours to do [00:17:00] that.

[00:17:00] Paul Westall: So, and there's only so much you want to do over zoom. So yeah, it's just pockets. They're everywhere are popping up. I think it's just driven by this creation of wealth. Wealth transfer that's happening. Now I'm going to be happening in the next five years. So yeah, that's a bit of a, it's not a direct answer, but all he's saying is just there's everywhere is having its own sort of, I think we've discussed it, how Perth, it's not the typical, you'd see as a family office hub, but they've got huge actual resources.

[00:17:26] Paul Westall: There's some really big families there. So there's some great wealth set up family office being set up there, but It's that's just situational is even so if there's all these things going on all over the world, I'd say.

[00:17:37] Tayyab Mohamed: I think, just to add to what Paul said, I mean, beyond the creation of new wealth, I mean, let's not forget the existing wealth that's been transferred on to the new generation, whether it's in the forms of, inheritance or divorce or whatever we're talking about existing amounts of wealth that's that's warranting the creation of its own family office. Wealth is so large sometimes, so, [00:18:00] so that, that, so that's very relevant to what the kind of work that UV do in this ecosystem, because that's money that's always been around, will be around generational wealth, but it's just being split into two or three now.

[00:18:13] Tayyab Mohamed: So, and that's so big that it warrants its own three new family offices. 

[00:18:18] Ryan Loehr: Yeah. I mean, that's, that's, that's the thing, right? That's a, it's a good point. Yeah, this space is so dynamic. Which is clearly why the resourcing needs reflect that whether it's the global tax regime that's changing, you might set up a family office in Singapore if you're in Asia because you've got favorable tax conditions potentially regulation.

[00:18:43] Ryan Loehr: Might change in a year or two years. And then, the reason for having that entity or that structure created all those being equal, changes. And maybe then there's an incentive to move the office or the structure into a different jurisdiction. Maybe you've got [00:19:00] the office or the legal structure in one of those regions, but then the actual family's physical presence is in a completely different Country because of lifestyle reasons because of, could be better access to health care could be, personal lifestyle choices and then, throwing into the mix relationship breakdown death divorce, where you've got that.

[00:19:22] Ryan Loehr: The fractions or that kind of separation with an established wealth. And you can quickly quickly see how, just the, the architecture behind these families. Splinters out to become enormously more complex from, one or two founders, husband and wife to then, children, grandchildren first marriage, second marriage, different jurisdictions, different entities that focus on different asset classes different subject matter experts, different offices around the world to reflect, That on the ground advantage in those markets.

[00:19:59] Ryan Loehr: So, [00:20:00] you know what? What starts out is probably seeming pretty simple. All of a sudden evolves quite big. And, for those established family offices, as you mentioned in terms of the extent, I think, a lot of Those that are beginning their journey in the family office space probably, wouldn't quite comprehend.

[00:20:18] Ryan Loehr: I mean, if you're kind of true family office level you've probably got, fleet of aircraft. So if you want to fly, you need a pilot. Do you, just have a pilot on your, on your books, on your payroll? How do you find them? How do you remunerate them? who benchmarks that everything from logistics, from transport, from security, from cyber security and artificial intelligence, which we'll probably get to those two things.

[00:20:43] Ryan Loehr: But it becomes an enormous business in itself. And if you're trying to build a great business, you need great people. That dynamism I think is you're hugely under, underappreciated, particularly, for us, Little Aussies that are looking at Europe and the kind of more [00:21:00] mature Asian markets in the U S we don't yet have that appreciation.

[00:21:04] Ryan Loehr: I mean, bar, maybe 20 or so of the country's wealthiest. I think Australian wealth is still pretty young. 

[00:21:11] Paul Westall: I think the hybrid model like we're talking about that can be anywhere in, in, in anywhere in the world, pretty much because you only need one or two people once it starts professionalizing institutes, then it, they tend to sort of be centered around the major hubs in the world.

[00:21:25] Paul Westall: So in Australia, they're in Sydney. Brisbane probably because they've got a good ecosystem there. In Europe, it's definitely London is, it's places where if you're going to hire it, you need access to the talent, in America, New York is still a place, but we've got clients that really, in places like, Connecticut, not, not Connecticut, cause that's another area that's actually.

[00:21:44] Paul Westall: But, Kentucky or, where they're just, they can, they can fly in one person to change their life and run it, but then they'll work with other managers in the major cities. But if you've actually growing a team and significant family offices, they tend to be in all these major financial hubs, just to [00:22:00] add to him.

[00:22:00] Ryan Loehr: Two of the points I made there, topics that are hugely relevant. We're hearing all the rage about artificial intelligence, Nvidia's reached astronomical levels. So, surely I must be this thing that's about to take over the world. And, are we about to be replaced by automation and big data?

[00:22:18] Ryan Loehr: And, I mean, I hope not. I think, personal relationships and, human interaction is certainly key to what we do. And, I don't think A computer can replace that, that personalization, that human interaction and understanding emotion yet, but who knows, but are you seeing any impact in terms of the hiring needs or, in terms of the interest from family offices in artificial intelligence and the application it can have, in, in, in their world?

[00:22:45] Pierre Pineau: We are still at a stage where we actually need real people. Adding AI to that would add, I would say, an extra layer of complexity. These are still very small organization, more than 60, 70 percent of those families in Singapore have probably less [00:23:00] than five employees at the moment. So you always have your investment professional, that's all they need.

[00:23:04] Pierre Pineau: And probably your bookkeepers and the rest, they will externalize that. So for me, as far as I'm concerned here in Asia, I don't see a real impact about AI. It's more about a cyber security. However as you mentioned, because especially when you are a new setup, you are not necessarily aware of all those risks around you.

[00:23:25] Pierre Pineau: And these are very basic, simple risks where, mail phishing and all that kind of stuff, right? If you have never thought about it before, you're just not aware of it, and it's very easy to click and open a simple email, and then all of a sudden, it's a big, it's a big catastrophe. So luckily we have good intermediaries around there, a big four companies that sort of start advising clients.

[00:23:46] Pierre Pineau: But I think it's really important to emphasize the importance of cybersecurity. I can't think of, at least from my side of the world, many families that have, internalize this kind of functions. Usually it's under the [00:24:00] CFO or head of operations, but that's, that's certainly a raising concern and I'm not sure how it is in the UK or Australia for you guys, but for everybody, and nowadays you have people reaching out to randomly on WhatsApp on twitter and on email to the points where the Singaporean government, for example, had to take some steps. To protect individuals against those scams. 

[00:24:21] Pierre Pineau: So, certainly a family officer should be they are aware of that. You just have to be mindful and put in place some safeguards. And we'll take them away from family interests and especially information as well. 

[00:24:34] Ryan Loehr: Yeah, I think that's it's so interesting, isn't it?

[00:24:36] Ryan Loehr: Because, on one hand, you've got artificial intelligence, which, maybe there's applications where, you're improving efficiency. The admin tasks that perhaps, an assistant previously did, you start to automate some of that. But on the other hand, you've got this concern for cyber security and the more data.

[00:24:53] Ryan Loehr: You know that you filter through, um, the cloud or you keep on storage. That remains a vulnerability for [00:25:00] big organizations. In Australia we've seen big telcos like Optus, hack and hackers of basically released the identity for, hundreds or thousands of individuals, be it tax file numbers, be it.

[00:25:13] Ryan Loehr: D. Passport numbers, which, is incredibly concerning. We've seen it with law firms we've seen it, with with big established organizations. So, probably the question is for family offices, no matter how big you are. How do they protect themselves? And, is it are we at a point in time where maybe some of those more mature family officers do need to internalize, cyber experts?

[00:25:36] Ryan Loehr: I mean, I'm sure they've got I. T. Professionals, but. Is that enough when, if you're a big household name and you become big enough that, the world knows about you that then creates a target and a vulnerability for the family. So, yeah, it's a really interesting one. I mean, have you guys been tasked with, resourcing any family offices with, cyber security professionals, or you [00:26:00] still kind of. seeing that play out. 

[00:26:03] Paul Westall: Yeah, it's funny enough. I mean, we've actually seen, I've been doing this for 14 years now. We've, we've seen, well not seen, we've heard of horror stories where, really they have been hacked and they've, they've, got into the systems and, shut down, these families own companies that have logistical or fruit or whatever it may be, food deliveries.

[00:26:21] Paul Westall: And they've, They've got in there and stop the whole process and then look, asking for ransoms, and it's like, it's really significant amounts of money. So I think we've heard even crazy stories where, it systems have been set up and people have, come along to officially sort of, do an update on the system and they're arrived and they've just hacked in, walked, hacked into their whole, Access to the data.

[00:26:41] Paul Westall: So these things definitely happen. We've actually hired a few heads of I. T. Which is really unlike, unusual for us to do in in this space over the last couple of years. Where there, these are significant families that have, Multiple residency assets such as yachts, aircraft, they travel, obviously run [00:27:00] their investments and run their life via remotely so they have access to, their, their house is all in the cloud and so they need someone to actually oversee that.

[00:27:08] Paul Westall: So we went in a new house, then they need to, that's where they're going to work. They need to make sure it's all set up on the same level of security. So, yeah, these things are. Well, definitely, definitely happening, not I think families are still see as a, until it happens to them, it's like, okay, we're okay.

[00:27:23] Paul Westall: And it's, but then I think they're starting to be a bit more. I think usually they would work with one of their, like the big one of the accounting firms will have a division that will say, look, we need to make sure that's fine. So, it's definitely something they need to think about. On the AI side, we've definitely seen, and we wrote about this on our website, about how they're potentially using AI for more productivity.

[00:27:42] Paul Westall: So, like you mentioned, helping them streamline administrative tasks, maybe helping them analyze data for some investment decisions. And then we, and we discussed it earlier, maybe even helping them with the, the basic drafting of legal documents that then get moved, sent on to their actual lawyers to assess.

[00:27:59] Paul Westall: So [00:28:00] they're cutting out some of that cost. And sort of streamless and then see, I think it may start to, especially where there's teams of small teams of say five people where, you know, in a big organization, you've probably got enough people to be able to do everything here. You might say, well, rather than hire two or three people, we might be able to do some of this job, through the AI.

[00:28:18] Paul Westall: And then we just hire someone who actually oversees it, maybe a bit more senior and does it. So it's definitely happening, but it's not like, it's small, it's small, it hasn't taken off massively. 

[00:28:28] Ryan Loehr: The AI question. It's interesting in a few parts. We we're at the football, Paul, our football is a bit different to, to yours.

[00:28:35] Ryan Loehr: Yeah, what we call the football yeah, last, last week. And, um, we hosted a group of clients, um, with a an M and a law firm that we work quite closely with and speaking with one of the partners of the M and a law firm, they mentioned how, in their business, they're starting to use a I and kind of doing the preliminary reading of contracts and, [00:29:00] documents to identify, different parties and highlight kind of, I guess, should be reviewed by, a partner or by, the firm which, which look a little bit concerning or, there's reason for, for reviewing those.

[00:29:12] Ryan Loehr: And that traditionally has been, the job of like juniors of the law firm. And he made an interesting comment that, Yeah, like the technology is not quite there yet. Needs to, obviously pass enough data and do enough of these reviews that it gets trained and improves the efficiency and the accuracy.

[00:29:30] Ryan Loehr: But, if it gets to a point where you've effectively replaced a large part of a junior's role, then how does that change the, the ability to train young star? Like if you're a law firm and, you get graduates coming out and stuff, well, what's the graduate going to do?

[00:29:46] Ryan Loehr: They can't just, jump to leading an M and a transaction like there needs to be an education process. So I think the interesting thing about AI, the concerning thing about AI is if you make these junior level [00:30:00] roles redundant, how else Do they learn and, there's going to be this big gap in employment opportunities for juniors, which is a concern.

[00:30:09] Ryan Loehr: But then I guess the second part which is somewhat relevant to what Pierre said, in Singapore, if you've got a family office growing family office that might have 5, 10 people in there. their office. Again, if that starts to shrink down to, to four people or three people or whatever it may be, because you've automated some tasks.

[00:30:26] Ryan Loehr: I mean, what does that do to the culture of these? Family offices. And we've, we've all spoken about the last podcast, how important culture is some of the work and the screening process that, the lengths that you go to when you're trying to suit for cultural fit, but, if you're making.

[00:30:44] Ryan Loehr: Roles redundant. How does the culture of these these firms survive? Young staff, graduates junior staff. I mean, you need them in any business equally, in family office. But yeah, I mean, do you guys have any kind of concerns or see any obvious [00:31:00] impact? In terms of, I guess both culture and also, creating a you know, a gap in the resourcing needs of the families you work with.

[00:31:09] Tayyab Mohamed: To establish the right sort of cultural fit in a family office, I'd like to discuss in our last podcast, it's tough anyways, because the smaller teams of people, everything is a lot more amplified. Now just imagine that small team and like, I don't know, half of this is being outsourced because of AI or whatever, which I doubt will happen immediately, but I think when it does, or if it does it will pose a big challenge because you just under that constant fear of, okay, when is my job going to essentially be done?

[00:31:41] Tayyab Mohamed: you can't be under the accent that kind of situation, so it creates this insecurity on top of the already complicated nature of working within a family office, so I think you've got to tread that very carefully. I reckon, so unless it's something that I saw personally, I mean, I'm I'm slightly I wouldn't say [00:32:00] technophobe, but I basically I've done a degree in I.

[00:32:03] Tayyab Mohamed: T. and everything like that, but I don't think. That AI will replace people like, like how it's made. I think it'll be complimentary to some of the, some of those sort of mundane things that people spend their times and doing and things like that. So, so I, I hope I'm right. And I hope that it never comes to that because if it does, like I said, I think it'll have a massive impact on culture.

[00:32:26] Paul Westall: I agree with Ty, because I think it might, the bigger firms, it will have a big impact, but in family offices, half of the time, different, even like we're talking about being in the office, most family offices, their staff in the office five days a week, I mean, it's changing, but, in comparison to some of the bigger institutions, and that's because the principal, matriarch or whoever it is, wants to come in and Look at you in the eye and say, Oh, this is the problem.

[00:32:49] Paul Westall: Can you tell me solve it sort of thing? And the thing is, there's different in the family office. Those problems change from one minute to the next, and that what they decided to invest in can change with one minute to [00:33:00] the next. So obviously they have structures and things in place, but it's not like sometimes, if you had to then go, okay, well, let me run an AI on that.

[00:33:07] Paul Westall: They're going to get frustrated and go, well, look, no, no, I wouldn't. I want to answer. So. They'll have these key people, the five you mentioned, the accounting, the investment, the lawyers, the support, and they'll want answers on that and it just, they may just then use AI to help get those answers quicker.

[00:33:21] Paul Westall: But I can't see it. Like I've said, replacing it fully. Yeah. Maybe in the big firms, I think a hundred percent. I think there is concerns about that, but touch wood. I'm not, maybe I'm just trying to be too optimistic about our business. 

[00:33:34] Ryan Loehr: Yeah, no, I- 

[00:33:35] Tayyab Mohamed: It'd definitely put us out of business.

[00:33:38] Ryan Loehr: Yeah, me too. Me too. Yeah, us too. So hopefully not. But yeah, I mean, even in our world, I mean, little basic things, which, certainly I think enhances productivity, but, you've got note taking apps now, which can transcribe conversation and then post, recording, transcribing those conversations, it can give you a summary.

[00:33:59] Ryan Loehr: Of the [00:34:00] key points and takeaways. And, I've found I'm actually using that quite a bit if I'm having meetings with portfolio managers, asset managers, analysts almost daily, I don't want to sit there in the meeting taking notes the whole time because I want to concentrate on, what they're telling me, digesting the information, asking relevant questions.

[00:34:17] Ryan Loehr: So going back and having those, kind of file notes and a summary of key takeaways really relevant and equally. with client meetings hugely helpful in terms of file notes. So, I mean, those little things, I think there's definitely huge, productivity efficiencies created, which, allows you to focus on more productive tasks.

[00:34:36] Ryan Loehr: But hopefully, we don't see big, big kind of redundancies, particularly in, the junior staff level, because I think what's probably leading to my next question, in relation to junior staff, but Certainly a lot of the family offices we interact with. Yes, there's a reason for establishing family offices, the economies of scale, the efficiency, the transparency and control that you have over, how, how you kind of manage your [00:35:00] finances and your family's position.

[00:35:01] Ryan Loehr: But there's also a big component of legacy. And, it's typically, I mean, at least in our world, in our practice, it's, it's family run business. And the nature of family run business is normally if they want it, the next generation, there's encouragement for them to be involved. So my question to you guys is, if you've got a family office that says, I want my son or my daughter to be involved.

[00:35:28] Ryan Loehr: I want them to learn, how to manage the family office, the family business, which is, multifaceted. But I don't want to give them, free kick. I want them to work for it. I want them to be qualified. I want them to be remunerated in line with the market. Do you guys help with that in terms of doing the benchmarking that you do?

[00:35:45] Ryan Loehr: How do you manage that effectively? And in terms of the cultural component, you don't want obviously the, the rest of the team saying, well, here's a son or daughter who's, coming in and, rising to the top because, their family how do you get that [00:36:00] kind of acceptance that they're professionally ready and, and you've got that development behind them. 

[00:36:05] Tayyab Mohamed: This is a really interesting thing, and we've, Paul and I have worked on a few cases where we were brought on specifically to review the compensation of the family members and everything like that, and I think the good thing, I mean, it doesn't happen always, there are exceptions to the case, but the majority of the time, the advice that we've given, what we've seen as well, is they treat them just like an external professional.

[00:36:28] Tayyab Mohamed: That's the only way to do this. That's the only way to ensure there's balance in the culture and things like that. So they've got to earn their stripes usually. So they would have come from an investment background or an accounting or finance background and spend some time outside in the industry.

[00:36:44] Tayyab Mohamed: That's something we advise family members who are trying to bring their children or next generation into it so that let them go and earn their stripes. Look at what the real world looks like outside and then come in and Bring those skillset in house and then again, treat them just like a an [00:37:00] external professional because you want to, you don't want to create emotions and sentiments that seem slightly unfavorable, but just because they're family members, and that kind of thing, and everything has got to be taken from a cost of replacement factors.

[00:37:11] Tayyab Mohamed: What happens if this family member that is making a lot of money for doing a very standard role suddenly walks away? Because he wants to pursue other passions, then you, you're going to have to bring that pay down to adjust to the market. So we say, just keep it fair, keep it to the market level. And we have had cases where the family members were paid extraordinary amounts because of what they've done with the operating businesses, but in the family office, which is a different, Game all together.

[00:37:39] Tayyab Mohamed: It's got to be benchmarked according to other family offices as we've advised to bring their pay down accordingly in some of those cases, so that I think that's that's the hope that answers both your question in terms of, how do you embed family members and also how do you repay them?

[00:37:54] Tayyab Mohamed: Because also that embedding aspect is very important from when, when there's an older CEO [00:38:00] or CI was going to be replaced by a new, like a succession planning hire. Let's say there's a CEO of a family office who's going to take retirement. And then there's a successor that's already come on board. It's so important for that guy to get along with the next generation, even more so than the guy's leaving, because he's the one who's going to win the confidence of the next gen and everything like that and spend some time in it.

[00:38:21] Tayyab Mohamed: So if you always say embedding is a good thing and you should, if that's what they want to do but treat them just like an external advisor. 

[00:38:29] Ryan Loehr: I think that's great advice. I mean, I'm always interested. Asking that question because it is so, so critical at least with the clients that we service and serve in Australia, because it is younger wealth.

[00:38:41] Ryan Loehr: We are, kind of the precipice of, the largest wealth transfer in history. Where you're gonna have an enormous amount of wealth transferred from first generation to second generation over the next, kind of five years. Which, seems pretty imminent and particularly, family run business.

[00:38:58] Ryan Loehr: It doesn't seem like [00:39:00] often they've had adequate preparation that they've kind of had their, that succession planning. They've got the governance mechanisms in place to, really enable that to occur successfully. And a lot of, families. That we deal with. I mean, they'll say to their son or daughter, look, if you want to work in the family business that's okay.

[00:39:19] Ryan Loehr: But you know, what I'd suggest first is go and work for, even if it sounds ironic, but, go work for one of our competitors or go work for somebody else in the same industry. So you can learn from a different organization and see kind of a different culture. And then, once you've got that experience and that you're at, you're at a level where, you know.

[00:39:38] Ryan Loehr: You're kind of, competing with the market. You've got similar level experience to the roles that need to be filled. That'll actually give you a unique perspective coming into our business, seeing how a family run business perhaps runs differently to a publicly listed business or, one that's backed by private equity investors, as opposed to, kind of having that legacy behind it.

[00:39:59] Ryan Loehr: So, [00:40:00] yeah, I find it fascinating and it's a question that, we're getting asked. More and more. It's, how do I do this the right way, Ryan? And, we don't we don't necessarily have that answer because it's a it's a complex issue. But things like what you do around, benchmarking so, you can pay them.

[00:40:19] Ryan Loehr: At market, fairly the incentive program be able to align, interests and outcomes with the, the family's overall objectives, not just the individual, basically demotivating them by paying them, as you said, to have, enormous amounts of money for probably, not not the equal amount of value that's being added.

[00:40:39] Ryan Loehr: So. No, I found that yeah, really interesting. And I know we're, we're short for time guys. So just want to say, thanks again for taking the time to catch up. I always enjoy these conversations and they always seem to go too quick where, almost feels like we need to have another, another conversation, so...

[00:40:55] Tayyab Mohamed: Cool. Thank you so much for your time, Ryan. 

[00:40:57] Pierre Pineau: Yeah, I appreciate [00:41:00] it. Thanks.

[00:41:01] Paul Westall: Cheers guys.

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