Investment Management

The creation of a thousand forests is in one acorn.
Ralph Waldo Emerson

Overview

Through our SEC-registered investment advisor, Choate Investment Advisors (ChoateIA), we provide comprehensive, integrated investment services to help our clients manage their assets and plan for the long term. We use a broad range of investment strategies in both public and private markets to help our clients achieve their investment goals across various time horizons. Our experienced and tenured team spends time understanding our clients’ objectives, constraints, and values to construct tailored investment solutions.

We have no proprietary products to sell and receive no commissions, allowing us to be fully aligned with our clients’ interests as we help them to accomplish their individual goals. Unlike many investment advisors, we are not built with the idea of eventually selling our business; this means that our clients can trust that we will be putting their interests – rather than our own – first for generations to come.

Client Story:

Improving Family Governance for Large, Multi-Generational Family

Establishing a Single-Family Office for Ultra-High Net Worth Entrepreneur Family

Navigating an Entrepreneur Family’s First Liquidity Events

Establishing a Founder’s Legacy for Future Generations

Managing Family Office Transition Across Generations

Challenges:
Many years ago a large, multi-generational family established several pooled investment vehicles to manage the family wealth. These investment funds were run by members of the senior generation, who over time wanted to involve the next generation in family governance.

Solutions:

Our lawyers were already providing comprehensive estate planning and tax advice to the individual family members at all generations, as well as corporate legal advice to the funds.
Building on that relationship, we helped reinvigorate the family’s participation in managing its funds.

1. Transition leadership to the next generation

With the help of the entire team – including wealth management and corporate lawyers, fund administrators, trust advisors, and investment specialists – we helped move the “family CEO” role to a member of the next generation through a transparent election process. The transition was a success, with more members of the younger generation joining the governing board each year under the guidance and supervision of their parents.

2. Educate Board Members on roles and responsibilities

To further facilitate the transition, we worked with board members – both individually and together – to educate the younger family members about the board’s responsibilities and family history, as well as important corporate governance, securities law, and tax considerations affecting the family.

3. Simplify and refocus investment strategy

A recurring theme emerged from these conversations: The family’s prior investment advisors had implemented an overly complicated investment portfolio that did not resonate with the family and left many board members feeling that their voices were not being heard.
After a lengthy diligence and interview process, the family hired Choate to streamline and rebuild the investment portfolio. Over the course of a series of board meetings, we helped the family understand the composition of its investments and initiated the process for repositioning the portfolio to support both ongoing distribution needs and the need for continued long-term growth to provide for future generations.

Challenges:
An ultra-high net worth family sought to create a brand new family office to help manage its rapidly increasing wealth, fueled by a highly profitable closely-held business.

Solutions:
We were hired to replace a family’s former estate planning attorney, whose expertise struggled to keep up with the family’s quickly evolving needs. We immediately recognized an opportunity to engineer a single-family office from the ground up that was customized to the family’s needs:

1. Create a family office structure

We began by creating a legal structure for the new family office, including several investment vehicles designed to pool existing family wealth. These new vehicles – which include series LLCs and special-purpose investment entities – provide a robust framework for pursuing the family’s investment interests. We help with all aspects of vehicle management and compliance, including complying with SEC rules for family offices.
This family office model proved to be very flexible, making it possible for the family to quickly deploy capital to take advantage of changes in the tax laws. For example, when the family’s advisors identified an attractive “qualified opportunity zone” investment, it took just a couple of days to fit that asset into the family’s overall investment portfolio in a tax-efficient manner.

2. Help build out a team

As the legal work was getting underway, the family was searching for a dedicated person to lead their new family office. Through our network, we helped the family locate a new family office director with an ideal background and the right cultural fit. Filling this critical role allowed the family to create a single point of contact for all family members regarding wealth planning, lifestyle and concierge services, and freed up other team members’ time to focus on their own specialties.

3. Implement high-impact, high-visibility philanthropy

With the right support structure in place, the family turned to one of its key priorities: high-impact, high-visibility philanthropy. We helped the family negotiate several “front page of the newspaper” charitable gifts with local institutions, transforming their charitable impact and securing prominent naming rights for the family in perpetuity.

Client:
Husband and wife are each scientific founders / advisers to multiple life sciences companies

Challenges:
Each spouse had an interest in a separate company that recently went public, providing the couple with their first significant liquidity events

Solutions:

Reviewed insider trading policies and vesting schedules to determine whether clients should implement a 10b5-1 sales plan
Formulated and executed a stock sales plan to provide clients with necessary diversification and liquidity, while accommodating low daily trading volume and tax implications of sales
Provided comprehensive review of financial holdings and goals, and prepared a diversified investment plan
Implemented core estate plan, including helping clients purchase real estate and other assets through LLCs that shield family from liability
Implemented lifetime gifting plan to create irrevocable trusts for children, and charitable foundation to be run by clients and future generations

Results:
Lifetime gifts saved clients millions in future estate taxes

Charitable foundation provides tax benefits and “glue” that holds older and younger generations together

Choate team provides ongoing investment, estate planning, and financial advice as additional opportunities arise, and family and wealth grows

Client:
Long-time founder and owner of consulting firm

Challenges:
Complex estate planning goals requiring coordination across multiple disciplines

Solutions:

Choate Wealth lawyers have implemented sophisticated estate planning, including grantor retained annuity trusts (GRATs), irrevocable trusts, and core estate planning documents that save significant taxes
Choate partners serve as trustees and executors with highest fiduciary duties
Assisted with a comprehensive evaluation of life insurance coverage
Choate Investment Advisors invests liquid portfolio, including exit proceeds
Quarterly estate planning & investment calls with the family, including separate “next generation” calls to educate younger family members

Results:
Proactive gift planning has moved significant wealth to trusts for the next generation, tax free

Education curriculum has helped foster the next generation of family investors

Choate Wealth team, together with Choate’s Private Equity group, is helping client explore gifts of stock in next startup at pre-revenue stage

Challenges:
Long-time legal clients of the firm originally built out their own stand-alone family office. However, as the older generation wanted to retire, and no younger family members were interested in taking over the CEO role, the family recognized that it needed a different solution.

Solutions:
The family hired Choate Family Office to serve as its out-sourced family office, leveraging our 60+ member staff, and our legal, tax, and investment expertise. Choate focused on three key areas to address the family’s needs.

1. Tracking and reporting

The family invested in a wide variety of private equity, search funds, hedge funds, real estate, and publicly traded assets. To replace an outdated collection of spreadsheets, we designed and deployed a comprehensive investment tracking and reporting system. Today, family members and staff have real-time access to both consolidated investment reports and tailored net worth statements, as well as visibility into outstanding commitments, distributions, contributions, and changes in asset values.

2. Management of public and private investments

Choate developed customized investment portfolios for the family’s estate planning vehicles, including private foundations and family trusts. We developed special investment guidelines for the liquid portion of the family’s investment portfolio in order to complement sizeable private holdings.
As part of our ongoing work for the family, we handle the day-to-day administration of their private investments. Members of the family’s Choate team monitor third-party investments and manage capital calls, distributions, cash needs, changes in investment activities, and all related tax matters. We helped the family establish several new investment vehicles in order to efficiently pool family capital and to reward key members of the family and staff in a tax-efficient manner.

3. Tax optimization

Our lawyers, tax advisors, and trust administrators regularly perform extensive tax optimization and charitable gifting analysis, resulting in material tax savings every year. This tax analysis is continually updated, ensuring that the family’s charitable giving program is always up-to-date and is positioned for maximum tax efficiency.