Mar 13, 2022

83: Family Office Investment Trends, Mark Brandt RSM

More than 13,000 Family Offices exist in the US, preserving the legacy and investments of the original family enterprise. Many see direct investment as a way to tap into the entrepreneurial DNA that made the family business successful. And family office investors can be a source of patient capital having a longer time horizon compared to other financial buyers.

Mark Brandt, Family Office Market Director for RSM, has worked with family businesses and family offices throughout his entire career. He joins Laurie Barkman to talk about some of the important trends with family office investing. 

Listen in to learn more about:

  • Direct investing do’s and don’t for family businesses
  • Tapping into opportunities in fund investing
  • Creating networks with other family offices
  • How succession planning keeps family offices going
  • The impact of inflation on family finances & investments in 2022 and beyond

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Laurie Barkman:

Why is a Family Office your next acquirer? More than 13,000 Family Offices in the US are quietly preserving the legacy and investments of the original enterprise. According to a 2021 BlackRock survey, more than 80% of family offices are interested in some form of sustainable investment. Many see direct investment as a way to tap into the entrepreneurial DNA that made the family business successful. 

My guest today, Mark Brandt, is the Family Office Market Director for RSM. Mark has worked with family businesses and family offices throughout his entire career. Because he focuses exclusively on family offices, I invited Mark to talk about some of the important investment trends facing family businesses in 2022.

In the M&A landscape, different types of buyers have different motivations. Family offices are known to have a long time horizon and offer flexibility during acquisition. Finding the right deal for your business is a key topic in my book that will be launched later this year. For more information on the book, please join my mailing list at

Enjoy my conversation about family office investment strategies with Mark Brandt.

Laurie Barkman:

Mark Brandt, welcome to Succession Stories. This is exciting. We’re going to have a great discussion about family offices. We’ve had a few other people on the show talk about family offices, but this episode is going to bring a level of depth and focus that we haven’t had before, so welcome.

Mark Brandt:

Thank you, Laurie.

Laurie Barkman:

Why don’t we start, give us a little bit of background about yourself, and tell us about your firm RSM.

Mark Brandt:

Well, I’ve had a long career and it’s touched private businesses and family offices almost my entire career. Probably the two notable things I’ll mention about my background is right out of Cornell University, our common college where we both went, I worked for Cargill Incorporated. I started up in Minneapolis, Minnesota, and that, at the time, was one of the largest family owned businesses in the United States, if not the world, and they had a very large family office called Waycross that we all knew about as employees for Cargill, that manage the wealth of the Cargill and the MacMillan families. That was the first 11 years of my career and then about eight or nine years later, I was invited into a family office and I ran direct investing for a multibillion dollar family office here in the Midwest.

Laurie Barkman:

That’s really cool, and yeah, Go Big Red. Cornell alumni on the show here. So RSM. What does RSM do?

Mark Brandt:

RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment. 

Laurie Barkman:

You’ve worked in family run companies, family led businesses, you’ve worked in family offices, and now you have them as clients, so I think it’s fair to say, you are an expert. I did a little bit of research and the number that I have found is that there are 3000 family offices in the US managing about a trillion dollars in assets. That’s a pretty big number and assets for a relatively small number of family offices so, pretty impressive. Why don’t we talk a bit about family offices? Some of our listeners might be part of one and some of our listeners might be wondering, “What is a family office?”, so can you describe for us what that means?

Mark Brandt:

Well, family offices are really very misunderstood, and part of it is when you sell a business and you’re sitting on a corpus of capital, a lot of times you don’t want the world to know you exist, so family offices are typically created to help in the planning of what a family’s goals are and so a lot of what we do is we sit down with a family that’s either about to sell a family business, or has sold a family business, and we talk about what they want their family office to be and so we work with people. Generally, family offices are recognized, people think you need to probably have $100 million or more to create a purposeful family office. I’ve seen situations where it’s half that number, and I’ve seen situations where people with a billion dollars don’t want to create a family office, so it’s a little murky, if you will. The other thing I wanted to share is your number of family offices. Those numbers are all over the board. I have heard the number of 13,000 family offices in the United States so I’m not saying you’re wrong. I’m just saying depending on who you talk to, you can get very different information.

Then the other thing you asked is what’s a family enterprise versus a family office? RSM has a history of almost 100 years of working with family businesses, and we have worked with founders and next generation family remembers to run family businesses. They’re enterprises that really, they crossed the whole gamut of industries where they could be, but the one thing is, when you get a paycheck, and the name on the front door of the CEO, it’s usually the same last name. It’s a family that started a business and it may have been passed down to generation two or generation three. Some of those family businesses have created family offices, a way of diversifying outside of the core industry that they have, and some have just stayed totally true to the business that they have and they keep reinvesting and they keep their debt low, they own all the real estate, and so they’re kind of what we would call a suspect family office but they’re not a family office today.

Laurie Barkman:

A suspect, that sounds so clandestine.

Mark Brandt:

Well, it just means that they could have a family office and they operate. I mean, the difference is, when you have an operating business, probably your CFO is doing a lot of the things that the head of your family office would be doing if you sold the business, but if you own the company and your name’s on the front door, they’re going to help you with generational planning, they’re going to help with succession, you’re going to come to that CFO and you’re going to go, “Hey, what should I pay my third generation grandson to come in and do this job inside the company?” Family offices address that once it’s sold, but when it’s part of the business, it’s more the core operating people inside the business that make those decisions.

Laurie Barkman:

Let’s unpack the family office a little bit. Let’s use maybe some examples from your experience, so let’s take a company amalgamation of different clients that you’ve worked with over the years. They’ve sold their company, now what? Is it at the moment the check comes and, “Now we’re going to open up this new family office,”? How much planning has gone into it at that point? The deal has closed, the funds have been received, now where does it go? I can imagine all these steps take time, to set up a family office, or are they saying, “Oh, wait a minute, we’re not gonna do any of that work until the deal closes, then we begin,”? When does the process really start?

Mark Brandt:

Oh, my goodness, Laurie, you’ve just asked the best question because it’s really all over the board. Some people start planning 5-10 years before they decide to sell and some people are very superstitious and they’re afraid that if they start the planning upfront, that the deal is not going to go through and they’re not going to get the right multiple. Then there’s a huge, you didn’t ask this question, but there’s a huge like, “Once I sell the company, and I don’t have that mantle where I’m the largest employer in my county, and I’m the largest supporter of United Way and the largest supporter of the church that I’m a part of,” and all the other things that you’ve done, all that moves over, and it becomes an individual obligation, as opposed to a citizen of the community obligation. 

There’s a little bit of a letdown a lot of times, the founding Mom and Dad, if you will, it’s a really hard transition to sell, it’s nuts. On the outside, we look and go, “They sold for 10 times EBITDA, or they sold for 15 times EBITDA.” It has nothing to do with the money and it has everything to do with how you look at yourself each day. You’ve looked at yourself as a valued member of a community and all of a sudden, now you’re being looked at as a potential philanthropy partner for all the charities in the community. It’s a big change, and so what we see kind of, if you let me put it all together, let me give you kind of like, and by the way, the joke in family offices is that if you’ve met one family office, you’ve met one family office, they’re all so different from each other, but I’m going to do the impossible and try and do an amalgamation of what I’ve seen. 

What I see is, I sell my business for anywhere between — I’ve worked with between 50 million and 15 billion in my career — and I will tell you, the issues are very much the same. At 15 billion, you have a much bigger legacy that you need to manage but at 50 million, I’ve not met many people that are going to spend that in their lifetime and so there’s clearly the planning of what I want to do with my money going forward. As the numbers get bigger, there’s a lot more about, “How do I do it in such a way that I don’t mess up the kids that are gonna have my name but aren’t on this earth yet? I don’t want to do it in such a way that they come on and they feel entitled, we made our money in our garage by starting this business and rolling up our sleeves.” 

The first thing is we sit down with them as we talk to them about what they want their legacy to look like. Most of the people we work with, truthfully, there’s not red Ferraris in the parking lot. Don’t get me wrong, I love fancy cars, but there’s not a red Ferrari in my garage, and I do admire them, but I admire them from afar, and I don’t look at them as something that you have to have. I think most of the billionaires that I work with, they might have a car collection, but they’re not driving it around their hometown. It might be at their house in Florida, their house in California or something like that, but for the most part, they’re modest people, they’ve made it by being modest. They’ve made it by being good to Gloria, that runs the front desk, and Bob, who runs accounts payable, and Fred who’s out in the factory, and they’re loyal to those people so the first thing they want to do is they want to take care of their employees and most of them do take care of their employees in some way, shape, or form when they sell the business. 

The next thing they do is they sit down and they go, “What can we do for our community?”, and a lot of them will do something big for their community and then the next thing they start looking at is they sit down with the wealth managers, and they go, “Hey, whether it’s X, or Y, or Z, they all give me this pie chart and they talk about global and they talk about domestic and they talk about large cap, and they talk about growth and they talk about value, and they talk about dividends, and they talk about stocks and bonds, but boy, it all sounds a lot alike,” so there’s this whole thing about sorting through who you can have manage your money. We do not touch that, we’re not money managers, but we do help them sort through that so if they say, “Well, we really like this one and this one,” we say, “Well do you know those are really alike, and there might be a third one that you could consider.” Then inevitably, where we’re going to end up is they’re going to sit back and they’re going to go, “So we’re paying a fee for this, we’re paying a fee for this, we’re paying a fee for this, but we’re not really doing much except analyzing reports that these investment advisors are giving us. How do we get that DNA that built this family business? And how do we keep it in this family office?” Inevitably, they start talking about wanting to direct invest.

If the goal is just to preserve your money, direct investing is probably not essential to preserving your money, because most money managers will model things out over 10, 20, 30 years and it’s more money than they’ll ever need to accomplish all their goals at this level. The reason they start doing direct investing is they feel the DNA that built the family and made them the billion dollars is still here, “Bob the CFO was a genius and did 26 acquisitions in the last 15 years for us. Why would we let Bob go? Why wouldn’t we keep Bob, move Bob over to the family office, and let’s let Bob lead up our investment strategy. We have a non-compete for two years in the space that we just sold to, but we can do peripheral investments, and there’s a lot of suppliers, and there’s a lot of allied industries that aren’t part of our non-compete that we can start looking at and investing in.”

One of the things I recommend to people is don’t go to the local college and do the venture capital deal day one. I’m not saying don’t do it ever, but the returns on the local venture capital deals are usually not as assured as a return on a private equity deal. If people came to me and they said, “What’s the best way to start investing?”, I would recommend getting a kind of a basket of investments that would include fund to funds, direct funds, and maybe venture capital, but a fund that does venture capital because that’s 10 or 20 bites at the apple, as opposed to one bite of the apple at the local college. For you to go up the street and plop down a million or $2 million at your local college and think you’re going to hit the next Google or Paypal or Netflix, it’s highly unlikely. There’s a reason that those deals are so available and they’re so hard up for cash. It’s a hard place to make a return.

That notwithstanding, I have done venture investments out of our college and I’ve been very successful with them. I’ve also gotten big goose eggs out of them, so I want to be clear that there you can go two ways with it, but what I recommend is build out the education of your family office and build it on the backs of paying two and 20. Pay your 2% management fee and your 20% carried interest.

Read the reports of the private equity funds that you’re investing in. You’re going to read about why they invest in telecom, why they invest in the green space, what solar and wind return are. Before you say you want to become an ESG investor, invest in some ESG funds and see how they do. Watch what they do, make sure everyone in your family reads the quarterly reports and the annual reports and you will build a knowledge base and you will become a wiser investor in the network that you build out when you talk to other family offices, which is something that I really take a lot of pride in. 

When someone says, “I really like to invest in ESG,” I connect them with other families focused on ESG. I have one family that’s been doing ESG investments for over 50 years and they have like 26 portfolio companies in their family office. Why wouldn’t you want to talk to that family and get that knowledge and they can give you generation after generation of, “This is why we did this. This is why we haven’t gone into this space, but we’re looking at going into the space right now.” All that is knowledge that can save you the million or $2 million dollars on one deal, so I wouldn’t just spray and pray. I would do a lot of knowledgeable networking, reading and understanding, and I would start as a limited partner in a fund, before I became a general partner in what’s going to ultimately be our Family Fund.

Laurie Barkman:

You just shared a lot of really great and helpful information, Mark. To circle back on a couple of things, you’re essentially saying that family offices can envision their sustainable future through investing, there’s different ways to invest, there’s different asset classes to invest in and they can take on a more active role, or they can have a more passive role, as you said with with investment advisors.

On the active side of investing, I did see a statistic you had shared, I just wanted to bring it forward. It’s from BlackRock, their global family office survey that they did in 2021. It said 80% of family offices are now interested in engaging in some form of sustainable investment so that just underscores everything you said. There’s quite a lot of activity, and there are choices of how to do it, how to execute it. In terms of options, there are some family offices that are acquiring companies and building out more of a — almost looks like a private equity investment arm for their family office. I had a gentleman on the show, Alex Panossian, and he and his father, he’s joined with his father and their family office and that’s what they’re doing, and he described different asset classes of types of investments that they’re looking at and so that could be another part of this discussion. (Episode 73) Are you seeing family offices doing mergers and acquisitions and trying to, again, looking a little bit more like their own PE fund?

Mark Brandt:

Spot on 100%. The answer is yes, we are. I’ll go a little bit further and I’ll share something else. We’re also seeing private equity funds convert from being an LP GP structure to where they’re taking it in and they’re going, “Listen, we’ve been doing this for 25 years, we’re all worth $100-$200 million, the founding partners of the firm. Let’s not bring in outside capital anymore,” in their starting family office, what I’ll call family office PE funds, and they’re funding it out of their own pocket. 

We’re starting to see more and more of this where people that were the principals in big funds are moving into a family office structure and really kind of recreating, certainly not…some of the large funds I’ve worked with over the years, they’ll have 250 employees, they’re not looking for that, but they’re looking for five to 15 employees, and then they use a lot more outside services. 

They’ll do things like do a 100 day plan, and then they’ll use an outside firm, like for instance, RSM will execute on some of this, we have a process called M&A 360, where we’ll sit down and we’ll say, “You know, this is a great opportunity for this company to expand in the southeast and the West, and there’s probably two or three allied lines that you should add to your book of business that you have today. We can help you through acquisitions and help execute on this plan.” 

Well, they will outsource parts of that 100 day or 250 day plan and they’ll take what’s initially an expensive investment because let’s be honest, any good deal right now they’re all expensive. The only way you really can get the cost down on what your your cost is to get in, is to grow the upside down the road and so these families are starting to mimic what we’ve seen in the private equity world for years and years and years, where the PE shops all have like buying departments where the first thing they’ll do, they’ll buy a company and then they’ll look at the three largest spend items, and they’ll go, “Well, how do we do reduce the cost of these three?” This was pre COVID because nowadays, what we’re hearing is just getting the three products onto the back dock of the plant is a miracle in almost every company we’re dealing with, right?

Laurie Barkman:

That’s true. We are dealing with a pretty still, pretty frothy, M&A market, but we’ve got some headwinds. As we look into 2022, what do you think will continue as some of the trends coming off of last year for family offices, and what do you think are some of the things that might be put on to the docket as considerations?

Mark Brandt:

Well, inflation is a really interesting new addition to the landscape. We’ve had kind of a very low inflation environment for a long time, I’m not going to wax political whatsoever, because I feel like COVID has led to a lot of the kind of underpinnings to what’s driving up inflation today and I don’t feel you can point one way or the other and say, that’s what’s caused inflation.

The fact is, we’ve pumped a lot of money to keep the economy buoyant, and there’s a lot of money out there right now and people are paying more for almost everything. The supply chain issues are huge. I think families sitting on a lot of cash are gonna start to see the cost of sitting on that cash, there’s been almost no opportunity cost. I mean, no, they’re not getting a return on cash. I mean, I think what they’re gonna look is they’re gonna go, “Keeping money in cash is costing me whatever the inflation rate is, and if inflation is 7%, then sitting on $1 today, and $1 365 days from now, it’s costing me 7%, or whatever the rate of inflation is,” so now we’ve got even a more kind of urgent need to put money to work. I think families are really going to look and they’re going to say, “Where can we put money to work?” 

Real estate is really interesting. Almost all of our families have very sizable real estate portfolios. If you look at multifamily or single family real estate, or kind of hotels, all those have held up okay. If you look at class A commercial space, it’s not held up quite as well, because look at this, Laurie, you and I are doing this interview for years and years, you were probably down in an office somewhere in Pittsburgh, I was down in an office in Cleveland, and we would have been in some class A space. Today we’re sitting in our class A home in a suburb of our cities so it’s changed and I think that’s changed the dynamic of what people are looking at in real estate.

One of the families that I worked for, the multi billion dollar family, was a mixed use real estate developer and I learned a lot from them. They bought land, and they sat on land for years and years and years and then they told great stories that when they bought the land, the city wasn’t where the land was and they expected the city to grow their way within five years, or 10 years or 20 years, and they’d sat on land for 50 or 75 years, some of the land was still way outside and the city never went that way. Other cities grew into the land that they owned. It was really interesting, where they thought maybe they would build all commercial or all, kind of storefront type environments, walkable storefronts, with maybe some apartments, and next thing they know they’re building single family homes, because that’s what the community needed. What I’ve seen family offices do really well, is to hedge their bets and build out a portfolio of investments, including raw land and then seen what happens around the market to make the land more valuable,, and go where the market is telling them to go as opposed to telling the market, “We’re going here.”

Laurie Barkman:

I want to circle back on something you brought up earlier about ESG just to unpack it a little bit, ESG standing for environmental, social and governance and also Diversity, Equity and Inclusion, DEI. Many family offices may be considering some of those initiatives or how they make investment choices around ESG or DEI considerations and how they may align with personal family values. You mentioned a particular family office that has been doing ESG investing for 50 or so years, while others might be newer to these considerations, do you also see a growing trend of awareness and investing for this coming year?

Mark Brandt:

I think ESG is I mean, you can’t open the Wall Street Journal or any business publication without reading that another company is claiming to go carbon neutral by a certain date and that’s the big companies. I think what you’re going to see is, you’re gonna see a lot of the innovation from small and mid sized companies helping the big companies figure out how to become carbon neutral

I’m not going to go down that rabbit hole, but carbon neutral is a whole thing. How carbon neutral is solar? And what happens to wind turbines when they become unserviceable, and where do they go? How do they recycle those? There’s a lot of argument about how all this goes, I have a family member that’s been in ESG for a very long time on the investment banking side, and I’ve watched the space grow and I’ve seen it grow from geothermal, wind, and solar to where now the innovation is springing through the roof.

Part of that is this whole spec culture that’s taking place. You can now take a company public before it’s fully profitable and ESG are some of the best specs in the last few years and so that’s opened up a whole kind of capitalization opportunity for good companies in the ESG space, and I’ve seen families take part in some of that ESG spec space as well. It’s a real opportunity for both ESG companies and family offices to play because it’s away from wind and solar. It’s a lot of emerging technology.

Laurie Barkman:

So this is the long game. This is part of a long game. Fun fact that our audience might be interested to know about you is that you are a ranked world athlete, a triathlete for the half Ironman marathon, right? A half Ironman.

Mark Brandt:

Yes, Ironman.

Laurie Barkman:

You have two finishes on your resume, five top 10 finishes, two trips to the world, in the age bracket, and the last couple years. I mean, that’s amazing. As we really think about the long game here, just want to bring that forward and recognize you for your athletic accomplishments. That’s outstanding. As we look to the last part of this conversation, Mark, what words of wisdom do you want to share with us? Do you have any favorite quotes about business or entrepreneurship, anything to inspire?

Mark Brandt:

I would just say my personal mantra, and it’s to try and move people forward. I’m in a role that’s a business development type role, so my role is to grow my company’s business, but anyone that’s known me through my whole career, I’m the type of person that wants to sit down and really help people move things forward. I love engaging over sports, I love engaging over triathlon and anyone that’s in this crazy world of triathlon, I actually relaunched the Cleveland triathlon as Tri CLE Rock Roll Run last year and we had 600 people do it. I have two employees outside of my role at RSM that run Rock Roll run for me, and it’s happening August 20, in downtown Cleveland, so I’m really active in the multi sport community, but if you want to know how to move your family office forward, gain timely insights about business issues impacting organizations, and learn more about RSM’s family office advisory services, I encourage you to visit, and I just am really thankful that you gave me this opportunity to reach out to people and talk about family office and direct investing.

Laurie Barkman:

Awesome. Thank you, Mark, so if people want to get in touch with you, is LinkedIn the best way or do you have another way you want folks to reach out?

Mark Brandt:

You can connect with me on LinkedIn by looking up Mark Brandt RSM or emailing me at

Laurie Barkman:

Awesome. Mark, thank you so much for coming on Succession Stories. It was great to talk with you today.

Mark Brandt:

Thank you, Laurie. It was a lot of fun.

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