Family Business Audiocast | Episode 70 | Jane siebels, Christian Bühring-Uhle, and Hans-Kristian Hoejsgaard
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R. Adam Smith: 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'm fortunate for my many experiences within the family firm industry. 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're 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. Now it's time to turn our attention to our accomplished guests on today's episode.
Welcome to the Family Business Audiocast. I am R. Adam Smith, creator of this audiocast series. It's great to be here today. Thank you all for joining. Today we have an episode on rethinking the Family CIO and the incentives, judgment, and truth-teller world around it. We have three elite guests in the family firm enterprise space, including Jane Siebels, global family office advisor and alternative investor; Christian Bühring-Uhle from his trusted advisor recruiting firm, along with his colleague Hans-Kristian Hoejsgaard, who's chairman and director in his career as well. I'm going to talk a bit about them and then we'll jump right in.
Today's three guests are distinguished in human capital, governance, alternative investments, and covering very important areas in family capital governance, leadership, succession planning. Jane Siebels is a seasoned advisor to family enterprises with deep experience across capital markets, alternative investments, investment strategy, and also multi-generational wealth. Christian is an international trusted advisor specializing in ownership strategy, governance and leadership for global families and privately held businesses. And Hans-Kristian brings more than two decades of experience with CEOs and C-suite executives across both publicly listed and private-equity-owned companies and family-controlled companies, working with Christian at their firm. We'll talk a bit about all their backgrounds and the firms they're working on. So together this is a unique, holistic conversation and perspective spanning investment, judgment, governance structures, real world planning, leadership. We'll be talking about the CIO function and other functions within the family enterprise space. So it's great to have you all here. Jane, it's wonderful to have you finally on the podcast with us.
Jane Siebels: Well, thank you, Adam. Thank you so much for having me. It's a delight to be here, and especially with such intriguing questions.
R. Adam Smith: And Christian, Hans, thank you so much today.
Christian Bühring-Uhle: It's great to be here. Thank you very much. Thanks for having us.
R. Adam Smith: Okay, great. So we know in the industry, the CIO and OCIO roles are really super important and complicated, expanding both in-house and out of house. So we're going to talk very much about that role that Hans-Kristian and Christian serve and fill and advise, and bring significant human capital experience to the table, and Jane herself in the family office for herself and her clients as well, very active in investing, mostly private investments. Let's talk about the issue of the traditional CIO model — the traditional CIO model itself is changing, and I think we should talk about how it can leverage the best practices in the industry for the family office. Of course, you need to recruit these people. Looking at the endowment model, looking at the OCIO model, and how private equity, illiquid and direct investments has changed the CIO model for large family offices, particularly in terms of creating alpha within the model. I'd like Jane to talk about her background a bit and just talk about her view of this CIO model that's evolving, and then we can turn it over to Hans-Kristian and Christian to start.
Jane Siebels: All right, thanks so much, Adam. The interesting thing I find is that the hard truth is that many families, it seems to me, are really fighting the last war. For 20 years, the playbook was get into top-tier private equity, embrace illiquidity, and harvest the premium. But today we're looking at what I think is a PE market that's very saturated. We're seeing compressed premiums that don't actually compensate for the risk of being locked up. And many families are finding themselves asset-rich but cash-poor. So there's a number of things going on here with the CIO, including the fact that valuation integrity is starting to be questioned. There's now a system where managers are setting their own prices and auditors are being hired by those managers. And crucially, the CIO's incentives are often tied to those very numbers. So it's a circular logic that really masks reality. So that's my question for Christian and Hans-Kristian. Christian, what can we do to kind of combat this? And is the role of a CIO changing?
Christian Bühring-Uhle: Okay, thanks very much, Jane. I think it's important to pinpoint what we're exactly looking at. We are often asked to help with the setting up and development of single family offices, and with the placement of the position of the person in charge of leading a single family office. That is very rarely been called, in our experience, really a CIO in that sense, because the task is broader. It's really the person who is in charge of stewardship for the portfolio, whichever it is — and they can be very different, obviously — and who is the bridge between the family and its portfolio and its wealth. And it's mostly about strategy, and then about with which detailed asset allocations and strategies the fortune is being managed. So there's obviously changing environments, but the most important thing is that the family really makes clear what they expect for the future, and that the person who is in charge of implementing that is hired accordingly, and incentivized and measured accordingly. And this cannot be by short-term performance measures.
R. Adam Smith: Okay, that's a good start. Let's go deeper on the incentive structures. Jane was talking about the models and how there are alignments or misalignments for behavior within the CIO model. Obviously that's much more complex with private assets. So, Jane, let's talk a bit about the governance structures that can challenge and manage these incentives, and what can be put in place to oversee the more complex, larger family office decision-making. And then Christian and Hans-Kristian will obviously talk about how those structures can be implemented, and then think about the background of this incredibly important role and what backgrounds are relevant from an operational perspective and in terms of quality of judgment.
Jane Siebels: Right. I think Christian's comments were very good in the general scenario of a CIO. But what I've been seeing, especially in the United States, is CIOs that are really entering what I would call the deal junkie syndrome. And that's really caused, I think, by the CIO's compensation, because we're seeing more and more CIOs whose compensation is being tied to carry or deal flow. And so they're incentivized to keep this carousel spinning. And it's starting to look like activity is actually being mistaken for progress, or perhaps even strategy. So when you align the CIO's bonus with short-term performance optics, or the ability to get into a hot fund, you've just lost the CIO's independence. In my mind, at least, the CIO then stops being a protector of the corpus, and he or she starts being a salesperson for the latest alternative asset. And this is where I think Christian's points on governance are incredibly vital, because if the board doesn't have tools, or it isn't the CIO's job description to challenge marks or to not be compensated by deals or performance, then the family is, frankly, essentially flying blind.
Hans-Kristian Hoejsgaard: Yeah, I agree with that very much. I would say, also building on what you said, that with the CIO being incentivized by the deal flow or otherwise, obviously means that suddenly strategy is no longer leading investment, but the investment is leading the strategy. And obviously that is not right. We have to create that sort of freedom within the framework, of course, but we cannot have the investments leading the strategy instead of the other way around. I think that is super important. A second point I would make also is that I think, at least a number of the family companies, the family offices I have been involved with, is that they are not necessarily truly equipped to oversee the CIO and particularly his or her decision-making. And I think that's why, in my life, also in Barclays Wealth Management, we do see a clear switch of more and more family offices going external for assets to be managed. I think there is a hierarchy or cascade of responsibilities. At the beginning, at the very top of it, is the family itself. The family has, and cannot get rid of, the obligation, the responsibility to define the strategic goals. If they don't say what good looks like, everybody down the line will not know how to react and how to act. So they need to express the goals, the objectives, what needs to be achieved and what needs to be avoided. Often families are by themselves not even capable of doing that, because sometimes they are too remote, they are too complex in their structure, or they are not proficient to deal with these things. So they need to be assisted in that. But they can't escape that necessity of formulating these objectives. And the other inescapable responsibility they have is to make sure that the right people manage that. So they have to look very carefully down the line who is taking care of their affairs. And that, at least in a larger single family office, will be an operational leader — call it CIO, call it CEO or general manager. That is really only names, and a board, which is between the family and this operational leader, who has to make sure this person does the right job.
Jane Siebels: Right. I think both you, Christian, and Hans-Kristian have made excellent points, and I think I'm just seeing kind of a greater disconnect in families between paper wealth and operating reality. And I just see so many families who have like 60, 70, even 80% of their net worth in illiquid vehicles. So they have zero dry powder when a real crisis hits, or perhaps more importantly, when a real opportunity comes their way in their core business.
Christian Bühring-Uhle: That's really true.
R. Adam Smith: Yeah, that's really good, Jane. Really focusing on private deals for families — that's a super important point. Sorry, I'm on a train commuting today, but it's not as luxurious as a Swiss luxury liner. I'm just on the Brightline here in Miami. Let's keep talking about the illiquidity and how that affects the CIO function — of course we're talking about the human capital recruiting element here as well. Why don't we just pause and do a one-minute introduction of each person, and just the firm you work for, what you're up to, so we hear more about that, and we'll keep going. Jane, you can start.
Jane Siebels: Well, I sit on a number of boards for banks, private credit funds and foundations and trusts. And I basically try to advise my own family, but also other families, in areas of not only investment but philanthropy and governance.
Christian Bühring-Uhle: Thanks, Jane. I'm Christian Bühring-Uhle. I am a partner at AvS Advisors. We are an international boutique consulting firm working with owners of businesses and larger portfolios, basically helping them be better owners, being more effective in that. And that starts with the ownership strategy and the setting up of governance systems, and then continues with the evaluation and the selection of the right people to fill and operate these systems, being their board members and their executives.
Hans-Kristian Hoejsgaard: And I'm Hans-Kristian Hoejsgaard, and I sit on a number of boards and have had my executive career mainly in the luxury goods sector, which is dominated by family-controlled businesses. So it has sort of been my work since then, as a non-executive chairman and advisor and mentor, to basically assist family companies in their family constitutions, in their succession planning, and mentoring the next generations as they assume responsibility.
R. Adam Smith: Thank you so much. So we'll keep going. Let's talk about this long-term illiquid issue and long-term wealth creation and creating alpha. From a governance perspective, it's tricky for the CIO to really pursue and deliver the alpha into private assets, because they want to create alpha for themselves but also for the family, and then also the family enterprise — they can be structured differently. So there could be a board, there could be a multi-family office, there could be a family governance council. So this illiquidity premium and complexity that Jane's talking about, I think, has become very significant the last 10 to 20 years, in particular where the pursuit of wealth creation and alpha potentially is not aligned or is not balanced with the governance ecosystem or these systems — even the technology, even the planning or the reporting or the KPIs. So it's particularly relevant, as Jane was saying, when you have asset-rich and cash-poor families where liquidity is a strategic asset. So let's talk a bit about that. Jane, just kick us off, and then we'll move over to the gentlemen.
Jane Siebels: From looking at it from a human capital perspective, from my point, you're seeing CIOs just treating investment portfolios as a standalone island. And what Christian and Hans-Kristian are talking about is definitely, I think, a holistic balance sheet approach. And I'm just wondering, how do you motivate CIOs to do that without tying performance fees and performance bonuses to short-term performance and carry and these other things?
Christian Bühring-Uhle: This is a very interesting question. I mean, when we are asked to look for a head of a single family office, we first obviously try to ask the family what they want to achieve, what's their mission. And then we look at who could be the right kind of people. If you have people who are very focused on short-term success in investment and who are demanding high carry and high short-term incentivization, then you're probably looking at the wrong people already from the outset. This may be a bit simplistic, but it also depends on the preferences of the family. Most other families we work with have a very long-term time horizon, and they are used to having large portions of their portfolio not very liquid, because they typically come from privately held family businesses, which they still hold or which they exited and then maybe invested in other similarly large-ticket and not-so-liquid assets. They often are aware, through their history where they had to go through crises, that it's important to keep some powder dry. And these are basically instructions, like in a strategic asset allocation, that have to be made by the family themselves. And then you need to find the people who are willing and able to execute on that. And that obviously means that they have to embrace these goals, and that also means that their incentivization must be much more long-term. And we have had families who said, "We have a very high fixed compensation, and that's it. We don't even create any variable compensation, because we want people who we completely trust and who completely act in the long-term interests of the family, and we compensate that by a very high fixed compensation." And we give them all the trust, and obviously we control them through a good board.
R. Adam Smith: Thank you for that. So we have another topic we talked about — I'm actually going to skip that and move into something else that leads into our final conversation. I'd love to really talk about the format and characterization of the larger CIO role between the US and Europe. And I think that role is also relevant to the way the personalities and character and perspective of a multi-generational family looking at legacy, looking at things other than wealth itself. So in a sense, the wealth creation, creating alpha, creating outsized returns, doing their job, beating metrics — things are benchmarked, there's KPIs, there's bonus plans. That's very important, obviously, to create wealth. But also in the non-American context, especially in Europe and Asia and other cultures, legacy and the sustainability and the longevity of the family enterprise is much broader than creating alpha. So Jane is very active in that. So why don't you kick us off on that conversation?
Jane Siebels: It is a difference, I think, between US family offices and, to a certain extent, the European family offices. What at least I'm seeing in the US is that the CIO is more of an allocator. And it's my personal belief — and I think Christian just also explained it — that I think the CIO needs to be a CIO consigliere. Whereas the traditional CIO, at least in the US sense, oftentimes just wants to show you how many deals they can source, the consigliere would want to show you how much risk they can mitigate. And the consigliere, exactly as Christian said, shouldn't be judged by beating the S&P by 1% through a convoluted PE structure, but they should be judged on their ability to provide strategic counsel, maintain the family's optionality. And actually the most important thing that they can do is say no. The consigliere really doesn't compete with the family's domain expertise, but they do have to protect it.
Christian Bühring-Uhle: Yeah, I agree very much with that. And I think it is super, super important that the consigliere role is where it develops, because the most valuable advisors are those who, while still respecting the values of the families, can still challenge that thinking in a constructive way, and not only ask the questions but actually also question the answers. I think it was the philosopher Kierkegaard who said that you understand your life looking backwards, but you live your life looking forward. And I think that's the same in business as well. We really do need to have that understanding. I think the most important thing in the future job description of the CEO or CIO is really having a very strong track on balancing the long-term strategic imperatives versus those shorter-term operating necessities. I think that is the balance that we have to get right, and that's very much judgmental rather than incentives.
Hans-Kristian Hoejsgaard: I totally agree. And I think it depends a little bit on the size of the structure. But if you have the means, you would have this wise generalist, strategic consigliere-type leader. And below that person you would have perhaps a manager for PE who can be incentivized in the more traditional way. You can have a real estate person or a liquid asset person who then has their more narrow and more KPI-driven incentives. But it has to be steered and coordinated and bundled, and at the end of the day also sort of being responded for by that one person who's in charge of the whole thing. And I think that is also basically leading to a different profile of the human capital we're looking for. I mean, leaders until now typically have been promoted because of their execution or their competence in strategy, or whatever. And I think it's McKinsey who calls it the inside-out journey now, where the leaders much more need to be judged on their resilience and their adaptability, because if we are constrained in our strategic and operating flexibility because we have invested too illiquid, we obviously are not able to perform under uncertainty, which is what the world is more and more about.
Christian Bühring-Uhle: It's a personality thing also — you need someone with judgment, experience, wisdom, the ability to speak truth to power when he sort of talks to his principals, not a short-term mindset. And so you need somebody who is in a way low-ego, because he serves a family. This job is not to sort of shine, but it is to let the family shine and thrive. And this person needs to take satisfaction out of the actual results and the long-term development, but not by any sort of visibility and large bonuses or carries, or being profiled somewhere as the guy who sort of made these huge deals or stuff like that.
Hans-Kristian Hoejsgaard: Agree, Christian, and I think responsible stewardship and servant leadership are really very powerful levers for a sustainable business.
Jane Siebels: Well, I agree with both of you.
R. Adam Smith: So far, so good. Let's continue on judgment and talking about the consigliere role. Why don't we talk about the human capital side at your recruiting firm? Your human capital excellence really is the core of your work product, and your own legacy essentially, at your firm. So I'd like to hear your views on judgment, and also particularly for the high-end consigliere — let's say putting money to work — what are some of the backgrounds that are most impactful to result in the elite judgment for these families?
Christian Bühring-Uhle: There is not one single sort of one-size-fits-all solution. You find people with the right mindset who have had different backgrounds. Some have done that with other families already, so they have already shown to be consiglieres in the family office background. Others may come from asset management structures or banking structures. We have had good experiences with people who have managed family holdings, who have worked for a business-owning family and have managed their operational businesses. It depends, obviously, on what the family tries to achieve. It depends on how the portfolio looks — what is the degree of direct investment. If you have a rather entrepreneurial family with a high degree of direct investments, not even investing in private equity funds but investing directly into companies, you need somebody with operational experience and somebody who has been the boss of the boss. If you have a portfolio which is basically all in funds and securities, you probably take somebody who is a little bit more of an asset management background.
Jane Siebels: I would just say, just looking from kind of a family point of view, the thing that I would look for the most — the one thing — is really courage. And courage kind of sounds simple, but it's really a very rare commodity in wealth management and in family offices. Because I think effective stewardship today really requires a truth-teller. You need someone who is willing to tell the patriarch or the matriarch, perhaps, that their favorite passion project is a value destroyer, or that their top-tier manager is actually underperforming. And so, you know, independence isn't just a fee structure — it's a mindset. So I really think that more advisors, perhaps, need to make the families think, and perhaps challenge the family's assumptions, make them feel uncomfortable. Because that's what true wealth preservation is about — it's about the courage to see the world as it is, not as we wish it to be. And so I believe that's what is sometimes lacking. If a family just gets a yes person, the person really needs to have high emotional intelligence, but also, at the same time, have the courage to tell the truth.
Hans-Kristian Hoejsgaard: I couldn't agree more, Jane. And I think your last point about the importance of emotional intelligence is absolutely critical. I mean, I have been involved in a number of situations where that was just absent, and that just breaks down the trust between the patriarch or the matriarch and the advisor. So emotional intelligence, I think, is much more important than what particular background — as Christian was saying, they can come in many different experiences and sizes and whatever. But I think that fundamental understanding of the history of the company, of the values of the family, and understanding that and respecting that, and then still being able to challenge it without doing that in a sort of a frightening way.
Christian Bühring-Uhle: And if I can add one thing to that — I totally agree with what you said about emotional intelligence, but often, especially in a multi-generational context that comes together, you need the courage, you need the judgment, the maturity, and you need the empathy, because you also need to understand that this is in motion. It's not just the matriarch or the patriarch any longer — you have the next generation coming. And so you need to accommodate that multiplicity and complexity in your stakeholder environment when you're in this role. So you need to start engaging the next generation, helping them take charge, helping them feel identified and responsible, without challenging too much the power, especially when it's very real, of the patriarch. So a good leader for a family office helps them in their transition process.
Jane Siebels: Yes. And I also think it's important, as part of that emotional intelligence, that the individual understand that capital is a subset of wealth, and not all wealth is capital. They all have their pet projects, or their investment in art or in cars or whatever — there has to be that space as well for that emotional attachment.
R. Adam Smith: Very important. Impact is so important for the new generations. Why don't we continue on this track a bit and wrap up around emotional intelligence — the soft power, the EQ we talk about often. This podcast, I think, because of your firm, is really leading in finding people and placing them as a fit. That's a real craft. Just maybe talk a bit more about how families that are listening to the show, the family officers listening to the show, can identify emotional intelligence. What are some of the tests, the environments, the subtleties? Just talk about how you identify emotional intelligence, other than background and track record and pedigree.
Christian Bühring-Uhle: It's getting to know people. It's really talking to them, spending time with them, asking them, being courageous and challenging them, and understanding also the family very well. Very often it's a matter of fit — you may find somebody who's generally perfect, but then doesn't fit. Then you also have to question, when you present these people to the family, they are very often not used to doing this — they're very often not very good at interviewing. So sometimes they talk a lot and don't ask; sometimes they don't say anything and create an uncomfortable atmosphere in these conversations. So you have to accompany both sides, and they sometimes start doubting each other, which is normal and natural. And then you can sometimes help them overcome that by helping them understand each other. But you can also then see when there are real obstacles, and then you have to be yourself, courageous, and say, "Well, it looks good, but it isn't. We shouldn't continue."
Jane Siebels: I actually have kind of a real-world example in this. We had a situation in our family where we had a younger generation person who had a business that she wanted to ask the family to capitalize. And we had a financial advisor that did all the numbers and said, "No, this will be a disaster." We had a trustee whose goal seemed to always be keeping every member of the family happy, and let it be said that this member would be devastated by the no — so his response was "No, fund it." But then my father had a dear friend who was kind of like an unofficial consigliere, and he asked him about it, and his advice was, "Okay, well, let's fund 20%, and then give her KPIs — can she find matching funds, can she hit these KPIs with the business — and if those were hit, then we would go ahead and fund." But I think it's a great example of: you don't want a pure financial person, you don't want a pure person who only wants to keep family members happy. You need someone who can think of structures and think kind of out of the box, if you will — solutions that really fit all the holistic purposes.
Hans-Kristian Hoejsgaard: I also think, in addition — I totally agree with both of you — but I also think that for me, the number one characteristic here is self-awareness. And that, I think, as we have gained more experience over the years, is relatively easy to identify: are people self-aware, and therefore can they empathize?
Jane Siebels: Great point.
Christian Bühring-Uhle: Yeah, definitely. And obviously, I mean, we also do psychometric testing, which can also add angles. I would never base a decision on that, but it can complement the picture.
R. Adam Smith: Thank you for that, everybody. So here we have Jane, Christian and Hans-Kristian, working at the elite levels of recruiting, placing, governance, investing in the family enterprise space, and again, human capital. Bringing value externally to these organizations is increasingly important and very complicated. I do recommend you reach out to them in the areas and capacities that they're experts in, especially for the larger family offices — over a billion, five, ten billion — this human capital element is very, very essential. Today we talked about this fundamental shift in families looking at capital not just as returns and alpha, but we talked about discipline, governance, of course, judgment and emotional intelligence. So ultimately the CIO model, which is more tactical, more around asset allocation, more about alpha, KPIs, is much more broad and incorporates legacy and sustainability, can incorporate philanthropy, of course, culture. And the final thing I would say is that these roles that go into the larger families, they need to be well chosen and positioned, because ideally this person is staying at the family enterprise, the family office, for many years, as change creates a lot of instability in the organizations. Maybe just one last comment from each of you — what is your favorite part of working in the industry? We talked a lot about tactical elements here. But Jane and Hans-Kristian, what are you thinking about the industry? What do you love about working in it? What really makes you tick?
Hans-Kristian Hoejsgaard: What makes me tick is really helping and smoothing the way from handing over from one generation to the other. And that's really what motivates me a lot, and it's incredibly gratifying. It's a tough task sometimes, but when you succeed, you really, really feel good about it.
Christian Bühring-Uhle: Wonderful — you said a lot of things I would have said. Well, I would say for me it's all about people. I love working with people, and I love being a matchmaker. And for me it's exactly what Hans-Kristian said — you're creating legacy. It's not short-term performance, it's really lifelong legacy. And that's what I love about this area.
R. Adam Smith: Thank you all. Exactly — we talk about legacy here often, focusing on incentives and governance and culture and so on. But again, as this role becomes increasingly important, we've heard today the importance of independent thinking, of course the training, the judgment that goes into that, the challenging of assumptions to be truth-tellers in the organization. So it's really wonderful to have you all here.
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