Carol Pepper: Family Office Creation & Consulting

This week, we sat down with Carol Pepper of Pepper International. Pepper, a trusted advisor to families around the world, sets up and consults for family offices, internationally, and also offers complementary services and financial education. She started Pepper International in 2001; prior to starting her own firm, she had a successful corporate career (Salomon Brothers, JP Morgan, Credit Suisse) and was a Senior Portfolio Manager for the Rockefeller Family Office, where she managed over $1 Billion. Pepper owns 100% of her firm; she personally provides confidential services to her clients and coordinates a group of top experts on behalf of clients when required.

In addition, Pepper is the the author of The Seven Pearls of Financial Wisdom, A Woman’s Guide to Enjoying Wealth and Power. She is passionate about empowering women to educate themselves on financial topics and works hard to help women gain confidence and knowledge about managing money and investing. She is also a Member of the Advisory Committee of the United Nations Capital Development Fund and in November 2021, she was honored to be named one of the Top 20 Family Office Advisors in the world by Citywealth UK.

I would advise families to read the studies that have come out over the years that prove how important a well-structured family office is to long term success.  It is consistently true that over 90% of families lose their wealth in three to four generations.  To become a highly successful family enjoying ten generations or more, it is critical to follow the path and processes that have been proven to work…

If you have a family, be willing to learn for their sakes. It is an unfortunate fact that over 90% of women will at some point end up managing the family finances due to the death or incapacity of a spouse, so make sure you can take care of everyone when it is your turn.  You never want to be at the mercy of Wall Street or any Private Banker…they have their own agendas, and you need to be very clear on your agenda for your own financial safety and security.

-Carol Pepper

Q & A With Carol Pepper

Can you tell us a little bit your background and how you came to start Pepper International?

I grew up in Sudbury, Massachusetts, where my Father ran the local VFW as a World War II Veteran for many years.  He was very dedicated to helping other veterans, and he always marveled that he survived five beach landings as a Private in the Pacific War arena. He ended up working as an assistant directly for General MacArthur.  He was an incredible man.  My mother was a dedicated homemaker who was also an accountant, who made me balance my checkbook to the penny every month as a kid.  In those days, this was with paper and pencil!

I attended Bryn Mawr College on an academic scholarship, and I am truly the product of the Philanthropy from both Bryn Mawr alums and the Sudbury Foundation.  I studied Philosophy, and I was in love with creative writing.  I have continued to be a student of life and philosophy, and I had an incredible four years at Bryn Mawr.  The women there opened my eyes to the possibilities of what women could do, and I thrived and became more ambitious, thanks to their inspiration.

I took a job on Wall Street during the roaring 80’s because I needed to start paying back my student loans.  It was a big jump to move from an all-women’s college to the rough and tumble of being the only female analyst in the Mergers Department at Salomon Brothers!  If you have seen “Wolf of Wall Street,” it was pretty accurate.  From there I was hired by JP Morgan, and they paid for me to attend Columbia Business School.  It is hard to imagine that this year I am celebrating 41 years in Finance!  While at JP Morgan, I moved into the Private Banking Division.  From JP Morgan I went to other top banks and was eventually recruited to work for the Rockefeller Family Office as a Senior Portfolio Manager.  I managed over $1 Billion, with a focus on Social Impact and ESG investments.

Working with the Rockefeller Family Office gave me an insight into one of the greatest American families.  I was so impressed by their philanthropic spirit and the thoughtful ways that they prepared their children to steward the family fortune.  They were amazing employers, and I will forever appreciate the time I worked with the Family Office. When the internet really became part of our professional lives in 2000, I could see how it would radically change the way we deliver wealth management services, to a more virtual model.  I worked briefly at Morgan Stanley and helped them to design the very first online services for ultra-high net worth clients. It was an incredibly exciting time

I had always dreamed of running my own business, so I started my own firm, Pepper International in 2001. For the last 24 years, I have helped families set up and run their own Family Offices and have acted as an independent Chief Investment Officer.  It has been exhilarating to be a pioneer in the creation of the Family Offices as a concept and a reality.  It has called on me to understand finance, technology, cybersecurity, and tax planning.  My job is to put together the best possible team to help each family achieve their goals. But the key skill is to help families articulate their vision for the family and to make it a reality. It is incredibly satisfying work.

I have always been focusing on helping women, as women have always helped me!  I wrote a book called The Seven Pearls of Financial Wisdom: A Woman’s Guide to Enjoying Wealth and Power with top journalist Camilla Webster. That book brought me to television, and I have appeared monthly on financial TV as an expert for Bloomberg, Fox, and MSNBC. Creating the book was incredibly satisfying; to take the most important skills I have observed in the most successful families and to make them available to every woman.

Women at every level of society have been programed to think that females are not good at managing money and investments.  In fact, numerous studies prove the opposite is true!  Women are actually wonderful investors and often outperform their male peers. Women bring long term thinking to finance and don’t get rattled in a crisis.  I love helping women see their own genius and power and a person capable of great positive impact for their families and the world.

What has been the most challenging part of working in a sector dominated by men?

I think the greatest challenge is to remember that men and women do think differently!  A general observation, for example, is that men will focus on the performance of a portfolio, especially in comparison to the performance of other portfolios, so they are very competitive and want to win and be the “best,” in whatever they do.  Women focus on the context- what the portfolio is doing for the family, and long-term results rather than just winning in the short term. Both perspectives are important: we need to see both the forest and the trees!  When we work with men, it is important to use language they can understand and are interested in, while also showing them why the context and our long-term perspective are equally critical.  We both bring something to the discussion.  The key is to listen to each other and collaborate.

In many ways, I think the Family Office is a feminine concept, because it focuses on measuring success over multiple generations.

What are you proudest of?

I am most proud of the private Family Constitutions I have helped families create. I know that these documents will be guiding the family for multiple generations, and it is humbling to think that I helped them articulate their most private values and vision.  I am also very proud that in 2017 my firm was named Best Boutique by the Society of Trust and Estate Planners.  This is the Oscars of our industry and was so delighted to win this award!  I am also proud that I am the only female owned Family Office Consulting Firm that has built Family Offices on five continents!

What distinguishes your company from others?

I do all the work myself. When families hire me for such sensitive and confidential matters, they are getting my advice personally, with my 41 years of direct experience.  They are also getting access to my trusted group of top experts.  This saves time and money.  I have been told by families I am more focused on the holistic happiness of the family- I am able to discuss personal matters, family crisis, family illness, succession in business, security, corporate matters, spiritual matters, and investments.  I feel that we all become more powerful when we are centered in our values and our habits support fulfilling our goals.   I am often the closest confidante to the family, the one person who knows the whole picture.  I take that responsibility very seriously, and I try to be worthy of the trust that is placed in me.  While most Family Office experts are either focused on the money or the personal issues, I am able to address both.

What is your best advice for a client at the start of setting up a family office?

I would say the most important thing to focus on first is the family values.  If they have never gone through an exercise to truly articulate what the family stands for, it is a satisfying exercise.  I have a very structured process that I use, which helps set the table for the family.  Once they really know as a group “who they are,” and “what they stand for,” all other decisions become easier to make.

The next thing I would say is to hire an experienced consultant to help them with the set up.  Often times, a CFO who is near retirement is asked to take on this task.  He may be fantastic at Corporate matters, but he is not expert in this highly specialized area.  He can run the process, but he needs an expert to help him be successful in this new role.

Then finally, I would advise the family to read the studies that have come out over the years that prove how important a well-structured family office is to long term success.  It is consistently true that over 90% of families lose their wealth in three to four generations.  To become a highly successful family enjoying ten generations or more, it is critical to follow the path and processes that have been proven to work.

Women often do not have an equal voice when it comes to financial decisions and planning. How can you help change the role of women in family offices?

Due mostly to tradition, women are often not included in key Family Office roles.  There is an assumption that sons will be better at running the Family Office than daughters.  I have even seen women who must endure their brother as their Trustee, even when they have an MBA, and he does not.  I always work to include all family members in the initial design of Family Values and the Family Constitution.  There is usually little resistance to women attending these meetings, and from there it is easier to keep including them as matters become more financial.  Things are changing, even in family offices, as women become more educated and are working at top jobs.  I have seen a real improvement over the years, and I always try to support the equal participation of female family members in all discussions.   As the outside expert, I am able to assert my influence on their behalf.  I have seen time and time again that women bring valuable skills and perspectives to the Family Office when they are included.

What would be your best advice for someone who doesn’t feel confident in their financial knowledge but would like to learn more?

I have been a lifelong student, and I encourage everyone to continue learning!  If Finance is an area of concern, I can recommend my book The Seven Pearls, which is available on Amazon.  I also have a YouTube channel called Family Office Bootcamp, and I offer free courses on setting up a Family Office and on Investing 101.  There is even a course called “Love and Money,” and “Friends and Money” for young adults and parents.  A Google Search on “investing education” can lead to many free resources to get started.  Many Private Banks and Universities offer courses geared to family members who want to become financially literate.  Women are very good at investing once they learn the language of finance.

If you have a family, be willing to learn for their sakes. It is an unfortunate fact that over 90% of women will at some point end up managing the family finances due to the death or incapacity of a spouse, so make sure you can take care of everyone when it is your turn.  You never want to be at the mercy of Wall Street or any Private Banker…they have their own agendas, and you need to be very clear on your agenda for your own financial safety and security.

You started your company 24 years ago. The world has changed a lot since then and you’ve helped families adapt to these changes in terms of their financial planning and security. What would you say are the biggest issues that have arisen in the past decade?

The biggest change over the last 24 years has been the increasing use of technology in every aspect of life.  We think nothing of looking at our portfolio or bank account online now, but 24 years ago it was not as simple as it is today.  Technology is an amazing tool, but it must always be a tool that we humans control, especially as AI begins to infiltrate every aspect of our online lives.

While technology makes it much easier to collaborate remotely via Zoom and work with people around the world, it has also made wealthy families bigger targets for cyberattacks.  We need to make sure that our systems are strong to resist online threats to our finances and our family members.  It is much more difficult today to be anonymous, and if you are wealthy, it is easier than ever to be targeted for kidnapping, fraud, and blackmail.  It is important to have a skilled security team as part of the Family Office, to keep everyone as safe as possible.  The safe and responsible use of technology and the prevention of crime are now starkly in focus.

What is the best financial skill that families should teach their children?  What tool can help teach that skill?

The best financial tool that parents have at their disposal is the humble allowance.  I am very inspired by the Allowance Contract that John D. Rockefeller II had with his son, John D. Rockefeller III, which was published in Smithsonian Magazine.  At the time, John D. II was the wealthiest man in America, and his son received a modest allowance of $1.50 per week.  He had to save 20%, give 20% to charity and could spend 60%.  He had to write down what he spent, and his Father would personally review his accounting.  If he did the accounting correctly, he received a raise; if he did not, his allowance was reduced.  His father would also match fund any amounts given to charity or savings above the required 20%.

This is a simple formula that any family can implement using three piggy banks: one for savings, one for spending and one for charity.  By implementing this system, you gift your children with an incredible habit that will serve them for the rest of their lives.  It is always critical to know what you are spending, to save money and to give back.

We understand how important giving back is to you. Do you have a favorite cause that you’d like to share with our readers?

There are so many good causes out there, too many to list.  I am inspired by charities that help veterans to honor my father, and research for the treatment of dementia to honor my mother.  I am a big fan of educational charities, and organizations that support women and kids suffering from domestic violence.  I love defending endangered animals and those who are too weak to defend themselves.  I advise families to pick causes that align with their values, and to bring their children into the world of Philanthropy at an early age.   The great families of the 19th Century who still have their fortunes were all highly charitable, and I believe that caring for the world is a key attribute of long term, multigenerational happiness, and success.

Pepper International offers the following services:

• FAMILY OFFICE SET UP
• 360 DEGREE FAMILY OFFICE ASSESSMENT
• CIO SERVICES/INVESTMENT PROCESS SET UP
• CONSOLIDATED REPORTING & DIGITAL VAULT SET UP
• FAMILY GOVERNANCE DEVELOPMENT
• FAMILY DYNAMICS CONSULTING
• FINANCIAL EDUCATION
• SPECIAL PROJECTS

Contact Pepper International

Carol Pepper, CEO & Founder
Pepper International
carol@pepperinternational.com

 

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