Tocqueville Asset Management has been performing ancillary services typically offered by so-called family offices for many years. Recently, we regrouped these services under a new, formal Family Office headed by Patsy Jaganath, heretofore the firm’s highly regarded controller.

Why A Family Office?

One might well wonder: "If we have been providing these services all along, why do we now feel the need for a formal Family Office?"

The reason is that the demand for services that go beyond pure asset management has grown exponentially in recent years, and is now emanating from a much larger and more diverse segment of our clientele than ever before. Most of our partners and their assistants are now providing at least some family office services -- from simple check writing and bill paying, to orchestrating complex estate restructuring involving multiple experts.

This showed the potential benefits of a more centralized "memory" within the firm -- but not a mechanical or impersonal one, such as might reside in the computer of a large institution. Instead, this memory function will operate on two levels:

·         On one level, a small, discreet and loyal team already known to most of our clients will be the custodian of these client financial histories. By working closely, on a daily basis, with all portfolio managers, it will ensure that each client’s specific requirements are foremost on our minds when we manage his or her fortune.

·         On the other level, this more formal Family Office team will enhance our existing capabilities. By drawing on the experiences of all partners, their preferred outside experts and their clients, it will allow us to be even more alert in anticipating future problems – whether in tax legislation or in family dynamics.

Importantly, the mission of this formal and more structured Family Office will never be to standardize service. On the contrary, its mission is to help make client service even more customized, more responsive and more proactive for each client.

In Search of a Definition

When we decided to regroup and formalize Tocqueville Asset Management’s family office functions, we conducted a study of what other family offices had to offer – whether as parts of banking institutions, or as the private emanations of very wealthy families. But our survey mostly yielded sadly predictable menus of standard services, or platitudes such as "We offer solutions" – a commendable, but vague promise.

So, the question of what a family office really is – or, at least, what we should make it be to honor Tocqueville’s tradition of client service – remained open. There simply is no good, single definition of a family office and the reasons are that all families are different, and their requirements change with time and circumstances.

Menus of tasks an institution is able (or willing) to perform are inadequately restrictive: all they do is to encourage employees to take a narrow, uncreative view of their responsibilities toward clients. Instead, we believe that our Family Office should be defined by the versatility of its resources and by its ability to respond to both predictable and unpredictable challenges.

For this reason, we decided that we would build our own definition of a family office by focusing on a number of role models that excel in one or another area of service. In the following, we offer two examples.

The Family Doctor

We have used before the analogy between our role and that of a good family doctor. Admittedly, we may be painting an ideal picture of the family doctor -- or at least a nostalgic one. But what is the purpose of setting mediocre goals?

"Our" family doctor becomes familiar with a family’s medical history, not by having patients fill forms, but by taking the time to collect information first hand, purposefully but tactfully -- over time. While his or her findings are transcribed into a file, the information sits first of all in his or her own memory, ready to send warnings or assistance in interpreting symptoms. For us, too, keeping knowledge about several generations of a family fresh in our minds will ensure that we remain responsive and proactive when circumstances change. The role of our family office will thus be to keep this information fresh in the minds of our portfolio managers as well.

Another quality of our family doctor is that he or she is uniquely available. Although they know it’s impossible, clients of a private bank (or portfolio manager like us) want to feel as if they were the bank’s only clients – just like the patients of the family doctor. They also like to feel that their adviser is a rock of stability in their otherwise tumultuous or complicated lives. Reliable, leading a model life and never having anything more important to do than to think about the client who calls, the ideal private banker is always a phone call away with advice, comfort and competence. He or she gives the client the peace of mind of being "cared for".

This is how the ideal private banker, like the ideal family doctor, becomes the most trusted adviser of a family’s several generations, which is our goal. Of course, the portfolio managers of Tocqueville are perfect… but not that perfect. It is therefore the role of our Family Office to make them "bionic", by allowing them to perform as if they were the supermen or superwomen clients wish for.

Finally, our family doctor model is a superior generalist. He keeps informed of all new developments that might enhance his ability to diagnose or cure his patient. And he has a strong network of specialists around him, to whom he can refer patients for diagnosis confirmation or treatment. Most importantly, however, his in-depth knowledge of the medical history of each patient and his or her family enables his consulting specialists to make much better diagnoses and to select more appropriate treatments than could be done from scratch.

We, too, have a strong network of specialists around us – lawyers, accountants, tax experts, insurance professionals, etc. Clients themselves often have their own experts as well. However, it has been our experience that most clients tend to consult experts before they have precisely defined their problems or their goals. Our role, as well-informed financial generalists who are closest to our clients, is to help them define as precisely as possible what their goals are before they consult their own specialists or ones we recommend. This will save considerable, wasteful and very expensive probing by the experts (often outside their area of expertise) and will eventually result in their rendering a much better diagnosis and more efficient "treatment".

The Small Palace

A few years ago, with some friends, our chairman had arranged a celebration at Marrakech’s legendary hotel, La Mammounia, where he had stayed many times before with great delight. A few months before the due date, he and his wife took a short trip to check that all was in order. But it was not. Somehow, in just a few years, La Mammounia had turned from a magical and nostalgic palace of yesteryear into an expensive Holiday Inn -- though without the efficiency or the predictability of one. All the charm of the place had evaporated, the personnel seemed indifferent and the smiles mechanical. You now had to wait in line to check in, three-size too short bathrobes could not be changed until the next morning, and we could go on with a litany of disappointments.

Distraught, they decided to visit a new and much smaller place that some friends had raved about – La Maison Arabe. This former residence (and, later, famous restaurant) in the old quarter (the "Medina") had been luxuriously and exquisitely refurbished by two partners, Italian and French, and sported a grand total of 10 very comfortable suites. The instant they entered the premises – unannounced – our chairman and his wife felt at home. Within one hour, they had reserved the entire hotel for the planned celebration.

When told of the cancellation, all La Mammounia’s manager could answer was "La Maison Arabe does not have a swimming pool!" This misunderstanding, we believe, is central to the notion of true luxury service, which is what our Family Office is about.

Above all, luxury service is about customization as opposed to standardization, and about readiness to please as opposed to lists of products or amenities. It also is about alertness in recognizing client’s needs and proactiveness in answering them. Finally, it is about who makes the effort – the client, to conform to the service provider’s rules, or the provider, to fulfill the client’s wishes.

At La Maison Arabe, there were no pamphlets and no menus of services: there were people – intelligent and efficient ones. If you needed anything, you called the desk and someone would appear almost instantly at your room’s door. No forms to fill for laundry, no chits to sign for anything else. In addition, if you asked something from one of the staff, everyone else seemed to be aware of it within minutes – the sign of a well-trained and cohesive team.

Finally, there was no formal restaurant, but one of the best cooks in town was on call and could come to cook dinner for you at the hotel. And almost any kind of other service could also be arranged with one phone call, as the hotel had a broad network of specialist services at its disposal (swimming pools, hammams, massages, etc.)

As for proactiveness… one morning, one of a guest’s two pairs of shoes fell apart as he was leaving on a visit. When he came back before lunch, the shoes had been repaired – without his even asking.

Unfortunately, our chairman has not been able to go back since this memorable stay, so he can only hope that La Maison Arabe has remained true to its wonderful beginnings. But meanwhile, the phenomenon of the small palace has been spreading. Several new ones have reportedly cropped up in Morocco (nobody talks about La Mammounia any more). In Asia, the success of the now world-famous Aman Resorts has also brought about a whole new crop of palaces with as little as 30-40 suites, but offering the utmost in luxury and customized service. At some of these palaces, your own personal assistant or personal butler will take care of everything for you, both within and without the hotel.

These personal aides (who obviously serve several clients at the same time) are less an expensive gimmick or an appeal to guests’ snobbery than a statement of policy: "the client is king (queen) and, within our possibilities but with great responsiveness and creativity, we will do whatever it takes to please him (her)".

There are a few lessons to be learned from these small palaces, for our Family Office.

First, the ability to offer a superior and highly personalized service with a very small staff is not due only to the low wages in the countries where the phenomenon originated. In fact, the small palace trend is now spreading to even the highest wage countries, and in France some family-owned "Relais & Chateaux" have been providing superior and attentive service for many years.

To be successful even with high wages, a small palace requires a highly sophisticated (though not necessarily ultra-expensive) infrastructure, to make sure that every client’s wishes are met promptly, and remembered for the future. It also needs a superior network of specialized services -- to ensure that no reasonable guest request is denied for lack of internal resources.

The staffs must be small, but superior in intelligence, versatility and initiative (as ours, of course, is) and they must be exceptionally interactive to ensure that all serve as one. Finally, these staffs must have a long staying power, because client loyalty implies familiarity. As our friend James Hughes once told us: "You must look for people who enter private banking as others enter religion" – or, evidently, the small palace business.

We are reminded of the old story of the two men, each building a brick wall. Asked what he is doing, one answers: "I put a little cement on each brick and then lay it on top of the others". Asked the same question, the other man answers: "I am building a cathedral". The secret to our success in offering first-class family office services will be to make sure that the office’s staff knows that together we are building a cathedral.

In Conclusion

At Tocqueville, management is fully aware that our firm’s culture of client service is one of our main competitive assets, and we all share a commitment to preserve and even enhance it in the future.

Tocqueville’s Family Office aims to be an organization that maximizes the benefit of superior technical competencies, within and without the firm, by making sure that they are applied for the specific benefit of each one of our clients. This, together with our investment performance, which we hope will continue to foster growth in the assets we manage, should help ensure that Tocqueville Asset Management retains its uniqueness in an increasingly standardized and impersonal industry. For our clients, we provide the serenity of feeling cared for, by ensuring that all our staff works as one for their comfort. Welcome to the new Family Office.

 

June 4, 2001 ^© Tocqueville Asset Management L.P.

Tocqueville Asset Management LP
40 W. 57th Street 19th floor New York, NY 10019 212-698-0800