Working alongside future generations of clients was one of two driving factors in governance and ownership changes at Matter Family Office, according to a member of its new board of managers.
The US multi family office, based between Denver and St Louis, announced last month it was shifting from a firm led by a CEO and managing director to a partnership. Founded in 1990, the firm serves 50 core clients across 20 states, with $5 billion assets under management.
The firm saw two main advantages to the ownership and governance shake-up, according to managing member and partner Whitney Kenter: to reassure clients about the long-term future of the family office, and to attract top talent to the firm.
It has changed from an S-corporation to an LLC that is treated as a partnership.
“We’ve created this structure where control is not just going to be held by one, two, three, four people, it’s already spread amongst 11 and we hope that continues,” Kenter said. “We were very adamant about staying private rather than having to take outside capital.”
Matter Family Office, which was initially known as KBL Financial, was founded by Katherine Lintz. She had served as CEO of the family office until the changes came in place last month.
Lintz is now part of the board of managers, and is joined by J Eric Lawrence, the family office’s former managing director, as well as Kenter and Brian Fernandez.
“Smooth leadership transitions are rare with privately-held advisory firms such as Matter,” says Tom Livergood, chief executive of The Family Wealth Alliance. “Not only have they achieved this, but they have also affirmed their continuity as an independently-owned firm. This ensures a smooth and transparent transition for their clients as well as employees.”
William J Kambas, a partner at international law firm Withers Worldwide, says the ownership and governance structure employed by Matter appears focused on the firm’s management structure, with the aim to encourage collective responsibilities. However, he adds that a partnership is usually the best way for sharing profit.
The partnership model is becoming increasingly popular, particularly for those employing a private equity and hedge fund based model, according to Kambas, who says the jurisprudence around these structures has grown as a result.
He says that as more single and multi family offices become focused on direct deals they may look at starting a partnership structure to entice investment managers from the private placement industries.
Kenter says private equity was one industry where Matter Family Office examined partnership structures, but the firm also looked outside investment services to accounting and law firms.
Kenter says there are a “staggering” number of financial advisers that don’t make it beyond one generation. “We’re working with sometimes three generations. So we thought for the families’ sake we don’t want them to be disrupted at some point in our firm’s history when we transition from our founder, and all of a sudden we’re going to have to sell to a bank.”
The professional aspirations of the upcoming generation of leaders were also a driving factor in the transition to a partnership structure, Kenter explains. “[Millennials] want ownership, they want inclusion, they want to be part of the vision of the firm and the future of the firm. They don’t just want to be employees.”
Kambas says there have been instances where banks buy out partnerships, though it is not always straightforward and can require careful planning.
“I would not say a partnership rises to the level of being a poison pill. That being said, the governing document can be done in a way that creates substantial restrictions on the transfer of membership interests,” Kambas says.