The Pritzker Organization is strategically investing in Wellspring Family Office, a Cleveland-based multi-family office.
According to Wellspring CEO Michael Novak, the deal differs from the industry norm of advisory firms opting for private equity partners with short-term time horizons. In an interview with WealthManagement.com, Novak detailed how a PE deal would be the wrong route for his firm.
Terms of the deal were not disclosed.
“We are a multi-family office that works with multigenerational families, and now is partnered with a family,” he said. “And I think that’s the difference for the industry. There’s a lot of private equity backing. We didn’t want that. (There’s) nothing wrong with that, but as far as our legacy families and alignment, we had to align with a partner that felt the same way.”
The Pritzker Organization is the multi-family office and investing team led by Tom Pritzker, former CEO (and current executive chairman) of Hyatt Hotels Corp., member of the wealthy Pritzker family (and cousin of Illinois Gov. J.B. Pritzker). The firm focuses on investments over long-time horizons and has raised capital for Steward Partners and Wealth.com, among others.
Earlier this month, Wellspring Family Office rebranded from Wellspring Financial Advisors to signal its expanse of services beyond financial advisory needs for multigenerational families (including tax planning, family governance and personal well-being). The firm was founded in 2007 and manages about $4.2 billion in assets for about 75 families with 35 full-time employees.
Novak was introduced to the Pritzker Organization through a Wellspring board member about 18 months ago. Since then, he’d fielded many calls from potential Wellspring buyers and investors, but he didn’t believe a private equity firm’s shorter time horizon would make sense for his business.
In such a scenario, Novak reasoned a PE partner would spend several years getting to know the firm and use the middle period to stimulate growth, whether through cutting staff (or hiring to increase profitability and sales). For his multigenerational family clients whose age span can exceed 50 years, Novak asked why they should care if he had a PE partner looking to monetize in a few years.
“That might be in my best interest if I were trying to monetize my ownership or the other owners. In this case, it’s really about the future,” he said. “And it’s about permanent capital, not three-to-seven-year capital. It’s about permanent money. I mean, (the Pritzker Organization) invests in businesses for 50 to 70 years.”
According to Novak, the Pritzker investment will help the firm expand its investment and tax capabilities and launch a trust company for clients.
The firm will also continue building out its “Be Well” services, which help families answer the “softer” questions, like when to speak to children about money and how to live healthily (the service includes access to medicine, mental and physical wellness and mental health coaching for kids).
Additionally, Novak plans to open Wellspring offices in the West and Southeast (in addition to its Cleveland headquarters and the Pritzker offices in Chicago).
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