Lessons From Family Offices, Private Equity Firms Who Built Tax Organization As Profit Centers

Over 25 years ago, I was retained by a family office and private investment firm on a search for a tax executive. It is an interesting experience to share because it demonstrates it grew from millions of dollars to billions in annual revenue through the last four recessions. A representative family member went to a corporate board meeting of the company they sold. This family member walked into the board meeting with a 100M check and asked the Board an important question. Would their Board consider starting a new company that would only manage the family money? The Board declined the Family’s offer to manage their money since this was not of interest to them. The Family decided to establish their own private investment firm to grow the family money.
Twenty years later, the family’s 100million-dollar check grew into an 8 Billion family investment enterprise. For privacy reasons, I would never disclose the Family Investment company name, but I was a witness to their strategy, growth, and success. How did they turn one hundred million dollars into eight billion dollars in assets for the family members annually over twenty years? Fortunately, I had a front row seat since they retained me to conduct more than twenty searches for their ever-expanding tax team over many years. The real story here is how the organizations looks at the tax function as a profit center. It is all in the sophisticated structuring they plan and then meticulously implement.

According to a survey done by Forbes, ninety percent of wealthy families lose their wealth within three generations. In other words, although one family member works hard to build their wealth, later generations erode the wealth when not managed properly. Families who know how to create wealth and protect it are as important as the original wealth-building family member. With the growth of family offices in-house over the last two decades, they are learning it is critical to their success to have the best experts in the tax profession. If you have any experience working with tax experts in family offices and private investment firms, they employ extraordinarily talented tax professionals who strategically evaluate each deal.

My experience in tax executive search provided insight to a world unknown to most people. The opportunity to communicate with super smart CFOs who work closely with their Tax Executives has been a valuable education. You learn a lot working with the smartest financial and tax advisors around the world. Whenever an organization hires us to search for a tax executive, they want to search the market over in order to be introduced to the smartest people they can find. They are willing to do what it takes to build a tax organization that turns into a profit center. Family offices and private equity firms who build technically talented in-house tax teams are knocking it out of the ballpark. They are certainly challenged to the max during markets like this but they work tirelessly to develop planning strategies that produce results.
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