This month’s interview is with Darragh O'Sullivan. Darragh is the founder of DOS & Co, an advisory firm that supports clients to plan, create, manage, and change family offices. As an advisor, he works primarily with business owners and high-net-worth families as their outsourced ‘in-house counsel’.

What are some reputational challenges family offices face when securing new investment opportunities?

Darragh: These can cut both ways. Direct family office investment is a courtship; the founder/entrepreneur wants to know that they are accepting investment from people whose reputations will enhance (rather than potentially damage) their own. 

Conversely, family office investors will be keen to ensure that their own reputations aren’t put at risk by entrepreneurs’ behaviours. In addition to this, for larger direct investors, they are often (perhaps inadvertently) cultivating their own eco-systems of investees; the well-prepared will be keen to ensure that no-one in the eco-system presents a risk to the reputation of anyone else participating.

In this way, family offices owe it to themselves and the entrepreneurs they invest in to ensure that everyone participating is both aware and considerate of the others’ reputations. As the investor, they are also best-placed to ensure that everyone else complies with any particular requirements or policies that may relate to public announcements, public behaviour and less tangible reputational matters (such as the investees’ own public ESG/CSR behaviours).

And is reputation important to family offices?

Darragh: The very essence of a family office is to give a focus to, and constitute a team whose primary mission is, preserving and growing the family wealth. This extends beyond simply managing investments. The family office of today is the custodian not only of riches and real estate, but of the family name as well.

While some family offices will operate under their own discrete branding and persona, others will simply act as The Family Office of [Name]. Either way, in today’s connected society, the family and its office will intrinsically be linked.

The risks cut both ways. For the family, it is important to ensure that pre-investment discussions take place in a professional and confidential context; it is the family office (and not the family members) who are investing. The family members should defer to those they have hired to deliver those strategic investments, acting as facilitators and enablers (perhaps making various family assets available for entertainment or meetings), but affording the offices space to manage the due diligence and business planning for investments.

How can a family office increase its credibility

Darragh: There are abundant opportunities for a family office to align itself with ‘popular’ investment opportunities. There is a danger, however, that too much emphasis can be placed on the reputational angle of an investment, prioritising trends over returns.

This comes down to a choice; is the ‘success’ of the investment to be measured in pounds and pence, or on a less tangible scale of reputational ‘plus points’? We would see credibility considerations weighing not necessarily in favour of particular investment options, but more so that particular investment decisions (the ‘traditional’ blacklist being gaming, adult entertainment, arms and cryptocurrencies) can serve to damage a family office’s reputation (and, by extension, that of its other investees).

In the coming years, we can expect to see that traditional list extended to include fossil fuels and environmentally-deleterious / high-carbon initiatives; businesses whose own credentials don’t align with the ethical/sustainability credentials of the family office, and probably even to include companies whose own tax mitigation strategies favour paying taxes in jurisdictions other than those where their actual sales originate.

What can a family office attract more deal flow?

Darragh: We consider ‘good deal flow’ not to be 10,000 pitch decks landing in an inbox. For us, ‘good deal flow’ means attracting the right investment opportunities. How is this best achieved? By telling people what you’re after.

Direct investment is a hands-on investment strategy. You can deliver the most value (and, therefore, achieve the greatest return) to investments whose morals, goals, needs and area of operations most closely match your own. 

Where family wealth has been amassed in a certain sector, the peripheries of that sector often offer the most fertile investment opportunities. Don’t forget, for the founder who is looking to sell you a stake in their business, their primary concern is ‘what can you do for them?’—they should have a fairly good idea of the answer to this question before they even consider submitting their pitch deck/proposals.

How can a family office define its messaging and branding?

Darragh: A good communications strategy goes beyond a glossy brochure. It can include websites, social media and most importantly, the way in which your family office behaves and communicates in person. 

Printed materials and websites should, at the very least, include clear statements of your targeted investment opportunities; a public investment strategy (What are you doing? Why? What are you hoping to achieve?); case studies of prior investment successes/exits—all of these will help to build your credibility and attract the right kind of investment opportunities.

How does philanthropy play a part in the structure of a family office?

Darragh: This very much depends on the family office in question. For some, it is everything. It goes to the core of the family’s mission and is their raison d’être. For others, it is probably most politely viewed as an awkward ‘add-on’. 

Where success is measured in financial returns, having a clear philanthropic goal and taking steps to advance that goal are not necessarily key performance indicators for a family office. What we are seeing, however, is that the next generation of wealth-holders (many of whom weren’t involved in the struggles or journey to build the family wealth) are far more interested to ensure that their wealth, having satisfied their immediate (and often modest) needs, can be employed to deliver impact outside of the family walls. 

When considering family office succession, philanthropy is increasingly viewed as a way of delivering true alignment between generations; for some, it is one of the only things they can agree upon!

What sorts of challenges brought up by the global pandemic are family offices now facing?

Darragh: Like most organisations, family offices have found themselves working remotely, unable to travel and, for a lot of our clients, ending the year rather tired. Family office staff generally picked up the responsibility for continuing operations and dealing with fast-changing legal landscapes, repatriation of family members and dealing with assets and travel restrictions throughout the world.

The culture in a family office is vital to its success. Keeping a remote team buoyant, motivated and engaged is particularly difficult. It is amazing how far a well-timed ‘thank you’, or a token of appreciation can take a family member. 

A great example of this, perhaps from the longest-standing family office in the UK, is Her Majesty The Queen, who always distributes gifts, Christmas puddings and a greeting card to her (1,500+ headcount). While, owing to the government’s restrictions on mixing outside of households, she will not be able to do so in person this year, no-one on the recipient list will be going without.
We’ve been encouraging our clients to do the same for their family office staff, prioritising rest and recognition for those who have supported them through this toughest of years.

Darragh O’Sullivan is the founder of DOS & Co, an advisory firm that supports clients to plan, create, manage, and change family offices.