Knowing Who You Are: Building a Long-Termist, Advisory Family Office

Twelve years, from wealth management to family-office service—this is a story of entering the field at its height, of setbacks in starting a venture, and of how it all transformed into a fee-based family office.

2003–2008: The 1.0 Model

The Lone-Warrior Model of Individual Heroism

Back then the scene went like this: a wealth manager would wait outside the door of a bank’s VIP room, and on spotting a client would bravely rush up to introduce himself—“Bank wealth products yield only 6 percent; right now I have a one-year trust yielding 12 percent, with guaranteed payment. Would you care to take a look?” In those days few wealth managers came out of finance; more had switched over from foreign trade, direct sales, insurance, and the like. Business grew mainly on the strength of individual ability, one client accumulated after another. At the time, a client’s investable assets ranged between 10 and 20 million yuan, and the client’s need was simple—to find a high-yield product to replace bank wealth products.

2009–2014: The 2.0 Model

Foxconn-Style Industrialized Selling of Financial Products

The path to realizing it was for headquarters to drive sales—from grand summits of thousands, to forums of hundreds, to roadshows of dozens, and then to intimate dinner exchanges with GPs. Wealth managers invited clients to attend, helping them break through the learning curve; this mode of group learning brought high client conversion rates and eased the pain point of a wealth manager’s insufficient personal brand and credibility. At the time, a client’s investable assets ranged between 30 million and 100 million yuan, and the wealth managers were basically people from financial institutions—bank branch managers, outstanding relationship managers, and the like. Clients’ wealth-management needs shifted from the single product to asset allocation, with the main products being PE, RE, FOF, and overseas funds.

After 2014: The 3.0 Model

Small-Scale, Customized Service for High-End Clients, Joining Investment with Education

Clients were no longer content with the sameness of thousand-person events; they wanted small-scale learning activities of twenty to thirty people—wealth-training courses, overseas study tours, and the like—that would let them communicate up close with investment experts while also learning and growing themselves. In a small, private setting they could share their own insights on investing and asset protection. At this point a client’s investable assets ranged between 100 million and 1 billion yuan, and among the wealth managers there began to appear members of the rising generation of families, managing their own family’s money while learning wealth management.

The 4.0 Model of Wealth Management

The Buy-Side Advisor Model

Within the wealth-management industry, I started from the 2.0 model, and over the course of the 3.0 stage I began my own venture, hoping to build, amid the tide of wealth management, the beacon-land I had imagined.

In 2017, several friends and I founded a venture together, advancing the 4.0 model of wealth management as I envisioned it—the buy-side advisor model. We saw the client’s need: to have an advisor who represented the client’s own interests—not pushing products at the client, but helping the client screen assets, negotiate prices with asset managers, manage risk control, and handle ongoing administration.

We invited nearly twenty clients from different regions to become shareholders of our headquarters, and locally set up subsidiaries jointly with these shareholders’ friends. If headquarters later raised financing at a premium, the subsidiaries’ shareholders could reinvest into headquarters at a discount—a scheme of cross-shareholding. At the time we thought it a marvelous business model.

In the first year of the company we spun out seven subsidiaries. We assumed that, as long as we had a shareholder system in the subsidiaries locally, we would never lack clients, and that headquarters’ strength lay in asset screening and family-office service. Yet we overlooked what truly mattered—the capacity to serve, right beside the client. Unlike the relatively standardized, product-sales-driven work of wealth management, family-office service confronts the client’s open-ended questions; without professional capability and accumulated experience, there is no way to hold a conversation with the client. So the capability of the family-office advisor at the client’s side matters most. If you cannot help the client solve real problems, the client will not use your service. Later, in November 2019, after consulting with our core shareholders and executives, the venture suspended operations. In 2020, the sudden pandemic brought many industries to a halt, and most people could only stay home, unable to go anywhere. Unexpectedly, this special circumstance prompted me to take my first step toward the family-office direction I had wanted to pursue.

One night during the pandemic, I received a WeChat message a client had sent me at two in the morning**: “Are you running a family office? I read your WeChat account, Poor Andy’s Almanack, and the content is quite good. I’m looking into family trusts right now, and I’d like to have a talk with you.”** This was a friend who had once wanted to go on a study tour to Israel with me—a friend I had never met in person, introduced only once by another friend.

Over the next six days, this client and I held conference calls in a row, beginning every morning at eight—from family trusts to global insurance, from asset allocation to asset protection, from U.S. taxation to non-China, non-U.S. structures. Whatever the client wanted to understand, I prepared a slide deck and walked him through it. After six meetings, the client said, “I think you’re very professional. I’d like to entrust my domestic and overseas family trusts to your service. How do you charge?” This was a typical family client: the beneficiaries numbered more than a dozen, and the needs were highly individualized. Usually such clients come to us only after they have sought out lawyers and trust companies and felt their needs could not be met. And yet it was precisely under such circumstances that we won our first group of fee-paying clients.

In the execution that followed, our first step was for our team to interview, over Zoom, top lawyers from six of the country’s top law firms, each of whom had done at least fifty family trusts. From six lawyers we screened three, then invited the client to interview them. In sitting in on the meetings between client and lawyers, we came to understand the client’s needs more deeply. Second, following the same process and method, we screened trust companies, choosing three from nine trust companies and inviting the client to interview them. Third, we assembled a project group, with the family office serving as project manager, and organized the client, the lawyers, and the trust managers to design the individualized content of the trust agreement. Because the client’s family had many beneficiaries, after setting up the trust, we also helped the client hold a family annual meeting, bringing together the family’s first, second, and third generations, and inviting trust experts and lawyers to explain clearly what a family trust is and why one should establish one. Seizing the occasion, we drew up a Family Covenant, organizing the family’s vision, mission, values, and red lines, and established a Family Council, managing and running the family as one would an enterprise. What remained to be done next was how to make the capital in the family trust generate perpetual, positive cash flow, able over the long term to support the education and medical expenses of ever more family members.

In the course of execution, we found that a family trust is the hardware, and the love among the members of the family is the software. The family annual meeting stirred up the ardent feelings of the more than twenty people in the whole family and kindled a sense of family pride. At the meeting, family members discussed and drew up various rules for running the family, its values, its red lines, and so on, and settled on the form of a charitable trust and a perpetual trust. The second generation took an active part in the family trust committee, repaying, through their actions, the family trust and the devotion of the family’s leader.

From February until now, we have signed on several fee-paying family clients. Although the work of building the protection architecture takes up a great deal of our time each day—since the pandemic began, the four of us on our small team have had to work more than twelve hours a day, yet the team’s state has been thoroughly positive and energized.

In the course of serving clients, we found that clients all have strategic plans and a vision and mission for their enterprises, but the family usually has no system, strategy, vision, or mission. The family leader always files this important-but-not-urgent protection architecture under “I’ll consider it when I have time,” only to discover, regretfully, that when a problem arises there is always “no time to deal with” these risks.

Entrepreneurs are all people of great wisdom—otherwise they would not continue to hold wealth. That they do not, at present, take asset protection seriously is indeed because they have had no chance to become aware of it, or have not fully understood the architecture of asset protection. But once the matter is thoroughly discussed and the entrepreneurs see the necessity of it, they usually grasp the crux with keen insight and complete the building of the protection architecture in the shortest possible time. And whether or not one helps the client see and understand this necessity is one of the very core service capabilities of a family-office advisor.

At present, Flourishing Tree Family Office’s target clients have investable assets between 100 million and 1 billion yuan, and their core need is a protection architecture for asset protection and succession. In my view, a family office does not lack clients. As long as you do the work well, clients will introduce their other friends. So doing the work well and keeping clients satisfied matters greatly. A family office does not need marketing, either; the competition is not fierce, and the market is simply too large—there are more clients than one could ever serve. The core is “finding out who you are,” making the client feel that “you understand me.” Make yourself a magnet, and you will draw others to work with you.

The name of Flourishing Tree Family Office—Zhiyun (执允) in Chinese—comes from the Book of Documents, “Counsels of the Great Yu”: “The human mind is precarious, the mind of the Way is subtle; be discerning, be single, and hold sincerely to the Mean.” The meaning of this line is that the human mind is unpredictable while the mind of the Way is upright and subtle; to be discerning and single is the method of the Way, and one must sincerely carry out the Way’s requirements, never altering the ideal and the goal in one’s heart, until at last the human mind and the mind of the Way become one. In it, zhi means to carry out, to execute, and yun means fairness and sincerity. I personally love this name—Zhiyun, to sincerely carry out the Way. Flourishing Tree hopes to be a 103-year enterprise, drawing together excellent, like-minded, and creative fellow travelers who share its values, to accompany families over the long term and help them pass on love with wisdom.