Michael Adam Smith is the founder of Braeburn Family Office. Braeburn Family Office provides unique, highly personal financial, transitional, philanthropic solutions and opportunities to domestic, multi-national families and their succeeding generations. Michael possesses 35 years of capital markets and investment management expertise.
Q.1. What is your life story? How did you go from UCLA to founding the Braeburn Family Office?
A.1. Thank you for inviting me to share my thoughts regarding Family Office dynamics, Nik. I was born and raised in Los Angeles. I graduated from UCLA in 1980. My degree was in Political Science.
I started my career working as a retail stockbroker at Dean Witter Reynolds in Westwood. A crazy idea really…..a 22 year old kid giving financial “advice” to families and individuals….nuts. All the stereotypes and cliches were fairly accurate and candidly I experienced mediocre success.
I was lucky in many ways as the early eighties were a time of global financial transition. I transitioned from DWR to the institutional research group at Oppenheimer & Co. OPCO was a great experience as I worked with very smart people and learned how businesses are valued by institutional investors.
My preference was to work closely with families and individuals beyond just investing their assets. I worked at Bankers Trust Company and The Boston Company for several years managing family assets but perhaps more importantly managing family fiduciary and transition dynamics. This experience was invaluable in understanding the dynamics of multi-generational relationships and challenges. My experience also included managing the Wealth Management and Trust Division of California Bank & Trust Company. My responsibilities included building the investment and fiduciary team throughout the state.
Prior to establishing Braeburn Family Office I was part of the investment teams at Reed Connor Birdwell and Covington Capital Management. While at Reed Connor I established our offshore (Dublin) investment vehicle that we distributed to London and Geneva Private Banks. It was a sensational experience as it required navigating multi-national jurisdictional regulatory dynamics and establishing relationships with non-US Private Banks. I established Braeburn three and a half years ago. Braeburn is the natural progression of my experience, interests, and career path.
I enjoy working with individuals and families beyond the asset management and product placement dynamics. Developing strategies to address family governance, transition, estate planning, philanthropy, risk management, collectables, etc. and weaving them together to create a mosaic for family success brings me great satisfaction.
Q.2. Tell us about Braeburn Family Office. What benefits do families get at Braeburn as compared to others?
A.2. The purpose of a true Family Office can be summed simply: develop and execute strategies and protocols to ensure a family’s legacy into perpetuity. That is Braeburn’s mandate. Braeburn provides this dynamic conflict-free. The Private Banks and brokers have created “Family Office” units during the past five – seven years. This is a bait-and-switch. They are merely marketing labels to sell product. Braeburn does not sell product. Single Family Offices do not sell product.
Braeburn clients benefit from knowing the only revenue the firm receives is the annual retainer they pay Braeburn. Clients benefit from the extensive book of relationships I have built over the course of four decades. I know who the best partners are for my families and I know who to avoid.
Q.3. What are some of the challenges you have overcome as a Family Office Founder and Managing Partner?
My challenges are the same as all business founders. That first step off the cliff into the abyss can be scary. Having the confidence in my business plan was key to my success. Perhaps the biggest challenge has been as founder I wear many (all) hats. All the behind the scene infrastructure is now my responsibility. I have enjoyed the learning experience very much.
Q.4. What can families do to preserve long-term wealth? How can you help with this?
A.4. Process, process, process. As noted above the foundational mandate of the Family Office is to establish protocols, structures, and disciplines to ensure family legacy (wealth) into perpetuity. The process to achieve this begins with a Family Census that quantifies every facet of the family including individuals, investments, assets, entities, and employees, etc. From this database a strategic roadmap and plan is created. At the centre of this map is a Mission Statement and Family Governance Policies. My families are essentially a corporation unto themselves. Impossible to imagine an Apple, Google, or Pfizer without a Mission Statement or Governance Policies. The Mission Statement states in unambiguous language a raison d’etre…..what are our values and what is our purpose as a family.
Governance Policies are the internal rules and guidelines by which the family governs itself. The policies include the creation of family councils, succession plans, internal conflict resolution protocols, guidelines for the family annual meeting, etc.
These documents are reviewed annually (annual meeting) by family stakeholders and fine-tuned to reflect changes in family dynamics and circumstance.
From this point a comprehensive strategy is set that includes investment dynamics, transition issues, tax challenges (opportunities), jurisdictional issues, etc. The core purpose of corralling information and integrating this information into the Mission Statement and Governance Policies is to create a highly efficient strategy that leverages family resources (human and financial) to their highest purpose.
Braeburn shepherds families through this process and secures the resources to successfully execute the strategies.
Q.5. Based on your experience, how are the risk/reward/timeline requirements of family offices different from institutional investors?
A.5. Family Offices may be institutions unto themselves but there remain differences. Within Family Offices there will be entities with divergent investment profiles. An example is a family foundation and entities that own operating businesses. The foundation’s investment policies may be closer to traditional institutional profiles as it must operate within specific tax and regulatory regimes.
In general terms, institutional investors are investing on behalf of other individuals and institutions…..it’s not their money. Institutions manage mutual funds, retirement assets, endowments, etc. They manage to specific actuarial assumptions, liquidity, and political pressures. Family Offices operate in an ecosystem of their own creation. The client of the Family Office is the family. Only guide rails set by the family apply (in addition to regulatory dynamics).
Q.6. How will family offices evolve in the coming years?
A.6. There will be many more Family Offices created globally during the next decade than were created in the past twenty years. This is the result of the enormous wealth created across the globe during the pandemic. While Family Offices have existed in Europe and the United States for a long time; the structure is relatively new in Asia and the Asian sub-continent and has been enthusiastically embraced.
Many Family Offices will expand their philanthropic endeavors as a result of tax challenges as well as younger generations’ increased charitable ambitions.
Q.7. What is your thesis on asset allocation in real estate? What asset classes in real estate are you bullish on?
A.7. Real estate has been a major creator of significant wealth since the beginning of society and I see no reason that will not continue. An asset that has a finite supply is going to necessarily create value. The challenge is to fashion the best use of that finite supply. And of course….location, location, location.
The concept of perpetuity permits the Family Office to invest patiently which in turn allows for increased acquisition opportunities.
The pandemic has roiled the real estate sector both through basic economics as well as public policy. Two years ago who would have guessed owning MFH assets would have been fraught with peril today as the government excused rent payments for tenants but offered little relief for landlords.
Like the phoenix rising from the ashes, these challenging dynamics are an opportunity for family offices (and others). The defunct enclosed mall is being re-purposed as an e-commerce distribution site. In a similar vein, warehouse asset valuations are going through the roof to accommodate Amazon, Walmart, etc. The explosion of e-commerce is not eclipsing.
In addition to warehouse assets, I look for cast-away industrial assets that can be converted to distribution and co-working space.
High-rise office space is under pressure and I am not convinced every worker is coming back to the office.
I like small strip centres with a 7/11, Starbucks, Verizon, etc. as anchors. Starbucks is going to a pure drive-thru concept and are evolving to three employees/unit.
Look for quick service retail as well. Single tenant with triple net leases is very solid dynamics.
Single tenant big box development is attractive. Think Lowe’s/ Home Depot.
Q.8. If you had to allocate your personal hypothetical $100M portfolio, where would it be?
A.8. The core of family assets will be the Braeburn Family Foundation. The Foundation’s initial assets are $40M. I have a daughter and she will be very involved in the operations of the Foundation. I strongly believe that with wealth comes responsibility. A serious concern of many (if not all) wealthy families is that their progeny will be productive and contributing members of society. It is the responsibility of the Family Office to create dynamics and resources for succeeding generations to understand and appreciate their family legacy and their individual responsibility to continue that legacy. This education is best initiated when the children are five/six years old.
My allocation for the balance of $60mln:
$30M – real estate (as outlined above and including private residence)
$20M – direct investments in start-ups and VC/PE vehicles. I invest in small ($20-$50mln) VC/PE funds exclusively. I harbor a serious bias for PT boats as opposed to aircraft carriers as they are nimble and resourceful operators.
$10M – portfolio of ETF index funds. This is my liquidity portfolio. Active managers cannot justify their fees as 90% do not provide alpha.
Q.9. What headline will the Wall Street Journal write about you/Braeburn?
A.9. Michael Adam Smith – A Passionate Life Well and Honestly Lived
Q.10. How may a family source your help in achieving their objectives?
A.10. They may reach me at firstname.lastname@example.org or 626.827.8594
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