Scott Peppet is president of the Chai Trust Company, the private trust company that oversees the family office for the Sam Zell family, as well as interim president of the Zell Family Office. A second-generation married-in family member, he has also had a consulting practice serving other families and family offices. He discusses the mission and goals of the family office:
How is your family office organized?
We are organized as a regulated trust company in Illinois: the Chai Trust Company. Inside of that entity we have two divisions: the Equity Group Investments division, which is our direct investing team, and the Zell Family Office division, which is our family office team.
We have a small investing team inside of the Zell Family Office division that handles all of the public markets and other forms of investing other than the direct transactions. Equity Group Investments does our direct deals, and then the family office does everything else.
The family office group also does all the other things you'd expect: tax and accounting, financial reporting, and investing, as well as governance, trust services, family engagement, family learning, legal — all the regular suspects.
In some families, there might be three separate entities: a trust company, a family office, and an investing group. In ours, it's all one.
What is your role?
I'm the president of the company as a whole, the Chai Trust Company. I am also currently the interim president of the Zell Family Office division, although we are going to be finding a president of that division. And I sit on our board. So, at the moment, I'm multiple things.
What is the mission of your family office?
This is a question we have been talking about. My view is that the mission of our office is to protect and enhance the human and financial capital of the family over a long period of time. The way we talk about it is “stewarding well-being.” The word ‘wealth' originally meant well-being, as opposed to financial capital. So, you could say that our mission is stewarding wealth, but only if you mean wealth in the sense of human capital, social capital and financial capital.
On the family office side, we definitely see our purpose as being the well-being, or the flourishing, the success, the thriving, of the family ecosystem – not just the family members, but the employees, the board members and the community around them, including contributing to society generally.
What does it mean for family members to flourish, and how do you get there?
It's a really good question. First of all, I think nobody knows for sure. Second, there's a lot of conversation with family members and participants in this system about what they think it means for them to be succeeding in their lives. For me, the core metric if you're talking about family members is: Are they integrating the financial capital into their lives in a way that allows them both to deploy it in healthy ways and to just live in a healthy way?
By that I mean, there are a lot of family members out there in the world that have inherited financial capital, but they haven't really integrated it into who they are, or into their lives. They have some sort of conflicted relationship with it: They're either ashamed of it or they're very anxious about it, or they're angry at it.
As a consequence of that conflicted relationship, they don't necessarily do much with it. Maybe it's paying their bills, but they don't feel ownership over it as an inheritor in the way that maybe the person who created it felt ownership over it. They may not start a business, they may not give it away to charity, they may not deploy it. And to me that's an enormous waste of potential. Because ultimately, this financial capital is just concentrated potential that needs to be released to do anything in the world.
The hope is that by focusing on the human capital aspects of a family and the system around them, you can unleash that potential, or they can unleash it if they want to. Now, they might not want to, and that's 100% their choice. But what I see in some systems that I've worked in is that if they aren't using the financial capital because of that conflicted relationship where they feel guilt or anxiety, then they aren't fully able to choose what they want to do.
Our goal as an office is to help this family learn and grow and integrate that financial capital, and then it can decide what it wants to do with it: keep starting businesses, build businesses, give it away, whatever — but do that thoughtfully.
What are the risks when family members do not integrate the financial capital into their lives?
The normal fear is dependency and entitlement — and those are real issues. That is a part of what it means to integrate financial capital in a healthy way. We have this social story of ‘trust funders': They're 18 years old and they're going to buy Ferraris and bottles of expensive champagne at fancy nightclubs or something.
That is a risk. But I've seen a lot more families where that isn't at all the scenario — where it's more that the kids are frozen than that they're overspending. The stereotype often oversimplifies and misunderstands the complexity they experience.
It goes back to potential: There's enormous potential in these systems to do good things. The opportunity cost for society is real if families with great financial capital don't use it. And I do think there's a benefit for these families, if people can come to terms with the wealth and then figure out what they want to do with it.
