Family Governance:  Making it Work for Your Family

Achieving Excellence in the Multi-Family Office

By Nancy McColgan, Director of Verdence/FAMILY

Families with significant wealth are continually challenged by next-generation transitions and various wealth management-related matters.  Whether it’s establishing trusts for newborns, training young adults for leadership within the family structure or closely held business, or educating younger generations on the concept of stewardship, charitable giving, and financial responsibility, there are many issues to consider.  There is a frequently heard saying in working with the ultra-high net worth crowd, “Shirtsleeves and to shirtsleeves in three generations.” This statement, attributed to philanthropist Andrew Carnegie, refers to the cycle of building wealth initially and then having proceeding generations blow it. It is informally predicted that by the third generation, 90 percent of wealthy families may lose their wealth.  However, wealth “evaporation” can also be the result of poor planning around wealth transfer, estate, and gift taxes, in which case two generations may be the appropriate number.  Either way, wealth can be squandered quickly without proper preparation, planning, and communication.  Which brings us to the topic of family governance.  While proper financial planning, investing, and wealth strategy is a baseline for wealth preservation and tax management, family governance provides a structure where shared and differing values, as well as the actual numbers and strategic wealth planning implementation, may be addressed with greater transparency across generations.

When to Focus on Family Governance

In working with ultra-high net worth families for well over a decade, I have yet to see a standard in what the term “family governance” means or how and when it’s applied within a family.  While there are many attempts at defining it, and perhaps an ideal framework to consider, it rarely evolves in an ideal way. This makes perfect sense because families are so different, generational wealth can be “old” or “new,” and family members have very different perspectives and personalities. As family assets grow in value and complexity, babies are born, others pass away, and marriages, divorces, and dysfunction occur, the need for some type of governance and oversight related to education, transparency in investment holdings, trust and estate updates, philanthropy, and family leadership (“patriarch or matriarch”) becomes more apparent and, frankly, more important.  Families often take note of this as generation two or three reach adulthood.

How Families Execute Family Governance

In some cases, a family may develop a “mission statement,” which is a summary that states the shared values, vision, and purpose of the wealth across generations; or it states the core legacy values and vision of only the wealth creator(s) who hope to instill these principles across generations.  Is a mission statement required?  Not necessarily, and families sometimes get too hung up on getting this statement exactly right at the expense of focusing on what they want to accomplish through the family governance process.   If a mission statement doesn’t come easily, start by answering this question:  What do you want to accomplish by establishing “family governance” now?  Answer that question first, then decide the best format and timing of how to proceed. Here are several examples of how the governance process evolved within several families.  None are alike and only one had a formal mission statement.

Driven by Philanthropy

A first-generation wealth creator in his 60s established a family foundation that supports a variety of highly specific local causes.  The wealth creator brought three of the four adult children together to discuss the oversight and the goals of the foundation.  All other topics related to estate planning, trusts, wealth transfer, etc. were off the table.  One initial, in-person meeting was held and several one-on-one phone calls.  One adult child took the lead and expressed interest, and the other two were mildly interested and were unfamiliar with some of the concepts and ideas discussed.  Although there wasn’t a lot accomplished at first, it was the effort by the wealth creator to communicate what was important to him that changed the dynamic of the family in a healthier direction.  Eventually, other topics were addressed.

Operating Company Update Focus

A privately held $2 billion family-owned company is run by one of three members of the second generation.  The other two do not participate in the management or operations of the company but receive an equal share of distributions and proportional ownership.  Meetings are held quarterly with the siblings to review the company and the financials, but each family line determines how they will educate and train their children in financial management and stewardship.  One of the three siblings takes advantage of the training available to them through their advisory firm.  The others do not because they have younger children who are not yet ready for more education and preparation.

Investment, Trust, and Foundation Focus

A divorced first-generation wealth creator with four children and twelve grandchildren meets in person bi-annually over a weekend in a neutral location with the children and in-laws.  None of the grandchildren, some of whom are young adults, are included.  The main topic of the discussions is a review of family trusts and legacy, the investment allocations, and the family’s donor advised fund.  The charitable allocation from the fund is rotated each year by family line so that all children and in-laws are involved in charitable activities.

Old Wealth

Heirs of an early 20th century industrialist (five lines of cousins) meet for a family reunion every other year in the town where the wealth was originally created.  Some family members consistently attend, while others do not.  At this point in time their only connection is the inherited, smaller “pockets” of wealth passed down through several generations, and the connection to the original family homestead, which is no longer occupied by any of the family members.  They spend the weekend together, review family history and legacy, catch up with one another, have a picnic, then go their separate ways.  A handful of family members remain involved in several family foundations.

Single Family Office

A multi-billion-dollar family with four living generations holds an annual family meeting. Every family member over the age of 18 attends.  The highly structured meeting with a firm agenda is held over a weekend and is focused on legacy and trusts, charitable giving, investments, and educating the younger generation on all aspects of the oversight of the family wealth structures and expected stewardship.

Five different families and five unique attempts at family governance.  There is no standard “formula;” however, a good advisor can greatly assist a family with developing goals, objectives, and a format that works with the unique style and approach that best serves them.

Beyond Lifestyle Management

Achieving Excellence in the Multi-Family Office

By Nancy McColgan, Director of Verdence/FAMILY

Though the business of wealth management is a serious one, I often chuckle when I encounter some of the more cliched assumptions as to what a multi-family office is and does. If I didn’t know better, I would think my colleagues and I were constantly surrounded by glamour and glitz, pressing clients to sign important papers while dodging champagne corks and the paparazzi’s flashbulbs.

But I do know better, and I can tell you that while the glamour may not (always) be front and center, the needs that a multi-family office (MFO) can fill for an ultra-high net worth (UHNW) family are very real and very important. After all, UHNW families need to handle the same “stuff” that everyone else does—raise children and grandchildren, deal with health issues, plan for college, give to charity, and all those other pieces that, when combined, make up a life.  The key difference is the scale and complexity that significant wealth can bring to all those pieces.

After working with nearly 100 UHNW families, I believe it’s time to take a clear look at both what defines an MFO and how an MFO achieves excellence in delivering a broad array of world-class services.

Defining an MFO

First, let’s define an MFO. An MFO is a financial services entity, usually an independent Registered Investment Advisor or trust company, that offers a variety of services to multiple ultra-high-net-worth individuals and their families.

These services include, at a minimum:

  • Capital allocation through investments in both public and private entities;
  • Integrated wealth strategy and financial planning;
  • Budgeting and cash management;
  • Trust, estate, and tax planning;
  • Some oversight of “real” assets (i.e., real estate, art, jewelry, etc.);
  • Family governance assistance;
  • “Lifestyle” services that may include activities like bill pay and concierge services.

In addition, risk management and business succession planning may be offered on a consultative or comprehensive basis.

Generally speaking, the net worth, asset requirement, or need for a client to engage with an MFO usually becomes apparent when a family is dealing with $30-$35 million or more in net worth or $25 million in investable assets. Although usually expected, when the wealth is the result of a windfall, such as the sale of a business, concentrated stock holding, or an inheritance, the complexities of managing that level of wealth tend to arrive with far more baggage than expected.  The right MFO will have the right team at the right time to deliver a highly coordinated approach to investing, planning, and strategy, leveraging the skills of financial advisors, accountants, attorneys, and insurance professionals, all of whom have the best interests of the family driving their decision-making process.

The Complexity Factor

The complexity that accompanies significant wealth requires close coordination of numerous advisors, management of multiple properties, cash management, paying bills, and keeping track of asset-related documentation. In addition, estate, trust, and tax planning need ongoing attention as circumstances and family goals evolve, and the tax code is continually tweaked and/or updated with every administration.  It can be overwhelming and incredibly time-consuming to juggle and keep track of all the pieces.

There are also the inherent and unique complexities that each family brings to their respective table, whether it be differing visions for a family’s philanthropic pursuits or the challenges of dealing with aging or infirm elders, substance abuse issues among children, complications from past divorces or a host of other issues.  An effective MFO provides services, guidance, and access to the best partners to provide the right kind of help, care, and advice to navigate life’s most challenging obstacles.

Conductor Versus Quarterback

With apologies to my colleagues at Verdence/PRO, while one often hears an effective MFO described as being the “quarterback” of a family’s plan, I prefer to compare our work to that of a conductor. A great quarterback will be able to read each play, weigh all the options, and make the best decision to keep a team moving down the field. But they are making one play a time. A conductor on the other hand must keep a hundred or more musicians playing in tune and in time, integrating all the various sections into a cohesive sound both in the moment and several movements in the future.

A well-functioning MFO understands this dynamic and works hard to listen, communicate, and coordinate multiple parties. This requires the ability to hire and retain the most talented, team-centric people with the right credentials, personality, and cultural fit.  Just as a conductor must enjoy and understand composition and classical music as the baseline for their profession, the MFO staff must relish the challenge of delivering both the breadth and depth of MFO services to families with various needs and demands.

Commitment to the Business

The multi-family office business is not a platform in which one “dabbles”.  It requires a firm commitment, strong leadership, and the willingness to build and maintain a cohesive infrastructure, with a highly-skilled, team-centric staff, and the processes to support families through generations.  Scale also matters. One or two wealthy families does not a multi-family office make. Rather, a true MFO has the footprint, the experience, and the size to live up to its commitment to the business of serving this type of client—now and for decades to come.

Having the Wealth Talk

Overcoming the Fear that Keeps Parents from Discussing their Finances with their Children

By Nancy McColgan, Director of Verdence/FAMILY

“I can talk with my kids about anything.”


“No, not that.”


First, A Story

Nearly a decade ago, I was meeting with an elderly couple who were revisiting their estate plan for what would prove to be the final time. They were both in their mid-90s, clear-minded, and fully aligned with their gifting and inheritance goals for their family. The patriarch was long since retired and one of his five children was running the family business. Trusts had been established, a detailed gifting and inheritance plan for each child was long in place. But when it came time to discuss what each of the children was going to inherit when the parents passed away, the patriarch pushed back. He was concerned that wealth would be squandered by one of their children who had been a bit irresponsible in their youth. It was only after much back and forth that the matriarch finally put her foot down, saying, “For goodness’ sake, he is 70 years old! He needs to make sure he can complete his own estate planning” that we finally made any progress.

After some hesitancy, the patriarch realized somewhat that he was being overly zealous but still had a hard time letting go of control and fear. And there is the real issue—control and fear.  He had never shared the family’s full wealth picture with any of his kids, even after seven decades. I finally got permission to proceed.

Anyone who has spent any meaningful amount of time in the multi-family office space has a similar story to tell, but there is much to learn from situations like this. The need to control, coupled with fear of the mistakes that the next generation might make, can be a major hindrance to building and communicating the kind of multi-generational plan that helps ensure legacies and sets future generations up with the tools and resources they need.  Difficulty starting conversations with children about trusts, spending, family wealth, and inheritance is very common.

When the kids are, well, kids, the process can be relatively easy. No need to talk about it in any significant detail.  The “revealing the numbers” anxiety begins kicking in during the teenage years. In some states, informing children of funded trusts and balances is required at the age of majority (18, 19 or 21, depending on the state), so in those instances, the wealth discussion and any stewardship training should begin before then.

Typically, many parents are terrified they are going to ruin their children’s incentive to be productive if the children know that they will receive a large inheritance down the road or will gain access to a funded trust at 25 or 30 years of age. Conflicts between the parents at this stage are common, and usually related to four factors:

  • The amount to leave to children in trust or outright at death;
  • When to tell them;
  • How to tell them, and
  • What to tell them.

If there are stepchildren or stepparents in the mix, things can get even more complex. Again, at the heart of these challenges are fear and control. As often as I’ve been asked how to help families through this issue, there is no single answer or solution for how families should handle these matters, but there is a common thread in all those scenarios where things go smoothly: effective and timely communication. Every family is different, and every child is different. The fear and control factors aren’t usually directly about preserving the family wealth because there are many good planning solutions for families to consider in protecting assets across generations. Parents often want to control what their children will do, the decisions they will make, and how they may react to a potential “windfall.” While understandable, the last thing a family should do is nothing. Communication is key, albeit difficult.

Assuming the parents want to begin talking to the children regarding these matters, a good place to start is for each to first address any fears or hesitancy so that it’s acknowledged. Each party should try to avoid criticism and irritation, even if the fears seem ludicrous. Although they may very well be, in that person’s mind they are real.

In addition, conversations may very well differ by child, so that should be addressed as well. Parents must fully embrace and understand that they cannot control all outcomes. Every person, including their children, is ultimately responsible for the decisions they make about their life, good or bad. Most parents understand this logically, of course, but fear and control born out of love typically override the pragmatic side of things in sensitive matters.

After the fears and concerns have been laid bare, the next step must involve working on developing a plan as to how and when to proceed with the conversation(s). Make sure both spouses are on board, even if their approaches are not exactly the same. In some cases, a meeting with the entire family may be ideal. For others, a two-on-one, or a one-on-one conversation with each child works better. Parents who have a hard time working through the discussion can work with a trusted advisor to assist them, either by preparing the parents or by facilitating a meeting. Multiple meetings are likely appropriate if children need education on various aspects of trusts terms, investments, philanthropy, or wealth strategy and planning. But no matter how long it takes, the initial goal must be to get started. Rest assured that while parents cannot control all outcomes, preparation and honest discussion with their children is critical to well-grounded legacy planning and shouldn’t be avoided. The best outcomes that I’ve witnessed are when parents have prepared and communicated well with their children on these matters at appropriate times.

Preparing the next generation for inherited wealth can be very challenging but can be successfully accomplished by identifying the hurdles that hold parents back from proceeding with this important step and encouraging them to find a way that works best for them and their children. My story of the 90-year-old father afraid to talk to the 70-year-old child about inheritance details may be an extreme example, but regardless of the ages of those involved, waiting will not help families achieve their desired outcomes.

10 Questions to Ask Yourself When Considering Private Aviation

Click here to download a PDF of this white paper

Though the cost is significant, the benefits of flying private are substantial. It provides you with tremendous convenience and reduces travel stress as you skip the security line, sometimes driving right onto the tarmac to board your jet. For business travelers, the flexibility to be able to book flights at a moment’s notice, the productivity associated with hosting collaborative meetings mid-flight and the positive image a corporate jet conveys are all huge benefits. It also can save you a lot of time since you will be able to fly directly to your destination instead of having to change planes which is becoming more common in commercial air traffic. As for comfort, you’ll be sitting next to your companion, with your pet by your side, in an incredible leather recliner with plenty of leg room instead of being crammed into a row of six. Finally, flying alone on your own aircraft helps maintain personal privacy and keeps you isolated from other possibly ill travelers.

There are several critical questions to consider when determining which of these most popular access options will best suit your needs: 

  • Chartering a jet
  • Buying hours on a jet card
  • Considering fractional ownership
  • Purchasing or leasing a jet
    1. How many trips do you take per year? 
      Probably the single most important question to ask yourself is “how many hours do you fly per year?” This will help you determine if it’s most beneficial to charter or purchase a jet. While your net worth and annual spending certainly come into play when making this significant decision, how much you plan to fly is more important. Someone who takes two short trips per year on a turboprop may only spend about $10,000 in charter fees, while a corporate executive who travels 2-3 days per week on an ultra-long-range jet should be prepared to spend millions in travel costs, tens of millions if they purchase the jet.
    2. Where do you typically fly?
      Another important variable in the equation of how to fly private is “where do you usually travel?” as this will help you determine what equipment you will need for the mission. Once you identify your destination, you can calculate how many nautical miles it will take to get there. Then, use the speed and range of an aircraft (see our Equipment Guide in Appendix A at the end of this paper) to determine what type of plane can get the job done. Keep in mind that many exotic destinations are surrounded by mountains and water so runway length may be a consideration as well. Though a turboprop is not as fast and comfortable as a larger jet, it can access most of these hard to get to locations. St. Barths in the Caribbean is a perfect example of this. The runway is only 2170 feet long, so you need a Short Take Off & Landing (STOL) plane like a Pilatus PC-12 and a pilot who has the training to accomplish a feat akin to landing on an aircraft carrier. Most high-end travelers will utilize larger private jets to get to Puerto Rico or St. Martin and then switch over to a turbo prop to shuttle them across to this secluded island.

      A family that has homes in two locations is the easiest to solve for, while someone who has 3+ homes and flies regularly for business is significantly more complex. Take a couple who lives just outside of Washington D.C. and has a vacation home in Kiawah Island, South Carolina. They travel back and forth about once a month (4-hour round trip X 12 times = 50 hours approximately). They choose to purchase a 50-hour jet card with Wheels Up that enables them to fly from Washington to Charleston on a King Air 350i turboprop. Another family has homes in Massachusetts, Florida, Colorado, and California. While a light cabin jet with a range of 1900 nautical miles can transport them comfortably from Boston, MA to Naples, FL, they need a midsize or super-midsize to get them from the East Coast to their home in San Francisco. A family that requires the use of different types of equipment should consider chartering, participating in a jet card or fractional platform that allows flexibility or putting a purchased jet into a charter pool where they can utilize other owner’s jets.
      See our Equipment Guide in Appendix A
    3. Who will be traveling with you?
      Now that you know where you are going and how often, it’s time to determine how many people will be traveling with you. If the kids are grown and out of the house, maybe it’s just two of you heading to Florida or Colorado for a long weekend. In contrast, some families like to travel with kids and grandchildren which can require a larger aircraft. After you have completed the head count estimate, think about how much luggage you typically need. Are you someone who travels light because you already have everything from clothes to toiletries at your vacation homes, or do you (or your significant other) tend to pack everything but the kitchen sink for a weekend away? Private jets do not have the cargo space that commercial planes offer, so this should factor into your decision regarding equipment needs. Finally, would you enjoy bringing your pets with you? They will require additional space onboard, and some charter services/platforms may not allow them. Candidly, the desire to travel with beloved family pets is one of the top reasons that many people fly private. They bounce from one home to another for weeks at a time and do not want to leave their pets behind but also do not want to subject them to flying beneath a passenger jet-like luggage.
    4. When do you typically travel?
      Anyone who is has ever booked a flight for the week between Christmas and New Years can tell you that when you want to travel is almost as important as where you want to go. Private jet charter rates go up dramatically and, in some cases, can nearly double for high-demand days and holiday periods. Many jet card programs have restrictions that limit or prevent their members from using their travel hours around the top 40 to 50 travel days. Fractional aircraft owners are often required to give advanced notice. Thanksgiving is the perfect example as blackout dates do not allow you to travel in some cases from the Tuesday before Thanksgiving until the Monday after. Prior to signing up for any program, make sure you have done a detailed analysis of your typical travel dates and read the fine print regarding peak date restrictions. If you plan on chartering for a holiday trip, book early as these flights are often very popular, and prices only increase as the date approaches.
      See our List of High-Demand Days and Holiday Periods in Appendix B.
    5. How flexible are you when it comes to booking trips, making travel changes and cancellations?
      Flexibility when it comes to booking, canceling, and making changes to a trip is another significant consideration when deciding on a private aviation strategy. Families who do not work 9 to 5 and no longer have kids in school have a lot more freedom than a company CEO who needs to board a flight first thing in the morning to discuss an important merger or acquisition face-to-face. Every family is different on this front. Some preplan every trip a year in advance, while others decide on a whim or unexpected weather change to pick up and fly south for more warmth or go west to catch a recent dump of fresh powder. Having your own jet gives you ultimate flexibility, however, that comes with a significant price. While chartered aircraft are readily available to most destinations and times, reserving them last minute will also cost you a pretty penny. If you plan to buy a jet card or a fractional share, make sure you fully understand the rules associated with last-minute bookings and changes.
    6. Do you prefer brand new equipment or is older equipment acceptable? Just like buying a car, there can be a significant difference in features, comfort, and price between the latest model to hit the market and a used aircraft that has been around for a few years, so you will need to weigh the pros and cons of flying new equipment versus realizing cost savings with used. To determine the “true age” of an aircraft, calculate its remaining service life using the number of years since it was built, its total flight hours, and the number of takeoffs and landings. The average private jet is between 1 and 40 years old with most inside of 25 years. Planes that are older than 20 years are considered “old”, while those 10-20 years old are “standard” and those younger than 10 years old are considered “new”. Most private jet operators put between 300 and 1,000 hours on a plane per year. This means that many standard jets will have about 10,000 hours on them while older equipment can exceed 20,000 hours if well maintained.  Maintenance history is key. This is probably the biggest difference between chartering a plane vs. embracing a jet card or fractional ownership plan. While you can pay a premium to charter a newer piece of equipment, there are a lot of older jets in the charter market. Private aviation membership and fractional platforms like NetJets and Flexjet typically have much newer aircraft. Those considering the outright purchase of planes should keep in mind that it will only be the “new, new thing” for several years before more advanced models come out. Though some choose to upgrade their jet every few years to stay current, this can be very expensive over time, as the most significant depreciation of the asset occurs in the first year. For business-use jets, many companies maximize the tax depreciation of the equipment and then upgrade when it is done. Many of the newer jets are faster, have longer range and cabins that are more comfortable for passengers. That said, many jet owners have gutted and completely refurbished the interior of their planes to give older equipment a more modern look and feel. In addition to the aesthetics, this can also include updating the jet’s electronics and instruments to keep up with changing technology and industry standards. For many people in the charter market, this is the ultimate “value trade” as it looks new, but the rate is lower to reflect the plane’s age.
    7. Will your travel be for personal reasons, business travel or both?
      From a complexity standpoint, another significant determination as to whether the plane will be used for personal trips, business travel or a mix of both. If you use the equipment for any business travel, it is incredibly important to keep a detailed log of everything from where you traveled to what company you visited to see, who was on the flight, their role in the organization and why they needed to join the meeting. These records will help you maximize your aircraft cash flow while minimizing your tax liabilities. They will be used to prepare your company’s aircraft-related federal / state tax returns, in aviation financial reporting for regulatory bodies like the SEC and in aircraft-related audit defenses with the IRS/state. Whether you have an accounting team with private jet taxation experience or choose to partner with a specialty firm like Aviation CPAs, it’s crucial to work with someone that has experience in navigating the often-conflicting FAA and IRS rules, layered regulations, and compliance issues that you will face in business aircraft ownership. Though some try to keep records in a standard Excel spreadsheet, we highly recommend that you either outsource it entirely or utilize software like Flight Tax Systems to record all your trips. This will help you keep track of the Standard Industry Fare Level (SIFL) which is the taxable fringe benefit charged to employees for non-business use of the company aircraft. Companies are required to disallow aircraft costs, expenses, and depreciation from non-business flights which involves a specific calculation. Flight tracking software also allows users to track Qualified Business Use (QBU) for § 280F Depreciation Recapture for Business Aircraft. You will need to track days, miles, and landings within applicable states, which can result in substantial taxpayer savings on state sales tax filings. If your company is public, your CFO will need to report the incremental cost of your personal use of a business aircraft for proxy disclosure purposes. That said, even if you only use your private jet for personal travel, it is still important to keep detailed records so that you or your team can perform an annual analysis to optimize your use of this expensive asset.
    8. When it comes to safety, what certifications do you require?
      One of the most important questions to ask when booking a private charter or purchasing a jet card or fractional ownership from a platform is, “have they been safety audited by one of the four major ratings organizations (IS-BAO, ARGUS, BARS & Wyvern) and what level did they achieve?”
      The International Standard for Business Aircraft Operations (IS-BAO) was created by the International Business Aviation Council because of the need to provide standards that look beyond those of the FAA’s for operators that provide international flights. IS-BAO audits use benchmarks created by the International Civil Aviation Organization, which are recognized around the globe. IS-BAO-registered operators are those that follow international best practices, perform internal audits, and pass third-party IS-BAO audits to receive a Certificate of Registration from the IBAC Standards Board. IS-BAO has three stages (I, II, & III) of safety auditing, with stage III being the most prestigious and most difficult to achieve.

      The Aviation Research Group US (ARGUS) audits an operator’s maintenance records, flight history, insurance coverage, the frequency of aircraft inspections and a program’s ability to meet or exceed FAA standards. Other considerations include flight hours, pilot training, and their medical records. ARGUS has four rating tiers for operators: Does Not Qualify, Gold, Gold Plus and Platinum. All ARGUS-rated operators must provide the auditing firm with its latest records to ensure that they’re cleared before each flight. Before flights, a “TripCheq” can be requested that provides further information about a specific crew and plane.

      The Basic Aviation Risk Standard Program (BARS) was developed by the Flight Safety Foundation (FSF) in conjunction with the onshore resource sector to provide a system of oversight for the contracted aviation sector. Operators undergo an annual audit to the BAR Standard to become registered BARS Aircraft Operators (AO). Color code designations are applied to the operator’s BARS registration that include amber, green, silver and gold which is their highest rating.

      Wyvern Consulting offers different levels of audits that comply with private aviation industry standards. Registered Operator is its entry-level program in which operators have their records on file in the due diligence-related Registered Standard PASS Program that Wyvern’s corporate, operator and broker clients can access before a flight. (Wayvern’s PASS is similar to ARGUS’ TripCheq system.) The highest-level tier for Wyvern is the Wingman Program which is much more difficult to obtain.

      To determine if a charter company or private aviation membership platform is certified, and at what safety rating, you should inquire with the private jet operator directly or check the company’s website. One reason chartering a jet can be less expensive than the major membership / fractional platforms is that they typically only acquire one to two safety audit certifications, and their resulting ratings are often lower.

      Safety Certifications*

       International Standard for Business Aircraft Operations (IS-BAO)
      Good Stage I Demonstrated the establishment of an appropriate Safety Management System (SMS) and that safety management activities are appropriately targeted.
      Better Stage II Ensures that safety management activities are appropriately targeted and that safety risks are being effectively managed.
      Best Stage III Verifies that safety management activities are fully integrated into the operator’s business and that a positive safety culture is being sustained.
      Aviation Research Group US (ARGUS)
      Good Gold Meets or exceeds ARGUS standards and the company does not have outstanding safety issues or history.
      Better Gold Plus Meets all of the Gold standards, along with an ARGUS on-site safety audit or registration with the IS-BAO.
      Best Platinum Meets all of the Gold Plus standards, as well as have an emergency response plan and a functioning safety management system.
      Basic Aviation Risk Standard Program (BARS)
      In Process Amber Indicates the audit has been conducted and non-conformities are still open within the allocated time (normal for the renewal cycle).
      Good Green Indicates that the operator has undertaken an audit and closed all priority 1 and P2 non-conformities.
      Better Silver AO has conducted two audits with the renewal audit before the current registration expired and closed P1 and P2 non-conformities within the allotted timeframe.
      Best Gold AOs have completed two or more renewal audits before registration expiration and closed the P1 and P2 non-conformities within the allocated timeframes.
      Wyvern Consulting
      Good Registered Operators Provides Wyvern with their records, makes them available to their clients to review and meets certain standards. Has not been audited by Wyvern.
      Best Wingman Program Must follow specific methods that reflect the latest and best safety practices. Have been audited and have passed Wyvern’s audit standard.

      *Source: International Standard for Business Aircraft Operations, Aviation Research Group US, Basic Aviation Risk Standard Program, & Wyvern Consulting

    9. Does privacy matter?
      While many athletes and celebrities enjoy the privacy of flying private so that they do not have to endure enthusiastic fans pressing for photos and autographs, it is not as private as you might think. Private jets ownership can easily be tracked via the equipment’s tail number or the ADS-B technology that every plane in U.S. airspace is now required to carry which anyone with the right antennae can pick up. This information has become very valuable in recent years as it’s often used by hedge funds, competing companies and the media to predict mergers and acquisition targets. A business deal of that magnitude often requires multiple trips to the other company’s headquarters, so it is quite easy—and perfectly legal—to figure out, since the information is readily available to the public. Though some companies will try to block access to this data by registering their corporate jet to another legal entity, it’s still possible for motivated parties to uncover the owner’s identity. The preferred way to mitigate these types of risks and to maintain your privacy is to charter a jet or take advantage of an anonymous pool of planes via a jet card or fractional ownership program.
    10. How has the industry changed post-COVID and how will it impact me?
      The COVID-19 pandemic has had a huge impact on the private aviation industry. For health reasons, many people no longer wanted to fly commercial or couldn’t during the shutdown so the demand to fly private skyrocketed. As we all learned in Economics 101, a substantial shift in demand typically results in an increase in price, but in this case, the supply side of the equation has also been impacted sending prices even higher. To further exacerbate the problem, we have also witnessed a shortage of qualified labor to operate and service the private jet industry. As a result of all these factors, the cost to fly private has increased significantly on everything from chartering a jet to purchasing a jet card or fractional ownership to buying the equipment itself, if you can find it. The shortage in planes has made it very difficult for potential buyers to locate what they are looking for and, in some cases, they have had to engage in bidding wars to be able to secure one. The pandemic-related supply chain issues that have limited the availability of planes have also caused frequent flight delays and cancellations due to trouble getting aircraft parts. To combat the rapid growth of the industry, most major providers of jet cards and fractional ownership have made changes to slow the demand. This includes price increases, altering dates some customers can fly, requiring advanced notification to book flights and not allowing new clients onto their platforms.



If all of this seems incredibly complex to you, that’s because it is. One of the benefits of having your own single-family office or being part of a multi-family office is that they often help you with private aviation consultation, charter booking and aircraft management. At Verdence/Family, we help our clients do this complex analysis to determine their travel and equipment needs so they know which solution is right for their situation. Once we help them make the determination of how they are going to fly privately, we allow them to fully enjoy the experience by comparing quotes, scheduling missions, and keeping detailed records of their flights for tax purposes and expense optimization. Private aviation is one of the world’s most sought-after luxuries, but it can be a complexity nightmare with plenty of opportunities to overpay so make sure you do your homework or partner with the right team to advise you.


Appendix A: Verdence Equipment Guide* (Gold= Verdence first choice; Gray=Verdence second choice)

Aircraft Type Manufacturer Model Platforms In-Service Year Max Speed Max Range Max Pass Bag Cap
Turboprop Piaggio Avanti EVO P180 Jet Linx, Stratos Jets 1986 460 mph 1668 nm 8 44 ft3
Turboprop Hawker Beechcraft King Air 90 Magellan, Stratos Jets 1963 283 mph 1260 mi 8 48 ft3
Turboprop Hawker Beechcraft King Air B200 Magellan, Stratos Jets 2004 333 mph 920 mi 6 55 ft3
Turboprop Hawker Beechcraft King Air 250/300 Stratos Jets 1987 368 mph 2255 nm 9 55 ft3
Turboprop Hawker Beechcraft King Air 350i Wheels Up, Magellan, Jet Linx, Stratos Jets 2009 368 mph 600 mi 8 70 ft3
Turboprop Pilatus PC-12 Plane Sense, Stratos Jets 1991 333 mph 1803 nm 10 40 ft3
Turboprop Beechcraft/
Beechcraft King Air 100 Stratos Jets 1964 307 mph 1473 nm 8 44 ft3
Turboprop Cessna Caravan Stratos Jets 1984 341 mph 1088 nm 9 34 ft3
Turboprop Cessna Conquest II Stratos Jets 1987 342 mph 1807 nm 8 65 ft3
Turboprop Mitsubishi MU-2 Stratos Jets 1986 326 mph 1605 nm 7 38 ft3
Turboprop Piper Cheyenne Stratos Jets 1993 326 mph 2577 nm 9 41 ft3
Turboprop TBM Socata TBM 850 Stratos Jets 1988 368 mph 1191 nm 5 12 ft3
Very Light Jet Cessna Citation Mustang Magellan, Stratos Jets 2006 453 mph 1050 nm 4 63 ft3
Very Light Jet Cessna Citation 500/525 Magellan, Stratos Jets 1971 465 mph 730 nm 5 57 ft3
Very Light Jet Raytheon Beechjet 400/400A Jet Linx, Magellan, Stratos Jets 2003 513 mph 1140 nm 4 25 ft3
Very Light Jet Embraer Phenom 100 Magellan, Stratos Jets 2008 537 mph 1178 nm 4 55 ft3
Very Light Jet Eclipse 500 Linear, Stratos Jets 2006 426 mph 1294 nm 4 40 ft3
Very Light Jet Nextant 400XTi Jet Linx, Magellan 2010 514 mph 2005 nm 6 56 ft3
Very Light Jet Bombardier LearJet 24D/25D Magellan, Stratos Jets 1966 546 mph 850 nm 5 40 ft3
Very Light Jet Bombardier LearJet 35A/36A Magellan, Stratos Jets 1973 542 mph 1930 nm 4 – 6 40 ft3
Very Light Jet Williams International Cirrus Vision Jet Stratos Jets 2016 345 mph 1275 nm 6 31 ft3
Very Light Jet Honda Honda Jet Stratos Jets 2015 483 mph 1223 nm 5 66 ft3
Light Cab. Jet Hawker Beechcraft Hawker 400/A/XP Jet Linx, Magellan, Stratos Jets 1978 518 mph 1400 nm  7 – 8 53 ft3
Light Cab. Jet Hawker Beechcraft Diamond 1A/Premier Jet Linx, Magellan, Stratos Jets 1998 523 mph 1140 nm 7 77 ft3
Light Cab. Jet Bombardier Learjet 31 Stratos Jets 1991 617 mph 1449 nm 7 66 ft3
Light Cab. Jet Bombardier LearJet 40/40XR Jet Linx, Magellan, Stratos Jets 2004 537 mph 1617 nm  6 – 7 50 ft3
Light Cab. Jet Bombardier LearJet 45/45XR Jet Linx, Magellan, Stratos Jets 2003 533 mph 1869 nm 7 65 ft3
Light Cab. Jet Bombardier LearJet 55 Magellan, Stratos Jets 1987 541 mph 2039 nm 7 60 ft3
Light Cab. Jet Bombardier LearJet 70 Stratos Jets 2013 535 mph 2347 nm 6 50 ft3
Light Cab. Jet Bombardier LearJet 75 Magellan, Stratos Jets 2013 535 mph 2080 nm 8 65 ft3
Light Cab. Jet Cessna Citation Bravo/II Magellan, Stratos Jets 1995 464 mph 1290 nm 7 73 ft3
Light Cab. Jet Cessna Citation III Stratos Jets 1991 479 mph 2992 nm 7 62 ft3
Light Cab. Jet Cessna Citation CJ1/CJ2/+ Magellan, Stratos Jets 2012 448 mph 1127 nm 5 – 7 65 ft3
Light Cab. Jet Cessna Citation V/Ultra/
XO, Fly Exclusive, Jet Linx, Magellan,
Stratos Jets
493 mph 1220 nm 9 46 ft3
Light Cab. Jet Cessna Citation VI/VII Magellan, Stratos Jets 1992 /2000 528 mph 1693 nm 7 51 ft3
Light Cab. Jet Cessna Citation CJ2/CJ3/CJ4 Fly Exclusive, Jet Linx, Stratos Jets 2008 522 mph 1511 nm 8 77 ft3
Light Cab. Jet Cessna Citation S/II Stratos Jets 1988 444 mph 1645 nm 6 77 ft3
Light Cab. Jet Cessna Citation Excel/XLS/XLS+ NetJets, Wheels Up, XO, Fly Exclusive, Jet Linx, Stratos Jets 1996 571 mph 2000 nm 7 – 8 90 ft3
Light Cab. Jet Dassault Falcon 10/100 Magellan, Stratos Jets 1970 492 mph 1520 nm 6 41 ft3
Light Cab. Jet Embraer Phenom 300/E Flexjet, NetJets, GrandView, Magellan, Stratos Jets 2008 533 mph 1971 nm 6 76 ft3
Light Cab. Jet Pilatus PC-24 Plane Sense, Stratos Jets 2014 506 mph 2076 nm 6 90 ft3
Midsize Jet Hawker Beechcraft Hawker 700 Stratos Jets 1984 471 mph 2100 nm 7 50 ft3
Midsize Jet Hawker Beechcraft Hawker 750 Stratos Jets 2012 514 mph 2429 nm 8 79 ft3
Midsize Jet Hawker Beechcraft Hawker 800/SP/XP/ A/850 Magellan, Stratos Jets 1983 514 mph 2390/
3150 nm
8 48 ft3
Midsize Jet Hawker Beechcraft Hawker 900 XP Jet Linx, Magellan,  Stratos Jets 2012 516 mph 2733 nm 7 50 ft3
Midsize Jet Bombardier LearJet 60/60XR Jet Linx, Magellan, Stratos Jets 2012 521 mph 2310 nm 7 48 ft3
Midsize Jet Cessna Citation Sovereign/Plus NetJets, Fly Exclusive, Jet Linx, Magellan Stratos Jets 2013 515 mph 3200 nm 8 100 ft3
Midsize Jet Cessna Citation Latitude NetJets, Magellan, Stratos Jets 2014 506 mph 2700 nm 9 126 ft3
Midsize Jet Dassault Falcon 200 Magellan 1995 529 mph 2975 nm 8 41 ft3
Midsize Jet Embraer Legacy 450/Praetor 500 FlexJet, Magellan, Stratos Jets 2013 624 mph 2904 nm 9 155 ft3
Midsize Jet Gulfstream G100/G150 Jet Linx, Magellan, Stratos Jets 2006 541 mph 2550 nm 7 64 ft3
Midsize Jet Gulfstream G200/G280 Jet Linx, Stratos Jets 2009 559 mph 3130 nm 8 150 ft3
Midsize Jet IAI Astra SPX Magellan, Stratos Jets 1986 543 mph 2330 nm 7 42 ft3
Midsize Jet Rockwell Sabreliner 60 Stratos Jets 1979 492 mph 1841 nm 6 43 ft3
Midsize Jet Israel Aircraft Industries Westwind Stratos Jets 1987 540 mph 2199 nm 6 63 ft3
Super-Midsize Jet Bombardier Challenger 300/350 FlexJet, NetJets, VistaJet, XO, Magellan, Stratos Jets 2011 629 mph 3276 nm 8 106 ft3
Super-Midsize Jet Cessna Citation X/X+ Wheels Up, XO, Fly Exclusive, Jet Linx, Magellan, Stratos Jets 1996 700 mph 2890 nm 11 72 ft3
Super-Midsize Jet Cessna Citation Longitude NetJets 2019 550 mph 3500 nm 12 112 ft3
Super-Midsize Jet Dassault Falcon 20 Magellan, Stratos Jets 1963 552 mph 1200 nm 9 60 ft3
Super-Midsize Jet Dassault Falcon 50/EX Jet Linx, Magellan, Stratos Jets 1976 569 mph 3057 nm 8 115 ft3
Super-Midsize Jet Dassault Falcon 2000 Jet Linx 1993 547 mph 2975 nm 8 134 ft3
Super-Midsize Jet Embraer Legacy 500/Praetor 600 FlexJet, Magellan, Stratos Jets 2014 624 mph 3112 nm 12 155 ft3
Super-Midsize Jet Hawker Beechcraft Hawker 1000/A Magellan, Stratos Jets 1993 540 mph 2970 nm 8 65 ft3
Super-Midsize Jet Hawker Beechcraft Hawker 4000 Jet Linx, Stratos Jets 2008 639 mph 3390 nm 8 108 ft3
Ultra-Long Range Jet Embraer Legacy 600/650 Jet Linx, Magellan, Stratos Jets 2002 528 mph 3766 nm 13 286 ft3
Ultra-Long Range Jet Embraer Lineage 1000 Stratos Jets 2007 540 mph 5178 nm 14 323 ft3
Ultra-Long Range Jet Dassault Falcon 900/B/C/EX Jet Linx, Magellan, Stratos Jets 1984 564 mph 3590 nm 12 127 ft3
Ultra-Long Range Jet Dassault Falcon 2000 DX/EX/LX Magellan, Stratos Jets 1993 555 mph 4000 nm 12 – 13 131 ft3
Ultra-Long Range Jet Dassault Falcon 6X/7x Magellan 2021 593 mph 5950 nm 12 155 ft3
Ultra-Long Range Jet Dassault Falcon 10X Stratos Jets 2025 704 mph 7500-8055 nm 7 198 ft3
Ultra-Long Range Jet Bombardier Challenger 600/601 Magellan, Stratos Jets 1990 528 mph 3912 nm 14 115 ft3
Ultra-Long Range Jet Bombardier Challenger 604/605 VistaJet, Jet Linx, Stratos Jets 2012 541 mph 3824 nm 10 115 ft3
Ultra-Long Range Jet Bombardier Challenger 650 NetJets, Stratos Jets 2015 541 mph 4000 nm 9 115 ft3
Ultra-Long Range Jet Bombardier Challenger 850/870/890 VistaJet, Magellan, Stratos Jets 2006 528 mph 3235 nm 12 – 16 202 ft3
Ultra-Long Range Jet Bombardier Global Express/XRS Flexjet, Jet Linx, Magellan, Stratos Jets 1996 590 mph 6305 nm 13 195 ft3
Ultra-Long Range Jet Bombardier Global 5000 NetJets, VistaJet, Jet Linx, Magellan, Stratos Jets 2003 590 mph 4800 nm 13 195 ft3
Ultra-Long Range Jet Bombardier Global 5500 Stratos Jets 2020 594 mph 5900 nm 16 195 ft3
Ultra-Long Range Jet Bombardier Global 6000 NetJets, VistaJet, Magellan, Stratos Jets 2012 548 mph 6163 nm 13 195 ft3
Ultra-Long Range Jet Bombardier Global 7500 NetJets, VistaJet, Stratos Jets 2018 709 mph 7700 nm 17 195 ft3
Ultra-Long Range Jet Gulfstream G II Magellan, Stratos Jets 1966 582 mph 4123 nm 14 157 ft3
Ultra-Long Range Jet Gulfstream G III Magellan, Stratos Jets 1979 577 mph 5070 nm 14 157 ft3
Ultra-Long Range Jet Gulfstream G-IV/G-IV-SP Fly Exclusive, Jet Linx, Magellan, Stratos Jets 1985 581 mph 4091/4220 nm 16 169 ft3
Ultra-Long Range Jet Gulfstream G300/G350 Magellan, Stratos Jets 2005 548 mph 3486 nm 14 169 ft3
Ultra-Long Range Jet Gulfstream G450 FlexJet, NetJets, Jet Linx, Magellan, Stratos Jets 2005 670 mph 4345 nm 14 169 ft3
Ultra-Long Range Jet Gulfstream G500/G550 FlexJet, Magellan, Stratos Jets 2004 585 mph 5200 nm 14 – 16 170 ft3
Ultra-Long Range Jet Gulfstream G650 Flexjet, NetJets, Magellan, Stratos Jets 2008 610 mph 7000 nm 19 195 ft3
Ultra-Long Range Jet Gulfstream G700 Flexjet, Stratos Jets 2019 690 mph 7500 nm 19 195 ft3
Ultra-Long Range Jet Gulfstream GV Magellan, Stratos Jets 1997 600 mph 6425 nm 13 226 ft3
Silver = Verdence 2nd Choice
Gold= Verdence 1st Choice

*Source: Jet Linx, Stratos Jets, Magellan, Wheels Up, Plane Sense, XO, Fly Exclusive, Net Jets, Flexjet, VistaJet, Grandview, Sherpa Report: Guide to Private Aviation 2021 & Verdence


Appendix B: High-Demand Dates and Holiday Periods*

Description 2022 2023
New Year’s Return Travel Day 1/1/22 1/1/23
New Year’s Return Travel Day 1/2/22 1/2/23
New Year’s Return Travel Day 1/3/22 1/3/23
New Year’s Return Travel Day 1/4/22 1/4/23
Thursday before MLK Jr. Day 1/13/22 1/12/23
Friday before MLK Jr. Day 1/14/22 1/13/23
Day before MLK Jr. Day 1/16/22 1/15/23
Martin Luther King Jr. Day 1/17/22 1/16/23
Second Friday in February 2/11/22 2/10/23
Second Sunday in February 2/13/22 2/12/23
Wednesday before President’s Day 2/16/22 2/15/23
Thursday before Presidents Day 2/17/22 2/16/23
Friday before Presidents Day 2/18/22 2/17/23
Sunday before Presidents Day 2/20/22 2/19/23
Presidents Day 2/21/22 2/20/23
Tuesday after Presidents Day 2/22/22 2/21/23
Early Thursday in March 3/3/22 3/2/23
Early Friday in March 3/4/22 3/3/23
Early Saturday in March 3/5/22 3/4/23
Early Sunday in March 3/6/22 3/5/23
Second Thursday in March 3/10/22 3/9/23
Second Friday in March 3/11/22 3/10/23
Second Saturday in March 3/12/22 3/11/23
Second Sunday in March 3/13/22 3/12/23
Third Thursday in March 3/17/22 3/16/23
Third Friday in March 3/18/22 3/17/23
Third Saturday in March 3/19/22 3/18/23
Third Sunday in March 3/20/22 3/19/23
Fourth Thursday in March 3/24/22 3/23/23
Fourth Friday in March 3/25/22 3/24/23
Fourth Saturday in March 3/26/22 3/25/23
Fourth Sunday in March 3/27/22 3/26/23
Second Friday in April 4/8/22 4/7/23
Second Sunday in April 4/10/22 4/9/23
2 days before Good Friday 4/13/22 4/5/23
Day before Good Friday 4/14/22 4/6/23
Good Friday 4/15/22 4/7/23
Easter Sunday 4/17/22 4/9/23
Easter Monday 4/18/22 4/10/23
Thursday before Memorial Day 5/26/22 5/25/23
Friday before Memorial Day 5/27/22 5/26/23
Sunday of Memorial Day 5/29/22 5/28/23
Memorial Day 5/30/22 5/29/23
Last Thursday in June 6/30/22 6/29/23
Friday before Independence Day 7/1/22 6/30/23
Independence Day Return Travel Day 7/4/22 7/3/23
Sunday after Independence Day 7/10/22 7/9/23
Friday before Labor Day 9/2/22 9/1/23
Labor Day 9/5/22 9/4/23
Thursday before Columbus Day 10/6/22 10/5/23
Friday before Columbus Day 10/7/22 10/6/23
Sunday before Columbus Day 10/9/22 10/8/23
Columbus Day 10/10/22 10/9/23
Thursday before Thanksgiving 11/17/22 11/16/23
Friday before Thanksgiving 11/18/22 11/17/23
Tuesday before Thanksgiving 11/22/22 11/21/23
Wednesday before Thanksgiving 11/23/22 11/22/23
Thanksgiving 11/24/22 11/23/23
Saturday after Thanksgiving 11/26/22 11/25/23
Sunday after Thanksgiving 11/27/22 11/26/23
Monday after Thanksgiving 11/28/22 11/27/23
Tuesday after Thanksgiving 11/29/22 11/28/23
Friday Weekend before Christmas 12/16/22 12/15/23
Saturday Weekend before Christmas 12/17/22 12/16/23
Wednesday before Christmas 12/21/22 12/20/23
Thursday before Christmas 12/22/22 12/21/23
Friday before Christmas 12/23/22 12/22/23
Christmas Eve 12/24/22 12/24/23
Christmas 12/25/22 12/25/23
Day after Christmas 12/26/22 12/26/23
Monday after Christmas 12/27/22 12/27/23
Weekday after Christmas travel 12/28/22 12/28/23
Weekday after Christmas travel 12/29/22 12/29/23
Weekday after Christmas travel 12/30/22 12/30/23
New Year’s Eve 12/31/22 12/31/23

*Source: Net Jets, Flexjet, Wheels Up & Verdence



This material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and statistics contained in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness.  VCA has not independently verified third-party sourced information and data.  Readers should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized advice.  For questions about this document, please contact us.


Next Generation Education

Verdence View on Bitcoin – video

5 Questions to Ask Yourself When Considering a Family Office

Whether you accumulated wealth over a lifetime of hard work or suddenly came into it via a business exit or inheritance, one of the most common questions within the ultra-high net worth space is what is a family office, and do I need one? A family office is an organization that assumes the day-to-day administration and management of a family’s personal and financial affairs. Though investment oversight is a significant component of their responsibilities, what differentiates them from traditional wealth management firms is all the additional services that they offer.  Having a family office allows the affluent to rely on a team of objective subject matter experts to oversee all the critical aspects of their lives so that they can focus on what really matters to them.

1) What services do we require?

  • Investment Management & Oversight
  • Manager Selection & Due Diligence
  • Alternative Investment Access
  • Aggregated Reporting
  • Bill Payment & Bookkeeping
  • Concierge & Lifestyle Services
  • Tax, Legal & Insurance Coordination
  • Family Governance & Education
  • Strategic Philanthropy Advice
  • Financial & Estate Planning

If you determine that you require more than 3 of the services on this list, chances are that a family office might be right for you. There may be services that you do not currently require but may need down the road.  Many families who are busy enjoying their wealth have not yet begun to think about estate planning, family governance, next-generation education, or strategic philanthropy but will probably need assistance in all these areas at some point during their life.  For this reason, it is important to evaluate a firm’s total platform and service offerings to make sure that they can handle both your existing needs as well as future ones.

2) Should we create our own Single-Family Office (SFO) or join a Multi-Family Office (MFO)?

Once you have decided that you need a family office, the next critical choice is whether you should form your own Single-Family Office (SFO) or join a Multi-Family Office (MFO). For most families, this decision comes down to your net-worth and the level of customization that you require.  Typically, a family with a net worth of $1 billion or more will choose to establish their own SFO, while those with between $25 million and $1 billion prefer to take advantage of the scale and shared cost structure of an MFO. Though it can be tempting to have an organization that exclusively looks after just your family’s needs, keep in mind that the cost of operating your own SFO can be deceiving.  By the time you factor in office space, technology, and several experienced professionals, it can easily be millions of dollars per year to support.  To keep costs down, many matriarchs and patriarchs serve as the head of their SFO.

3) What will it cost us?

A good rule of thumb is that a family should expect to pay about 1% of their assets per year to run their own family office. With a $10 million annual budget, a family worth $1 billion should have no problem setting up and running a high-end operation, where a $100 million family office would barely be able to afford one senior investment professional and office space with a $1 million. This is exactly why most families under $1 billion embrace joining a multi-family office as the cost savings associated with shared infrastructure, technology, and team, enables them to offer a larger team of domain experts at a price below 1% of assets per year.

4) Should we go with a large firm or a smaller boutique?

A popular industry joke is that if you have seen one ultra-high net worth family, you have seen one ultra-high net worth family. From the way each family amassed their wealth to the industry where they were successful to the way they spend money to the charitable causes they support; each family is truly unique and will require different services and support. There is a direct relationship between how custom an offering is and how much it will cost you.  As mentioned before, a single-family office will be 100% dedicated to its sole family but the costs, both monetary and your time, can be very high.  On the other end of the spectrum are family office services provided by large investment and trust banks.  Due to the sheer size and scale of their organization, they can offer these services at a low price, but this assumes that the client fits into their existing model with little customization.  For this reason, many clients choose to partner with a boutique MFO that can offer bespoke services at a competitive price.

5) How should we evaluate a Multi-Family Office (MFO)?  Questions you should ask:

  • Compensation
    – How are you compensated?
    – Are you paid strictly for your advice or do you also get paid to sell products and/or accept soft dollar arrangements?
    – Are you bound by a fiduciary standard or are there conflicts of interest I should know about?
  • Expertise
    – Can you tell me about your team?
    – What are their backgrounds and specific areas of domain expertise?
    – Who will we be working with on a day-to-day basis?
  • Firm History
    – What is the history of your firm?
    – What is your ownership structure?
    – Can we please get a copy of your latest ADV?
    – Have you ever had any issues with the regulators?
  • Clients
    – Can you please tell me what your other clients look like when it comes to net worth?
    – What industry backgrounds do they have?
    – Where are they based from a geographic standpoint?
  • Privacy
    – How do I know that my information will remain private and confidential?
    – Can you walk me through your security protocols from a physical and cyber perspective?

If done correctly, a family office can enable you to truly enjoy the benefits that your wealth brings. In addition to conducting thorough due diligence on several potential firms, make sure you also enjoy working with them as you will be in constant contact with them. From adding new family members via marriage or birth to contemplating a new investment or business opportunity to considering a major purchase or charitable gift, your family office should always be your first call.

The Most Frequent Questions Wealthy Family Ask

  1. Should I create my own Single Family Office (SFO) or join a Multi-Family Office (MFO)?
  2. In our quest to be intelligent investors, what return expectations should we target, and what mix of traditional and alternative assets will help us achieve it?
  3. As we think about robust financial planning, how much can we spend and/or gift to charity in our lifetime?
  4. How much do we leave to our children and grandchildren?  What are the optimal tax and timing strategies?  When do we start educating them on financial literacy?
  5. What are the limitations and opportunities for effective estate planning?  What changes should I expect over time?
  6. Across health, cyber, personal safety, and portfolios, what are the hidden risks can that can negatively impact our family?
  7. From passing values down to the next generation to having an impact through philanthropy, what will our family’s legacy be?
  8. What’s the difference between tactical charitable giving and strategic philanthropy?  Should my impact be expressed through the way we invest or should investments be cause-neutral and maximized to increase the size of the gift?  How and when do I involve the next generation in philanthropy?
  9. What do we need to take into account when considering private aviation?  Should we buy a jet to put into a charter management pool,  buy a fractional interest in a firm like NetJets, or use a private charter or shared ride service like WheelsUp?
  10. What is good Family Governance?  Should we establish a family council for leadership purposes, do we need to draft a family charter, and how often should we gather as a family?  How do we handle family communication and conflict resolution?

Understanding Private Markets

By Megan Horneman, Chief Investment Officer

What are the private markets? What are the different types of private investments? How do private markets differ from public markets? What is the importance of due diligence?

The private market includes a variety of alternative investments such as private equity, private credit, and/or private real assets. The private markets differ as they are not listed on a publicly-traded exchange. The private market has grown almost three-fold over the past decade and globally, stood at $6.5 trillion at the end of 2019.(1) The demonstrable growth of the private markets can be attributed to many factors including the absence of regulatory burdens in the private markets, the massive liquidity that was created by nontraditional monetary policy over the past decade, the lack of daily volatility swings, and the extremely profitable IPOs of companies that were backed by private equity (e.g. Facebook, Alibaba, Salesforce). In fact, the number of private companies grew ~9% per year (from 2000-2018) while the number of publicly traded companies declined by more than 2% per year over the same period.

Some commonly known private market investments:

  1. Private equity – The most commonly known portion of the private market is private equity. While select investors may invest directly into a private company, most investors gain access to private equity through a well-seasoned private equity fund and/or separately managed account. Typically, the fund is run by a general partner (GP) who gathers capital from investors and these investors become limited partners (LP). Examples of well-known private equity strategies include:
    — Buyout funds typically utilize leverage to obtain enough capital to acquire a controlling stake in a company. These companies are typically mature companies and the goal is to restructure the companies to become more profitable.
    — Venture capital funds invest small amounts in startup companies with the hopes of making outsized returns when the company matures. The funds typically carry more risk than other private equity funds. Most venture capital funds are either early stage where they are taking a bet on future growth (most of the time betting on an idea or intellectual property) or late-stage venture capital that may have the infrastructure in place but need help maximizing their earnings stream.
    — Growth funds typically invest in more mature companies than venture funds and carry less risk but a lower return profile as well. Typically, the companies they invest in are looking for expertise to make the business more profitable to potentially spin-off and/or look for merger candidates.(2)
  2. Private credit – Private credit funds have grown substantially over the past two decades. One of the major contributors to growth in this space is that investors are desperate for income as yields in the public bond market remain near record lows. Private credit funds typically offer attractive yields as they lend to smaller companies that may be unable to access the public funding market at affordable rates. There are many areas within a company’s credit structure that private credit funds invest in and the level of return is highly dependent on the amount of risk associated with the debt in the fund. Some common private credit funds include:
    — Mezzanine and senior debt funds typically make loans to lower and middle-market borrowers as either senior or subordinate loans. The structure of the loans varies as senior loans may sit higher in the payout structure in the event of default while subordinated debt sits a bit lower (but still before equity ownership).
    — Distressed credit funds are funds that invest in the debt of distressed companies. They look for discrepancies between how the debt is pricing and compare it to the ultimate recovery rate in the event of default and/or the underlying value of the loans in the event of restructuring the company’s debt. This type of private credit can be highly speculative and dependent on expertise in bankruptcy laws and legal corporate structures.(3) These funds carry more risk than mezzanine or senior debt funds but also can offer a better return potential.
  3. Real assets – Real asset funds access a variety of investments that carry the characteristic of having a tangible value. An investment is considered to have tangible value because there is something physical that backs it up. In addition, because it has a tangible value it is also expected to keep pace with inflation and some investors utilize it for a long-term inflation hedge. Some of the common types of real asset funds include:
    — Real estate funds are private funds that can invest in a pool of real estate offerings or into a direct real estate structure. Real estate funds vary across investments in office space, apartment buildings, warehouses and shopping malls. As with most private investments these represent long-term investments with capital locked up for different periods of time depending on the project. Investors are drawn to private real estate for its steady cash flow and historically negative correlation to publicly traded real estate investment trusts.
    — Infrastructure funds are private funds that may participate in a public-private partnership to spur infrastructure. The need for infrastructure is a global phenomenon. It is estimated that the world needs $3.6 trillion in annual spending for infrastructure. Given the limitation of government budgets to fill this void, there is always the need for public/private partnerships.(4) These types of funds may offer both capital appreciation as well as steady income.
    — Natural resource funds invest in companies that focus on the extraction, drilling, production and or refining of commodities, chemicals and/or timber. Since these funds invest in the physical commodity, chemical, etc. they are considered another way to hedge against inflation. These funds are long-term investments and carry risk as they are heavily correlated to the economic outlook.


How do the Private Markets Differ from the Public Markets?
There are advantages to investing in both the public and the private markets, especially for a well-diversified portfolio. Some differences investors should be aware of include.

  • Barrier of entry: With the development of mobile apps and the increasing number of online brokers, the ability to invest in publicly traded stocks is open to nearly all Americans regardless of their knowledge or individual financial situation. However, in order to access the private markets, you must be classified as an accredited investor (e.g. high net worth individual).
  • Reduced regulatory burden: Private companies are not constrained with regulatory hurdles and scrutiny like public companies. Regulatory filings, registrations, annual reports, and highly reviewed earnings reports are some of the items that cost money for public companies but not for private companies. A public company is sold to the public, so it is forced to accept more regulations. However, a private investment is typically sold to a smaller pool of accredited investors, and not required to adhere to the same regulatory environment.
  • Daily volatility swings absent in private markets: Public equity markets have always been subject to daily price swings. However, in recent years these daily volatility swings have been exacerbated by algorithmic trading. Since private companies are not listed, investors do not have to see daily price swings or accept massive changes on frequent investment statements.
  • Liquidity differences: Investments in the public market offer daily liquidity for investors that need to sell or want to buy. However, private investors are forgoing daily liquidity and willing to lock up their money for prolonged periods of time in exchange for the potential of a better risk-adjusted return.

Due Diligence is Crucial in Private Markets

The information to value a private company is not as readily available as it is for a public company that is forced to disclose financials, so the due diligence process is more complex and even more important in the private markets than in the public markets. The efficient market hypothesis states that a publicly-traded company should reflect all available public information. It should be a fair playing field for all investors because anyone can obtain the same public information. However, that is not the case in the private markets. It takes deeper due diligence and market analysis to determine the appropriate value of the private investment and the price a buyer may be willing to pay for it in the future. An example of the importance of due diligence is evident in the dispersion between returns in the public market and compare it to the private market. Over the past 10 years those investors that invest in a publicly-traded equity manager saw a very narrow dispersion in the returns (10.3% for best managers and 7.8% for worst managers). This is because all managers had the same information. However, you can see the dispersion in returns between the best managers in the private equity space (20.1%) compared to the lowest quintile managers (1.9%).

Private Investments can add to a Well Diversified Portfolio with Less Volatility

Volatility in public equity markets is typical and should be expected by investors throughout any long-term investment cycle. However, the violent daily swings that investors have had to absorb this year brought back memories of the Great Recession. In addition, a traditional portfolio of stocks and bonds has not recently been offering the same diversification benefits as it may have historically offered. This is because the Federal Reserve has been a more prominent player in the public bond markets resulting in bonds not pricing in underlying fundamentals, instead, prices are manipulated by the Fed purchases. In addition, artificially low interest rates result in excess risk-taking and may drive equity prices higher than fundamentals warrant. Therefore, it is important for investors to look at alternative ways to add diversification to their portfolios. The private markets not only offer the potential for attractive long-term returns and diversification benefits but also less volatility for investors to absorb.

The Bottom Line

Taking advantage of the private markets through a less liquid investment can provide investors with the ability to generate excess returns over time and eliminate the stress of daily price movements of a public security that may have no fundamental impact on the actual value of the business. In an environment where finding value in the public equity and bond markets is starting to entail taking on more risk, the private markets look even more attractive. In addition, the demand for good quality private investments has had investors chasing too few deals in recent years. This can be seen by private equity funds coming into 2020 with $1.5 trillion of “dry powder” or money that can be deployed.(5) However, the market conditions and dislocations over recent months have resulted in attractive opportunities for that massive amount of money to be deployed and history suggests that private investments can outperform public investments at the turn of an economic cycle. While every client’s financial situation and investing goals may vary, the ability for a wide array of investors to access the private markets through different structures is growing. Therefore, we will continue to look for attractive private investments that offer our clients the opportunity for a good risk-adjusted return, can enhance income opportunities, and offer attractive diversification benefits.

As always, if you have any questions about our perspective, please do not hesitate to reach out to your advisor.

  1. Mckinsey Global Private Markets Review 2020 – A New Decade for Private Markets. McKinsey and Company, February 2020. Three times estimate comes from the Mckinsey report and is as of 2010.
  2. Private Equity Interviews: The Official Guide. Published by Andrew Chen.
  3. Private Credit Strategies: An Introduction. Cambridge Associates. September 2017.
  4. Mckinsey Global Institute, JPMorgan Asset Management, Data as of May 31, 2020.
  5. Private equity has $1.5 trillion of unused funds and is looking to raise more. Fortune magazine. January 2020.


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Verdence View on Bitcoin

By Megan Horneman, Director of Portfolio Strategy

Since Bitcoin was founded in 2009, the price has skyrocketed from basically zero to nearly $60,000. Its market cap has exceeded $1 trillion which is more than the market cap of Facebook. After an initial surge in 2017, the price of Bitcoin was relatively stable until the pandemic brought renewed interest in the cryptocurrency world. Below we will offer reasons why we believe the cryptocurrency has skyrocketed since the pandemic, the risks associated with investing in Bitcoin, and our recommendation on investing in this highly volatile investment.

Five Factors Causing the Renewed Interest in Bitcoin:

  1. Decline in USD and currency use: Not only has the pandemic resulted in the decline in the use of paper money to transact but the actions taken—massive fiscal and monetary stimulus—to prevent a global depression pressured some fiat currencies, specifically the dollar. The USD has lost 11% of its value since its March 2020 high and speculators believe that digital currencies can take over the USD as the world reserve currency.
  2. Increasing acceptance: Companies such as Paypal, Square, and Venmo have started to allow customers to buy and sell bitcoin. Microsoft allows the use of bitcoin on its online gaming system. Fidelity digital allows its institutional customers to use bitcoin as collateral against loans. Sporting teams like the Dallas Mavericks have also adopted the cryptocurrency as a form of payment. Lastly, while once rejected, there has been increasing interest from institutional accounts and hedge funds.
  3. Negative real yields: Typically, investors would turn to precious metals to escape a negative real yield environment and hedge against the potential of inflation. However, there has been a clear connection between the recent decline in gold and the contrasting rise in bitcoin which suggests investors are turning to bitcoin as a precious metal substitute in times of negative real yields and rising inflation risks.
  4. Fear of missing out: Bitcoin’s rapid surge has left investors emotional and fighting the long-standing investment mistake by falling into the fear of missing out. Since there is a limitation in the amount of bitcoin that is available to be “mined,” investors are panicking that they will miss out on investing which is only driving the price to bubble-like levels.
  5. Retail investor surge: With the massive amount of fiscal stimulus being distributed, the world on lockdown for most of the last year and many out of work, we have seen a massive increase in the amount of retail, online brokerage accounts being opened. Robinhood, a well-known mobile trading app saw over 3 million accounts opened in the month of January alone. These investors tend to be short term traders, can tend to chase momentum, and lack the long-term investment discipline that is key to success. Bitcoin is and has been a prime target for these types of investors.

Understanding the Risks Behind Investing in Bitcoin.

  • Bitcoin has no store of value so cannot be considered a fiat currency. Bitcoin is not a store of value. It is too volatile, is not backed by a government entity, not regulated, not insured and as of now cannot be stored at central banks. Since it is not backed by any government or physical asset Bitcoin’s value is purely from speculation. To be considered a currency or supplant the U.S. dollar, the Euro, or the Yen, a currency must hold value in all types of stress and turmoil. It is hard to say that the daily swings Bitcoin has experienced since inception satisfies this standard.
  • Commonplace for illegal activities, theft, and hackers: Since Bitcoin lacks regulation and transparency, it is known to be a place for criminals, drug traffickers and even suspect countries (North Korea) to transact illegal activities. In addition, cryptocurrency storage is flawed and subject to hackers and theft. It is estimated that hackers were able to steal over $6 billion in cryptocurrencies in 2019 and 2020 alone.(1)
  • Bitcoin highly volatile; regulation could make it worse: Bitcoin is a highly volatile product with no way to fundamentally value it. Over just the past four years, Bitcoin has seen two drops of more than 60% and two additional bear markets (a drop of 20% or more). A product that has no fundamental value, is purely speculative, has little to no correlation to traditional asset classes and carries immense volatility has no place in a long-term investment portfolio. In addition, given the “bubble-like” characteristics and non-transparent transactions, regulators often take notice. While the new Administration has not taken a firm stance on Bitcoin, President Biden’s pick for Treasury Secretary, Janet Yellen, has vocally been a critic of the “highly speculative asset.”
  • Bitcoin ownership concentrated: Only 2% of the crypto accounts, considered “Bitcoin whales” control 95% of the digital currency.(2) A well-diversified investor would never own a fund or investment manager that carries that much concentration risk. If one of these “Bitcoin whales” opted to unwind their holdings, this could cause significant instability in an already highly illiquid investment.

Verdence View on Bitcoin

In our view, Bitcoin is a concept that uses the complexities of algorithmic math, some technological quantitative mathematicians, and the growing use of the internet as a way of transacting daily life (e.g. PayPal, web banking, etc). However, Bitcoin has no fundamental store of value which is necessary to be considered a currency or commodity, and is extremely volatile. With no earnings, no tangible product, and no valuation, Bitcoin is simply an experiment that is testing the appetite of individuals for an advanced technological payment system. As with any speculative asset moving at the speed that Bitcoin has experienced in recent years, it is impossible to determine how high the asset can go as more and more speculators enter the market. In historical “bubble” scenarios, the asset ascends far beyond any possible expectation and ultimately crashes further than any possible explanation. As a result, we would not recommend the product.

While Bitcoin itself may exhibit “bubble-like” characteristics, it does not necessarily mean the technology behind the way Bitcoin virtually transfers money (i.e. blockchain) does not have value. The blockchain technology anonymously secures the holders of their “currency” and trades it amongst users. This could have immense value and many technology companies are moving to develop this technology for uses in business and finance. As a result, Bitcoin may not even exist in its current form in the future as more and more companies use the underlying concept (i.e. blockchain) to enhance their own businesses. We will continue to assess the development of the entire cryptocurrency market, more specifically the blockchain technology, but at this time would be hesitant to recommend entering this space.



1. as of February 17, 2021.
2., “Bitcoin’s Volatility Resumes After $40,000 Topped for First Time.” As of January 7, 2021.