105: 5 Advantages of Starting Your Own Micro Family Office

(0:00) If you're a tech professional or entrepreneur with $1 million to $30 million in investable assets, (0:06) I'm here with the hard truth. The financial system was not built for you. On one side, (0:12) you have fast food wealth managers that treat you like a number.

On the other side, (0:16) you have billion dollar family offices that are just too big for you right now. (0:21) So in this episode, I am going to show you how you break out of this financial dead zone (0:26) with the micro family office. I'm going to give you the five advantages to micro family offices (0:32) and how they can help you go from this dead zone to building and scaling a business that's going (0:39) to give you the lifestyle that you want.

Let's dig in. Welcome to Managing Tech Millions, (0:45) the podcast for tech professionals navigating the journey from high earners to confident (0:50) wealth managers. Struggling with equity compensation decisions? Are you curious (0:55) about turning your portfolio into a thriving, scalable business? You're in the right place.

(1:02) Master your millions, own your legacy. Join us each week as we uncover strategies, (1:08) share actionable insights, and help you take charge as CEO of your financial future. (1:14) All right, welcome back portfolio CEOs.

My name is Christopher Nelson. This is Managing Tech (1:20) Millions. Today, this is the third episode in our foundation series.

We have episode number (1:28) 103 on the mindset of the ultra wealthy. We have episode 104, two years, that is the micro (1:39) family office. What is the micro family office? Today, here we are, episode 105, where we are (1:45) breaking down what are the five game-changing advantages of the micro family office.

(1:52) You may just be joining in, okay, Christopher, let's take it from the top. (1:57) What is a micro family office? Well, a micro family office is specifically for you, (2:03) tech professional, entrepreneur, one to $30 million in investable assets, where you build (2:09) a bespoke business around your family's wealth to be able to grow it, protect it, (2:16) and pass it off to multiple generations. You do this with the WealthOps framework.

(2:24) The challenge with traditional wealth management, as I teased out in the intro, is you're either (2:30) going to be shoved into a standard portfolio that is not going to give you the results that you want, (2:36) or historically, the family offices have been too big. A single family office requires $100 million. (2:45) Multi-family office requires $30 million.

Now, there is for you the micro family office (2:51) that offers you the same benefits of a family office at a larger scale, but for your size. (3:00) Today, I want to overview what are the five advantages. Why would you do this? What are (3:05) the advantages of building a family office around your money, especially this micro family office? (3:12) Number one, purpose-driven wealth management.

Number two, operational efficiencies. (3:18) Number three, standardized business processes. And number four, seamless transition or legacy (3:27) planning.

And then number five, control and ownership. All right, so let's dig in right (3:34) away. Purpose-driven wealth management.

For those of you who have worked, and I'm talking, (3:39) I know there's a lot of technology employees that listen in. This is managing tech millions, (3:43) by the way, and I know there's other people who've not made their money through tech millions that (3:47) are interested in what we're doing over here. You're listening in.

You are more than welcome. (3:51) When you work for great companies who have a great culture, what happens? Things scale and (3:59) grow. People get excited to work there.

I remember working at Splunk when we were (4:06) really pushing hard to get through our IPO and even beyond as we were scaling to a billion dollars. (4:12) It was an exciting time to come to work every single day because we were rowing the boat in (4:18) the same direction. It was infectious.

Well, I'm here to tell you that the same thing, (4:22) you can put that same culture, you can put that same purpose into your wealth. That is the power (4:30) of what's called a legacy statement. This is the difference between a wealth management company (4:36) that's going to talk to you about your goals and a micro-family office where you write down (4:41) a legacy statement, where you are articulating what is the impact you want your wealth to have (4:48) on your family and what you want it to have on the world.

That's just like these great companies (4:53) that we work for. We want to solve problems for people. We want to change lives.

This can do the (5:00) same thing. I want you to think about that for a moment and unlock this. You have the ability to (5:06) run a business for your family that can be as impactful as some of those great companies that (5:13) had amazing culture work for.

You can build that culture here. That's building it through (5:17) a legacy statement. When you're able to have purpose around your wealth, you're able to then (5:25) get excited about doing it.

You're more excited about managing it. Instead of being a chore and (5:30) a headache, you realize this is the thing that can unlock freedom. I know for myself, as I've been (5:36) managing my wealth, that I've exited my W-2.

Now my main focus is creating tax efficiencies, (5:43) generating income, so that we can do two service trips a year. Service trips are where we go (5:48) to other parts of the world and we learn about water poverty, help repair wells, or we actually (5:56) go into communities and we do construction projects or other things like that. Being able to (6:02) manage my home office, my micro-family office, to be able to execute those kinds of trips is (6:10) incredibly exciting.

This is the opportunity. With purpose-driven wealth, you can create an (6:16) amazing culture around your family business that can impact change in your community and also at (6:22) home. Here's the great news.

The great news is that when you're creating your legacy statement, (6:29) you create it with an investment thesis that gives goals to your money. When you're giving (6:35) goals to your money, what that is also going to do is goal-oriented investing tends to outperform (6:42) non-goal-oriented investing by around 15%. They say that if you're just investment-led, (6:48) if you're just picking investments versus, no, I'm actually investing to achieve these growth (6:53) goals or these income goals, that goal-oriented investing performs 15% better.

There's upside to (7:02) doing this. It's important that you understand, number one, purpose-driven wealth, that is an (7:08) advantage to managing your dollars and your money as a business through a micro-family office. (7:15) What is advantage number one of running your own micro-family office? That is purpose-driven (7:22) wealth.

Let's think for a moment. For many of you that are technology employees, technology (7:29) executives, and I know there's even others that listen in that while this is managing tech millions, (7:35) you just want to know how to manage your millions, and that's completely fine. (7:40) Many of you have been a part of great companies and great cultures.

There's been books written (7:45) on the fact that if you have a great company culture and things are moving in the right (7:51) direction, it can have an exponential effect on the company. The reality is it can have the (7:57) same effect on your micro-family office. Giving your wealth a purpose that you and your partner (8:05) share, you and your spouse share, you and your family shares, that can change the way that you're (8:11) thinking about it.

When you also understand that that wealth and the way that you manage it can (8:17) unlock freedom, time freedom, freedom of purpose, geographic freedom, that can be energizing and (8:26) create this sort of growing and scaling culture. When you are running your micro-family office, (8:32) a part of it is writing a legacy statement where you are documenting the purpose for your wealth, (8:39) the purpose today, the purpose in three years, five years, and forever, so that it really has (8:46) intention behind it. This makes your business more powerful.

We all know, and this is where (8:52) I want to make sure that you understand that as somebody who is working in a W-2 and is standing (8:57) up a micro-family office, this can then, even if you're getting burnt down in your day job, (9:04) if your micro-family office has purpose, then what you're doing today becomes purposeful (9:10) because you're growing and scaling this micro-family office that can lead to freedom (9:16) for you and the entire family for generations. It gets really exciting. There's also a bonus (9:23) there in the sense that when you are setting up your micro-family office, you have a legacy (9:31) statement and an investment thesis.

The investment thesis gives goals to your money saying that you (9:37) want it to meet a certain amount of returns in a certain amount of times. There is data that says (9:42) that goal-driven investing outperforms investment-led, meaning I'm just picking (9:47) investments and hoping they perform, or I don't give them real goals, by around 15%. (9:54) Having a micro-family office where your wealth is given purpose, where your wealth is given (9:58) goals, has a distinct advantage of creating a culture around it that is impactful, that is (10:08) purposeful, and then also, it can actually outperform things that don't have it as well.

(10:14) This is why family offices have been doing this for generations. They create a culture. (10:20) There're many families that we don't hear about that have great culture around their money (10:24) and the way that they're creating impact.

This is your opportunity to do something different. (10:30) That's number one, is purpose-driven wealth management. (10:35) Okay, advantage number two is operational efficiency.

When you are running a micro-family (10:41) office, you are taking your investable assets and you are putting them inside of a business (10:46) structure. That could be an LLC. It could be an S Corp, a C Corp, whatever.

Your tax (10:51) strategist is really going to be the one that advises on what's the best setup for you. (10:57) Ultimately, when you have that structure, that business structure, that does create (11:03) tax efficiencies. You can start moving some non-deductible expenses to deductible expenses, (11:09) right? You're getting more tax dollars back.

You can look at the strategic timing of income (11:15) versus expenses to make sure that you're reducing your tax burden year over year. (11:20) This also allows you to ultimately create what's called tax or structured alpha where you're (11:26) really targeting your after-tax return number as your target for what you want to produce for your (11:33) micro-family office. There's efficiencies in your cash management where you're moving things around (11:43) between your entity, between your personal accounts and where you're actually purchasing (11:47) things so that, again, you're constantly in a state of where you're looking to save money and (11:54) reduce taxes that you're going to be paying.

Ultimately, too, running it as a business means (12:01) that you are getting profit and loss statements, that you are managing it the same way that you (12:06) would in any efficient company. You're looking to reduce waste. You're looking to be efficient (12:11) with all of your dollars.

When you start managing your wealth as a micro-family office, (12:19) you're going to get a lot of the efficiencies that come with running a basic business. (12:24) This is why I think it's really important to understand that if you are somebody that enjoys (12:28) running and managing businesses, running and managing a micro-family office is ultimately (12:35) the same thing. Again, to recap, number one, purpose-driven wealth.

Number two, (12:40) operational efficiencies. Then what's number three? Well, in a micro-family office, is a (12:49) micro-family office because it leverages the WealthOps system. WealthOps operating system (12:56) gives you process standardization, meaning that you do not need to think through how things are (13:03) going to run.

You may want to do some modifications. Of course, this is bespoke, but ultimately, (13:09) you're going to get the framework on how to architect, build, and run your micro-family (13:14) office. You want to leverage the same type of techniques that you would use in a high-performing (13:22) business.

You want to be able to take something that works effectively for others. You want to (13:28) leverage those to work for you. You also will then have very clear metrics and performance (13:34) measurements, not 10, not 15, but a core five that are going to help you understand how effective (13:43) you're being in managing your wealth and moving beyond simple returns to really looking at things (13:50) like tax alpha and how efficient you're being throughout your particular business is important.

(13:56) This also, these standardized processes comes with a monthly and quarterly review process (14:01) so that you can essentially manage all of that together in a very standardized way so that you're (14:08) not missing anything, so that you are being very clear that you are managing your business from (14:14) end to end. Because ultimately, when you leverage standardized systems and processes, you are (14:20) treating your wealth as a high-performing business. That allows you to then decrease the (14:26) amount of time on the business operations and spend the majority of time in the wealth (14:32) management where you want to, where you have the opportunity to make the most impact.

(14:38) I think for myself, before I was managing my wealth like a business, it seemed very (14:47) disconcerting because I would do one piece, I would make investments over here, I was managing (14:52) taxes over here, but I always thought that there was money that was lost in the middle (14:57) and transition. Once I moved everything into an LLC, started getting profit and loss statements (15:06) against it, I started outsourcing all of my bookkeeping, so I wasn't doing my bookkeeping, (15:11) but I was managing it like a professional with profit and loss statements. That then allowed me (15:16) to start making decisions like an executive on where I needed to adjust my business and also (15:25) how my business was performing over time.

This is the same thing for you. (15:31) This also leads into, so advantage number three is business process standardization, (15:36) but this also leads into advantage number four, which is seamless transition planning. (15:44) Now, let me give you some insight here.

As somebody who was taking the lead on managing (15:52) the family finances, before I was managing this as a micro family office, I would be managing this (16:00) as a series of investments and I'm investing because of, and there was always, as I was (16:07) reviewing this with my wife, Regine, there was always this lack of understanding of why this (16:14) investment, why now? It made the conversations arguably more difficult. Now that I'm running (16:23) it as a business and there's clarity where we can go from our legacy statement to our investing (16:27) thesis, to looking at our performance metrics and understanding, we want to make our next investment (16:35) as an income investment because we're looking to continue to increase our income over the next (16:40) three to five years to replace your paycheck, Regine. Here is the next investment we're making (16:45) is why.

Here are the different investments we've made in the past, (16:49) their performance and why we're choosing this asset class, this particular operator. (16:54) The conversations make sense and being able to present a profit and loss statement and being able (16:59) to show how we're doing in a very clear and concise manner is also very easy to communicate to (17:07) somebody who is a professional themselves, who has an MBA, who understands how business is run. (17:12) I'm teasing out this story so that you understand that most wealth transfers fail or struggle (17:20) because somebody unexpectedly passes away or maybe expectedly they pass away.

What they're (17:28) transitioning is they're creating a succession moment that is another symptom of a wealth (17:37) transfer where they don't understand it. They don't know how to manage the money. (17:42) What they're doing is they're getting this wealth overnight and they don't understand (17:47) where or how to manage it.

Then they become more stressed and they're not passing on (17:52) something that could actually help somebody else. When you're able to actually articulate and you (17:59) have a business, you have a business plan, it's in accounting systems, you have tracking for your (18:05) investments and you're able to say, I'm passing on a business. This is a functioning business (18:09) and my intention, everything wrapped up, is that I'm not dissecting the business, (18:14) but I'm passing it on.

I've actually been bringing my sons forward and teaching them how (18:19) to use it. Then they're just taking over the family business that has had training wheels. (18:24) They've been able to run portions of it and now they run and own it.

(18:28) That is essentially how a family office operates. You're building a business and you're bringing (18:34) people to it with a common language, with a focus. You're seeing this unfold.

You're really just (18:41) managing your money in a very systematic way to reach outcomes that you decide on (18:47) so that then you can systematically bring people to this common language and they can own and run (18:52) it. That's the strategy. This is the advantage of this transition planning.

Seamless transition (19:01) planning is an advantage of running a micro family office. Number five, I'd say the ultimate (19:08) advantage is control and ownership. Control and ownership.

I heard a story the other day (19:16) about a gentleman who had sold his business and was ready to then move on. What he discovered is (19:24) that his trusted wealth manager had put his money that he had built in his business into a lot of (19:32) higher risk investments that I think he may have been choosing at the time, but they were (19:37) these more complicated, high-risk, high-octane investments he didn't really understand. (19:45) His retirement didn't turn out how he wanted it to.

In the conversation, it was interesting to (19:52) me because it seemed like he was not ultimately taking responsibility for the fact that he had (19:57) hired this guy to do the results. It sounded like some of this stuff had been happening for years (20:04) and not been monitored, but I think this to me is a risk that I've seen is that when you put (20:09) somebody up and you say, you are the CEO of my wealth and I'm going to focus on my business over (20:14) here, you need to understand the risk that's associated with that. That's something that (20:19) ultimately I have refused to do.

I do not want somebody else to be the CEO of my wealth. (20:26) I want to be the CEO of my wealth because the difference is I am willing to delegate portions (20:32) of the responsibilities to other people just like a CEO would, but I want to make sure that I own (20:40) the result. I also want to make sure that I'm in direct control of my investment management (20:47) decisions.

I want to know where it's going and why. I also want to control the inputs because I (20:53) realize it's investing, so I control the inputs and then I manage and I understand what the (20:59) outputs. I also want to make sure and create a log and understand what are the decisions I'm (21:04) making, which ones were good, which ones were poor, what can I learn from them so that I can (21:09) pass this information on.

Ultimately, I think that when you take responsibility for your own (21:16) wealth, what I've come to understand is I can unlock the lifestyle a lot easier and a lot (21:24) faster than I thought I could by outsourcing it to somebody else. (21:28) Not that I ever completely outsourced. We had some fee-only financial advisors for a while, (21:33) but I think it was more of I wasn't just stepping into the ownership seat.

I was treating it more (21:38) like a hobby and I wasn't treating it like a CEO. That could be you too. I know that there's (21:44) plenty of people in technology who've built considerable wealth and they're stuck.

They're (21:53) no man's land and they don't want to go to a fast food wealth advisor and just get in the (22:00) standard growth portfolio. They see multi and single family offices that are out of reach and (22:06) they're stuck. Well, this is your opportunity to leverage a tried and true system of wealth ops (22:14) to run and scale your own micro family office so that ultimately you can be the CEO, have the (22:21) control and ownership yourself, and then also start bringing other people along for the journey (22:26) and bringing some more of the family ownership to get people bought into this vision that we're (22:32) running a family wealth business that we want to grow and scale to create impact after we're gone.

(22:39) Ultimately, this is truly what changed everything for me is when I went from a hobbyist to no, (22:47) I am actually now, as I'd learned enough and I realized that I had to start setting (22:52) and creating the vision, I had to start managing this like a business if I wanted it to perform (22:58) like one, this was arguably the biggest decision that I made that changed the trajectory of my (23:05) wealth. The reality is you can do it too. You can make this decision too because as I've stated (23:11) before, running a wealth management company is not a wealth rocket science company.

It's not even (23:17) a wealthy technology company. It's not that complicated. It takes some work and a lot of (23:23) the things that technology employees do in their day job are much more complicated and sophisticated.

(23:28) This is truly what it is. It's managing. It's just keeping an eye on it and when you're working (23:32) with a system that helps you decrease the amount of time in operations and help you focus more on (23:37) wealth management, the truly enjoyable part of this business, that's when things get really fun.

(23:42) Let me recap them all. Let me go through them. Number one, the advantage, purpose-driven wealth.

(23:47) When your wealth has a purpose, it will give you exponential returns because of the goodwill that (23:54) it generates between you and your family, creating a great cultural business around your wealth, (24:00) but then also it is proven that whether it's goal-oriented, purpose-driven, it will perform (24:05) better. Number two, operational efficiencies. When you're running a micro-family office (24:11) as a business, you will get tax efficiencies, you will get cash efficiencies, you will be able to get (24:18) more out of your dollars.

Number three, standardized business processes. When you're (24:26) running a micro-family office based on WealthOps, you are going to get standardized processes so (24:31) you don't even need to think about that. You're focused on getting to execution, (24:35) that speed of execution that helps.

Number four, seamless transition planning, whether that's to (24:41) your partner or spouse, whether it's to the next generation. You're going to have a common (24:47) language around this business that you can communicate that will allow you to then pass (24:54) on this business to the next generation. It's not just a collection of investments, (24:58) but they will be able to see through all the documentation, through all the setup of this (25:03) is an actual business that's moving on to the next generation.

Number five, ultimately, (25:09) control and ownership. It allows you to sit in the CEO seat and to control the inputs and manage (25:18) the outputs, which is so important because then you are ultimately the one that can lead your (25:23) family to the success that you want. I think that's so important.

The ultimate outcome here (25:30) is for you to create a wealth management process that serves you in your life and is able to unlock (25:38) the lifestyle from the wealth that you've created. This is truly what I want for you. (25:44) Thank you so much for listening.

That is the end of this episode. These are the five advantages (25:48) for running a micro-family office. My name is Christopher Nelson.

If you are interested in (25:53) learning more, we do run monthly masterclasses. If you go to wealthops.live, you can apply now. (26:01) We'll see you next week.