Family Business Audiocast | Episode 30 | Shaun Parkin | Hall Road Investments

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About Our Guest:

Shaun Parkin founded Hall Road Investments, an Australian consulting firm specializing in family offices and endowments. Before establishing Hall Road, Shaun spent several years at State Street Global Advisors, where he led their ETF program and developed the institutional investment management business. His career spans over 25 years, culminating in his current role with investment committee work and advising family businesses on best practices through his unique, modern perspective. Additionally, Shaun publishes the Family Office Sherpa platform, which includes a newsletter and a popular podcast on topics such as family office structure and next-gen.

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[Transcript]

R. Adam Smith: [Intro] Welcome to the Family Business Audiocast on LinkedIn. I am R. Adam Smith, creator of this audiocast series. As an entrepreneur, investor, founder, investment banker, and board leader the last 25 years, I am fortunate for my many experiences within the family firm industry. 

A warm thank you to our live audience on LinkedIn today – and for those listening in the future.

A brief comment on why I created this broadcast: private companies are a passion of mine, having grown up in a family of entrepreneurs, and having engaged for two decades in deals, strategic transformations, investments, and boards, with an array of fascinating family enterprises, family firms, and family offices. I founded this series to offer a useful platform for listeners to hear from veterans, academics, and leaders in the vast family firm ecosystem. Whether you are a family business owner, building, running, or advising a family office, or just expanding your family office activities, I hope these conversations are useful and enlightening. And now, it is time to turn our attention [01:00] to our accomplished guest on today’s episode.

Today I'm pleased to host Shaun Parkin of Hall Road Investments down in Australia. Shaun, great to have you today.

Shaun Parkin: Thanks, Adam. Good to be here.

R. Adam Smith: You finally made it. Thanks for joining in your evening. And as you noted, we've had some other experts in your market on the show earlier with David [Werdiger], which is great. I'm really glad to have you on.

I'm going to run through your bio for a bit, and then we'll kick off.

Shaun Parkin: Sounds good.

R. Adam Smith: Shaun is the founder of Hall Road Investments, which is an Australian-based firm specializing in family office investment governance strategy and structure. And at the firm, Shaun worked closely with tens of family offices in Australia and around the world, serving them as an investment committee member and also as an advisor.

And prior to Hall Road, about six or seven years ago, Shaun was at State Street [Global Advisors] (SSGA) for many years. Initially, he headed up their ETF program [02:00] and then moved into the institutional investment management area, focusing on endowments, insurance, and family offices, and built that business up. And over 25 years, he has worked at State Street as well as in other positions in stock trading, asset management, and also mining in Australia, and he also has been stationed in London and Mongolia as well.

We should talk about the Mongolia story, Shaun, if we have time.

Shaun is also the publisher, as many of you may know, of the Family Office Sherpa platform, which is a newsletter and also a thriving podcast.

And Shaun is in Australia, probably in Perth in Western Australia, if I'm correct.

Shaun Parkin: That's right.

R. Adam Smith: Awesome. Great to have you here today. So, let's get started.

Maybe talk initially about Hall Road, which is a specialized advisory company you formed this decade after your storied career, [03:00] really focusing on the family office segment and their needs at the investing and committee and governance level.

Tell us a bit about that and what led you to set that up.

Shaun Parkin: Hall Road Investments was started five and a half years ago now. So, I moved back to Perth from 17 years in Sydney. And as you mentioned there, previously in London and Mongolia and a few other places, but predominantly in Sydney. So, I moved back to Perth where I'm originally from. My wife's from Fremantle as well. So, it's nice. It's home for both of us.

For the final two years I was with SSGA, like you mentioned, I headed up client coverage for family offices, endowments, and insurance. And when there was that mutual decoupling, which sometimes happens when you're in the middle of the wrong state in the country, I had to find a job, really, and I've always wanted to start my own business. And I really, really [04:00] enjoyed working with the family office client type. Historically, I'd worked in private client stockbroking and things like that, but I really liked the family office style of investing. It wasn't heavily intermediated by consultants. It was interesting, it was fun.

So, I really wanted to concentrate on that. And so, I had to come up with a product and a service and an offering there. So, when I spoke to most family offices that I knew—and as you mentioned, I said I worked with them the last two years, but prior to that, I'd work with them on the ETF side. So really, 12 years all up now. Nearly every single one of them said, well, we have a challenge, or we'd like your assistance or some assistance with the operational infrastructure. So, getting that reporting infrastructure in place. At the time, you know, some of the larger custodial banks and things like that weren't as interested in this sort of mid-market. [05:00] So, there was an element of looking for non-custodial portfolio tracking and data analytics.

A lot of it was run off Excel. I really liked technology. I really liked that sort of middle office component as well. So, I initially started the business on projects only and helping select and recommend and, to a certain degree, sort of quarterback the implementation of that operational infrastructure. A lot of it we were reporting. So, the names that most people know from that space. But that's where it started.

And over the journey, it sort of morphed more into a full suite of offerings, which you mentioned, which is more aligned to the total investment governance space. Reporting is a big part of it, but so is assisting with investment policy and governance and strategy and counterparty management and selection and monitoring. So, you know, that soup-to-nuts kind of componentry of what makes an investment committee member or an advisor to that investment committee because [06:00] I'm a big believer that investment committee work is governance work.

So, that's where the business is now. I sit within investment committees or, like I said, as an advisor to them across single-family offices in Australia—monthly retainer style work—and I really enjoy it.

R. Adam Smith: That's great. I wanted to talk a bit more on the governance side. So, you've seen the family office market grow in Australia, but also the world. Probably over 10,000 family offices now. Maybe 12,000 or even 15,000 that we don't even know about, right?

So, when you when you work on investment committee work and you're thinking about how that relates to governance, I'd like your thoughts on how that's evolving. And, where does the committee work focus in the alternatives world as opposed to the traditional efficient frontier work of public securities, ETFs? Now it's more complicated.

I’d love your thoughts on what does an ideal investment committee look like and how is that evolving, and [07:00] also the complexity involved in alternatives, given that they are illiquid, and also the movement from funds to directs—and so, therefore, the directs become a bit more complicated as they're not commingled in a traditional entity.

Shaun Parkin: I mean, it all comes down to the investment policy—in my mind anyway—which is really putting the elements of that investment management, investment philosophy together. So, a part of that is, if you're talking about alternatives, there has been a little bit more of a movement in Australia towards those assets. I mean, they've always been there, but potentially they've become a little bit more prominent.

To be honest, the complexity comes through three components, which is managing those less liquid markets that aren't priced daily that might require specialist skill sets to do the DD on, the due diligence on. The counterparties that, [08:00] historically, family offices utilized may not have that skill set either. So, there is an element of searching for good counterparties within that space, either the wealth management, private bank, Big Four, whatever that looks like, but really sort of having that as a priority now to have counterparties with that ability to either assist with the DD or at least to be able to be a good counterparty for that due diligence.

So, we can look at that. I think the other thing to look at as well is—like all good investment policies and governance structures, reporting is a big part of it—so, how are we reporting on those more idiosyncratic asset classes, those that potentially might have different measurements like money on invested capital, as opposed to sort of time-weighted return or something? We also look at DPI and TV, total value paid in. There's different measurements associated with that.

So, from a reporting infrastructure point of view, do we have that as part of our infrastructure? [09:00] And also, how do we measure efficacy? So, benchmarking is changing. Benchmarking these asset classes is extremely different to public equities. So, what's the compensation rate or what's the margin of expected return above those public markets and how do we benchmark that efficacy?

So, there is complexity there. I think it also comes back to, what's the purpose of the asset class and are we getting compensated for the risks we're taking on? So, you know, it’s the same as equities. With equity markets or public markets or even more traditional corporate bonds and bond portfolios, there's an expected return there, right?

So, I think the complexity that we're seeing a little bit now, or the challenges we're seeing a little bit now, from an investment committee perspective is, do we have the right amount of expertise that sits within that investment committee to be able to be a good interrogator of counterparties like fund managers and things like that? Are we asking the right questions? Are we doing the DD? You know, things like that. [10:00] That does pop up a lot more these days as well.

R. Adam Smith: So, the larger family offices, are they employing experts like yourself and even larger investment consultants versus building out their own CIO team and investing teams, especially on the direct investments?

Give us an example of a family office that, let's say, has a billion or so and maybe 10 people. Walk us through the mix of internal and external human capital expertise, for example. 

Shaun Parkin: Everyone says you've seen one, you've seen one family office, right? And I guess that is quite true in this case.

We see a lot of family offices. It's not necessarily dictated by the asset size. I mean, you get highly complex, sophisticated investors with smaller assets and you get quite not simple, but less complex portfolios for large assets. I don't think asset size necessarily is the determinant here.

R. Adam Smith: Good point.

Shaun Parkin: I think what we're looking at is, [11:00] what's the goal and what's the bias from the family themselves? Do they like going directly into funds themselves or would they like an intermediary? And if they like going directly into it, they have to have an internal person that does the DD, or we can bring someone in with that expertise.

I think when it comes to, you know, the insource versus outsource component here, which I think you're alluding to, we have some families of extreme size that outsource nearly everything and they might outsource the investment part, like an OCIO kind of structure, which implies that they are an outsource chief investment officer, so therefore, they are doing all that heavy lifting. We do see some on the smaller side that would really like to have it all internal. So, they'll do all that internally and they'll hire for it.

So, there's no classic form here. I think it all comes back to potentially that purpose, [12:00] which is, what are we trying to achieve here, and what's the internal bias or what's the internal values of the family themselves?

Some families value total control or they want it all internalized and some don't. So, it's not necessarily reflective of the asset or the asset size; it tends to be reflective of the goals and the purpose of the office itself.

R. Adam Smith: Okay, I like that. Maybe a bit on the investment strategies for the family offices that are unique these days or the last couple of years. Give us some examples of some of the custom strategies you've worked on or developed. Maybe it's around real estate or secondaries or co-investment.

Just kind of run us through a couple of the more edgy and unique structures out there that you're working on this year or the last couple years.

Shaun Parkin: I don't really assist with strategy itself. I mean, I assist with the governance around that strategy. But I think if there's one thing that we're starting to see a little bit more of; [13:00] there's two main components, which is how we're integrating impact or a version of, say, environmental, social, and governance (ESG) or something like that, and how we're engaging the next generation there, right?

So, if you looked at a fairly classic investment policy, it would be, to a certain degree, devoid of emotion. You'd have North Star components like, what do we believe philosophically? what's the purpose? and things like that. But my job a lot of the time is to assist single-family offices to articulate the investment policy, the investment strategy, and investment philosophy that they want to manage these assets by, right? And it's never a static document. But what we're starting to see is, there's a little bit more language around purpose. We've got some financial goals, but we've got some more subjective, non-financial goals, things around legacy [14:00] and engagement of the next generation, components of impact, and things like that.

But, I guess, the other thing as well is that there's a change in the way that we almost gauge success here as well.

R. Adam Smith: So, now you're talking more about the qualitative, the softer metrics versus the quantitative?

Shaun Parkin: The qualitative, I think, is the good term for it, right? Which is not necessarily that we are looking for CPI plus whatever, or we're looking for capital market expectations of a particular asset class; we might be looking for something that is a little bit more subjective, a little bit less financially oriented. So, I'd say that that's where we're starting to include it.

But also, the thing I love about family offices is that we're not necessarily looking to manage like a client base, or we don't have members outside of the family. So, we can be as unique as we like.

So, [15:00] we put things in there that wouldn't necessarily be written by a wealth manager or an asset manager or a consultant normally.

R. Adam Smith: That’s a good point.

Shaun Parkin: If you're an institutional asset management consultant, you came in, you looked at some of the things that we put in the document, they'd be like, how? What does that mean? And it doesn't matter what they think. It matters what it means to the family. It matters what it means to the people that the assets are being managed for.

So, I'm a little bit different in terms of not being too prescriptive around these things.

R. Adam Smith: Got it. Let's talk about generations and generational transfer and the succession of family office next of kin.

So, recent research suggests 30% of family businesses—of course, not really exactly the family office, but family business in general—survive into the G2 and then 12% to G3. So, maybe talk a bit about this massive transformation of wealth that everyone's talking about, right? It's going to be the biggest transfer of wealth in modern history. However, [16:00] I think it's not really clear if that wealth is going to be linked to, let's say, liquidity versus the operating companies.

And also, you're talking about legacy, which I talk about often as one of my favorite topics. Legacy is different for each person in terms of how they define it. So, I'd love your thoughts on the succession of, let's say, the actual managing of the family office and then also the succession of the large operating company that often houses the primary wealth of the family itself.

Shaun Parkin: It's probably better to talk about the operating business first, right? You rarely have a liquidity event without the operating business having some component there.

So, I've seen with operating businesses—and you know there tends to be an embedded family office within that structure, but we'll park that. The way that I've seen family businesses or private businesses run effectively this transition is really [17:00] with having some idea that you can go outside of it first and then come back in, right? And most of them have an element of, we would like you to see something outside of the family business, get some more real-life experience, university, whatever, work for other companies, work in other industries, and if you feel that what we do is something that you'd enjoy, then come back, right?

And I think that's when the ones that come back into that fold or within that business model are the ones that tend to be the happiest with it, right? And they tend to be—

R. Adam Smith: You’re talking the 20-year-olds. Like the mid-late 20s.

Shaun Parkin: Yeah, so you've got people that's, you know, it's like any family business that I've experienced, right? You start sweeping floors at the shop or you start picking apples or whatever it ends up being, right? You're a part of it as a kid. And then you go into another stage which tends to be, well, we would like you to go out and get some real experience or some other experience [18:00] and diversify the family's knowledge and bring it back, because that's where a lot of good ideas come from, and businesses develop from that.

But to be honest, I'm not really involved in those components. I've seen it where it's been successful, but where I'm usually coming into this is when the liquidity event has either happened or the embedded office, or sort of that portfolio that sort of sits within the operating business, which is investments purely, then that's when I become involved, because, and I'm not sure if you find this as well, but embedded officers, the family, the embedded officer, those assets tend to be looked at in a relatively unsophisticated way.

When I say unsophisticated, I don't mean that they're not managed with nuance and professionalism. I'm saying, it doesn't tend to be driven like a multi-asset class portfolio and it doesn't tend to have a return expectation.

R. Adam Smith: I agree with that. That’s true.

Shaun Parkin: [19:00] There’s a lot of single stock in there or there's ideas in direct businesses and stuff like that. So, what I love to do is look at those parts of it and see how that affects the next generation transfer, because it's such a great opportunity to engage people. I've seen a lot of families treat that as a little bit of a Future Fund or a legacy fund that people can start to engage the next generation in something that's not just the family business, that’s not about the operational piece, that’s something that is unique to them.

So, I think getting people involved in that very early, I've seen that being very successful. And I've helped with sort of structuring that in the past from potentially having advisors that are not there to really build up a long-term portfolio but more to just offer ideas like stock ideas and stuff like that.

And I'm bringing a little bit more of a boring institutional asset management piece into it, which is strategic asset allocation of the building blocks, [20:00] what's the total return expectation, what's the benchmarks, things like that. So that tends to be where I'm involved.

R. Adam Smith: Got it.

Shaun Parkin: And I've seen that work incredibly effectively because nothing narrows the focus like in particular giving the kids or the next generation some buy into that portfolio either from a, this isn't going to be impactful as a legacy or some sort of long-term investment, or this is an opportunity for us to get our hands dirty and start picking stock or picking managers or something like that, while still having an operating business going on in the background.

R. Adam Smith: That's helpful. On our show here, we've had some interesting conversations about that entrepreneurial spirit and human capital expertise and the risk tolerance of family offices in engaging in entrepreneurialism.

So, for example, we had Professor Mat [Mathew] Hughes from FamilyBusiness.org talk about that. We also talked about the same topic in a different way back with Christina Wing, also operationally [21:00] with Phil [Strassler], who's on the call today. Thank you, Phil, for joining. And then recently with Valerie Galinskaya from Merrill Lynch, who runs the Family [Wealth] Center there.

It's a really fascinating topic. And this issue of skill set internally to build an organization, build a family office organization, which of course includes the governance, includes the human capital, includes the culture, is super tricky and super important. I'm part of a single-family office myself now, and I've advised hundreds of family offices more in the transactional side, but also working with them and building their activities and direct investments in merchant banking. And so, this more esoteric area has become more commonplace, and it puts more of a premium on human capital and also the operational and technological capabilities of the family office or the family enterprise.

Maybe a bit on the technology and operations side since we have some experts on the call [22:00] that are building the family offices and also have businesses that build the operations, the technology, the governance. I'd love your thoughts on that.

Where do you see the importance and the awareness of this scale that a larger family needs to have operationally, administratively, and also from a technology perspective? And from there, move into legacy and a couple more questions.

Shaun Parkin: Like I said, the business itself started from the family offices in Australia needing an alternative to non-custodial portfolio tracking data analytics, right? So, for the first two or three years of the business, that's really what I concentrated on.

I think the interesting things that came from those first few years was because the way that the projects were done was, I would be engaged by a family office just to do that specific component, which was look at the [23:00] investment policy, look at the counterparties, the portfolio, look under the hood completely and have an opinion on best practice within that. And part of that best practice opinion was, what's a good piece of technology or infrastructure or multiple components of infrastructure that's going to improve the efficacy of that operational piece?

There's nothing more engaging than having good reporting that you can rely on, that you can also send to people, that they can look at that's not an Excel spreadsheet, that they can see what they're invested in, they can see what they're exposed to, they can see the performance figures, red, green, you know, what's the asset mix look like geographically, all that good stuff.

And one of the great things about infrastructure is that unlike investments, we're not looking at a five-to-seven-year potential cycle of return here. We are looking at something that changes really, really quickly. It could be months, could be a year, but you're going to be seeing a [24:00] really big difference  in the way that you engage with an investment portfolio if it's reported on and you can get people to view those reports, right? So, that's a really, really effective tool for engagement.

I think the challenge for a lot of family offices is potentially not knowing the questions to ask a lot of the time. So, that's really where I help in terms of saying, well, what are you looking to achieve here? What's the point of this reporting? Are you looking for a portfolio management tool? Are you looking for some portfolio management system component? Are you looking for an investment book of records, something that just puts it in front of people that shows you what we're invested in and how we're investing? What's the performance figures? Are we getting bang for our buck in terms of managers, but also in the total return?

So, those are the questions that we sort of ask. And also, does it reflect the investment policy? So, if we say the investment policy should be, I don't know, some sort of benchmark of CPI plus, or the asset classes are at, you know, public markets plus [25:00] 300 basis points, or something like that, there's an element of being able to determine very quickly if the internal or the external managers are doing their job.

And also, you know, having some accuracy there too. And for internal staff members, I think one of the biggest things that changes with internal staff members with good reporting infrastructure is that it gives them just as much comfort as it does the family or whoever's looking at that final report, because it doesn't take a lot of data entry. It's not a whole lot of key person risk around the Excel spreadsheet; it's good graphics, it's easily manipulated in terms of saying, what did we return on this period or this asset class or whatever?

So, that's a big component of it, I think. Not only just the engagement piece, but also the portfolio management piece. And also, it's just a more efficient, lower risk system in terms of key people running it.

R. Adam Smith: Right.

Shaun Parkin: [26:00] You look at all the big platforms. It's all cloud-based, it's all multiple permissions. It's all being able to have some reconciliation of some description. So, it gives you comfort, but it also gives you clarity.

R. Adam Smith: Right, that's great. This topic of legacy and succession and who's around to actually do the work is fascinating and there's no monopoly on the correct answer. I think it's great to get different opinions like you're saying, just reading a lot, going to events, having a think tank, and behind-the-door sessions with experts both internally and externally.

This week I'm going to Bratislava to speak at one of the congresses there for a private event with Central European and European leaders to talk about that. And the views on really what is legacy and where's the money going to when there's liquidity and when there isn't children to take over the business is fascinating.

We had Tom [Thomas] Deans on the show recently, who you may know. [27:00] He just finished a book, and he has a very unique perspective on succession within the family business. So, I encourage people to listen to some of those shows. Also on Shaun’s show, he runs a wonderful media platform, both newsletter and podcast. And there's a lot of knowledge in these materials. And as we've seen growing at some of the other organizations out there, McKinsey, Martin Roll, one of our guests, is going to build a family office content platform there, which could be quite useful, also simple. It’s where we have Francois [Botha] building some nice content there—friends of ours and Shaun’s.

So, there is a lot to learn. I recommend reading as much as possible. At some point, you've got to hire some advisors. You've got to hire, spend some money with lawyers, technological consultants, investment committee experts like Shaun here.

So, on the Sherpa, [28:00] tell us about that program and what are some of the topics you cover there and where can people find that?

Shaun Parkin: So, the newsletter is up to number 136, I think, but that was started because when I first left SSGA, I wanted to stay in contact with some old clients in terms of just being able to provide some information. My first job in finance was to write the overnight reports on the institutional equities desk. So, it's just never really left me, and I've always enjoyed writing. So, that was a natural progression.

So, the newsletter can just be found at HallRoad.com.au and you just register on there.

And I've always liked writing articles. And so, I had the idea to write five series of articles on family offices in terms of that soup-to-nuts piece, right? So, it's structuring it why, where, how kind of thing to, you know, the fifth on the series was supposed to be around family office engagement, in particular on the next generation, things like that, but sort of covering off these five main factors or five main components of the family office structure. [29:00] So, I was going to write that, but then I thought, well, I'll give podcasting ago because I like the idea of being able to just talk rather than spending not an insignificant amount of time writing.

And my brother-in-law is an online content provider, and he does this, so I said to him we'll put together a five-episode piece, and so I did and that was super fun, and I enjoyed the process and all those sorts of things. So, that parlayed itself nicely into doing a fortnightly program on more less evergreen. So, the intention was that the first five episodes were evergreen, so it doesn't matter when you listen to those at any stage in five years’ time, or whatever, hopefully, it's still relevant.

R. Adam Smith: I saw that. Those are very timely.

Shaun Parkin: So then, the sixth episode is really a little bit less evergreen, a little bit more dynamic. So, I talk to things like staffing and pay [30:00] because there was that awesome KPMG report that came out that really dug into how much people within family offices are paid and what the roles look like and stuff like that.

But also, the other big parts that people ask me about, every time I talk to a family office around sort of the challenges or what they're interested in, I can put that into the podcast. So, there's no shortage of topics.

And I try to keep it to 15 to 20 minutes, because the hope is that people can listen to it in bite-sized pieces, the most recent one being on the Endowment Model. And the Endowment Model, you know, that sort of Swenson Yale Model, because there's not an insignificant amount of family offices that are really intent on having that, like we talked at the beginning of the show, which was, you know, alternatives and where they fit within the portfolio that illiquid componentry. But what are the implications of that? So, that's really what I went through in that because that's the conversation I had with [31:00] family offices. So, there's no shortage of content.

It's really enjoyable. And it comes out every two weeks on a Monday. So, it just fits within my brain, and it also fits within what I enjoy, and it seems to resonate. So, that's super helpful. And you can just find that on Spotify. Just type in “The Family Office Sherpa,” or “Shaun Parkin,” and that'll pop up. Or Apple and do the same thing. So, it's relatively easy to find. So, it'll come out every two weeks on a Monday.

R. Adam Smith: Great, I've enjoyed some of those. And what you said is important for all of us to do something that we enjoy. We will, I think, perform the best when we're working hard and we're focused on an air of passion and enthusiasm for our work. In your case, you advise tens of families on their investment portfolios and governance, which is wonderful. I look forward to learning more about that.

This concept of [32:00] being rich is complicated within the family office community, because there's such wealth being built and put into the family office structure. So, it carries different connotations. Over there in Australia with your clients, how do you define what rich means and how these large families consider a transition to the family office structure?

And then talk a bit about philanthropy and kind of the softer side of what you're seeing, looking at where the wealth is deployed.

Shaun Parkin: I'm a big fan of purpose, to be honest. So, if you've got a structure that works, and you call it a family office, then I don't really care, to be honest. If that's what you want to call it, then that's great. Call it a family office, call it a private office, call it your investment portfolio, whatever it ends up being, as long as it's structured in a way that works for you and your family, right? I think people have sort of a rule of thumb [33:00] being that if you've got a $200 million of something like that, then you need to set up a single-family office, which I've always called shenanigans on to be perfectly honest with you. You know, don't set up a structure just because you're told you need; to think about the reason why you're doing it, because there's complexity.

Like you mentioned at the beginning, there's legal, there's tax, there's all these other components that needs to be inputted. And if you talk to some people, it's an incredibly expensive round trip. You know what I mean? And some people are looking at it less around purpose and more around, well, just everyone told me I needed to get one, so I should.

So, I'm a big proponent of saying no if someone asked me, “Should I start a family office?” And I'm like, well, you got to think about why you're trying to do it, right? But if the purpose is there, and the structure works for you—and when we say, “the structure,” we just sort of mean that you're setting up either a physical or a legal entity that's just there to manage the assets of you and your family—then do it. But think about the repercussions of that.

[34:00] There is an element of, well, if you've got a certain amount of assets, rich or otherwise, or whatever you want to call it, what's the next piece of your life? You have an exit. We've all seen people have exits and then think, well, what do I do now? Well, I've got to set this office up. I'll get an office in the city, or I'll get an office wherever, I'll staff it, I'll put some people in it.

I remember when I first started in this and there was a survey done within the family office themselves. I was talking to the chief executive officer, and he said he did a survey of all the people within the office. And they said, rank the things you like about having this family office. And every single one of them ranked number one the fact that we could all come to the same place, and we can see Grandpa or there's somewhere to work. We're not working out of our house. We're there. We can talk to our other family members and well-credentialed helpful staff that sit within there, either in the [35:00] investment side or the transaction side or philanthropy side, as you mentioned.

That was the number one thing. They liked coming there. It was almost like a meeting place, which we all love, right? I mean, to be honest, I'm at my parents' place up in the hills of Perth today, and a big part of that is the fact that I like when my family is around their grandparents and when I'm around my parents.

R. Adam Smith: It's the familiarity of it.

Shaun Parkin: Absolutely, yeah. And if that's the number one reason and that's the only reason, then that's awesome. Do that, right? Call it the family office, but just the structuring of it. So, if you start to get into the componentry piece here, make sure each one of those components is there for a reason.

If you've got an investment and you want an internal investment person, then have that internal investment person for the right reason, not just “I'd like to have an investment person.” Why are we internalizing this? Why aren't we using a good external manager or OCIO structure or whatever, right?

So, I think that's what I would say. I mean, [36:00] people say, if you're over a certain asset size, anything below that you shouldn't have a family office. And again, I think that's not for me to say. It's more that I'm more interested in having people with a structure that is well articulated, that is good on the governance side, that we know what we're trying to achieve, and we know its purpose. And that's ultimately what we're seeking here.

Now, to your other question around that more philanthropic side, sometimes that is a big reason why people have these, right? So, in Australia, we have things like private ancillary funds or those donor advise style structures. And that sometimes is the number one reason why people set these up, because they can have some structure around the gift giving or the philanthropic components of it. And the investment thing might be separate, or it might be very peripheral.

So, I think that's certainly a reason I've seen people establish these structures for sure.

R. Adam Smith: Good point. [37:00] That was super interesting. We have to wrap now, but I also like your reference to this incubation of talent and new activities within a family office or family enterprise called a Future Fund. I encourage people to think about and look at that, like how do you diversify and how do you create activities of investing and even incubations, corporate venture capital, buying companies.

We had a really fascinating conversation with a G2, G3 president around 40 years old, running a billion-dollar company in the Midwest. His name is Kyle Chapman. And so, he took over the family business, running it day to day from his family, who transformed the business from his father. And he set up a private equity business acquiring stakes of separate companies, but then consolidated those holdings almost like a Berkshire Hathaway into the family business to create diversification. And frankly, it's just interesting [38:00] to work with smaller businesses and work more closely with the entrepreneurs.

So, that's a wrap today. Shaun, it was really great to have you today. Shaun Parkin from Hall Road investments.

Shaun Parkin: Thank you.

R. Adam Smith: Please follow Shaun on LinkedIn and his Sherpa podcast and newsletter platform. And of course, you can reach him on LinkedIn or visit him in Australia when you’re there.

Shaun, great to have you today. I really enjoyed it.

Shaun Parkin: Thank you. Appreciate it. And thanks for everyone's time.

R. Adam Smith: This is R. Adam Smith signing off. Stay tuned for the next episode of the Family Business Audiocast on LinkedIn.

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