Wealthy families are trying something new – ditching the secrecy

Belz, a former executive at Goldman Sachs and the Victor Smorgon Group – one of the country’s most prominent family offices – is working with younger founders or younger generations of established families. In his experience, the previous generation was happier to pass on new thematics while his younger clients are keen to make sure their portfolio covers artificial intelligence, next-generation computing, semiconductors and gaming. “Venture or private equity is more exciting to them. [They prefer it to] getting dumped into an index strategy,” he says.

Pym’s Euphemia has about 100 investments, with about 50 of those being direct, and takes outside money. He says the focus of his office is on investment in fintech, climate-related firms and female and under-represented founders. This is not always what is served up by private banks and wealth managers, used to family offices whose venture capital investments are housed in a small, alternatives section of their portfolio. “Goldman Sachs, JPMorgan, UBS, [they] take us to the tennis or out to lunch and send us investment opportunities ... we do go along to the events but [a lot of the] time the investments are not for us,” he says.

An estimated 2000 family or private offices are now operating in Australia, according to research from KPMG, a 150 per cent increase over the past 10 years. The 350 largest family offices in Australia are estimated to manage between $515 billion and $695 billion of wealth outside their operating businesses.

Selling a business, or death and divorce are among the usual catalysts for setting up a family office. These entities usually bring together a range of services including tax advice, financial planning, investment management, budgeting, insurance, philanthropy and succession planning.

But Australia is also home to more and more entrepreneurial family offices, which invest in growing businesses rather than managing the funds that have resulted from a founder’s past success. Some of the more prominent examples of these include Mike Cannon-Brookes’ private Grok Ventures vehicle and Scott Farquhar and wife Kim Jackson’s Skip Capital.

“I want to protect family wealth, but equally I want to create a fulfilling and exciting next stage of my career,” says Hannah Spilva, the co-founder of flower delivery service LVLY. “I’m at the stage of life [with] the best part of my career’s ahead of me, making purely passive investments is not something that excites or motivates me.”

Spilva and LVLY’s co-founder, Verity Tuck, made about $20 million after the company was sold to Malaysia’s Limitless Technology in 2020. Spilva, 40, now has an investment vehicle, Radical Ventures, where she invests along with her husband.

The Productivity Commission estimates that $3.5 trillion in assets will likely change hands in Australia alone by 2050 and the next generation in wealthy families are keen to make their mark as the matriarchs and patriarchs hand over the baton.

“We have a younger generation coming through, freer to do things with the family wealth and not as restricted in the past,” Private Wealth Network’s Milroy says.

William George is in the process of setting up a new specific program targeting the younger generation in family offices at the Table Club, another prominent membership organisation for family offices. In May, Table Club will host its first international event in Japan for a group of about 20 next-generation family office members within their network. “More than likely we will then roll out a ‘next gen’ membership model,” George says.

Francisco Widjojo is among this group starting to have a greater say over the future of their family’s wealth. He started venture-focused Arkblu Capital in 2019 when he was just 26 with seed funding from his family, who live between Australia and Indonesia.

Widjojo’s childhood was a lesson in entrepreneurialism. On a weekend trip to a local McDonald’s, he remembers his parents asking him to calculate how much money the franchise was making. “So how much was your happy meal? How many cash registers are there? How many orders are they taking an hour?” Widjojo remembers his parents prompting.

Aside from investing in equities and debt, Arkblu Capital is focused on e-commerce plays in Indonesia, attempting to take advantage of the country’s rapid development as well as the Widjojo family’s established connections in retail and distribution. “We have a company, Hypefast, which buys up interest in direct to consumer brands, it’s a holding company within particular verticals fashion, cosmetics and skincare,” he says.

These more recent family office arrivals are increasingly looking to work with the younger generation in more established vehicles, Pym says, adding that Euphemia already works with the Smorgons, Gandels, and Schwartzes on investments, encouraging them to tip more money into venture capital. “They are making direct investments, more entrepreneurial than you would expect maybe because the next generation is coming through,” he says.

“We’re trying to disrupt the family office, trying to make family offices sexy [and] remove the mystique.”

Some prefer for their investment vehicles not to be thought of as family offices at all. PPR Capital’s Nikita Gossain is a Private Wealth Network member, and prefers not to give her age given perceptions that grey hair equates to smarter investments. “I’m older than what people think,” she says.

Gossain, started out in M&A at KPMG before pivoting to private investments after studying an MBA at Cornell University and buying security business Smokeshield from a retiring founder.

“I started with a crazy hope and a dream to purchase a business, I figured I could get it funded through debt and equity, so I cold called businesses for six months,” she says.

Gossain says she sees PPR as a “special purpose vehicle” which acquires businesses then matches them with operating teams. “Yes [it’s a family office as] it’s my net worth, my financial value tied up in this investment house, and it’s my lifetime’s work,” she says. On the other hand, she adds, she is not just allocating a set amount of capital for the optimum return or investing her money passively like many other family offices.

While some next-generation founders have plenty of appetite for risk, Gossain says she is trying to dial down the danger after taking out a $3.5 million bank loan with a personal guarantee to buy her first business. “I was unemployed for six months after I’d just dropped $US100,000 ($152,000) on an MBA,” she says.

“This is the reality of investing ... your risk appetite decreases, there is no need for outsized risk to achieve something.”