- Working in a family office
- Cycle of wealth stages
- Leveraging tax background to get into family office
- Early career advice
Colin Patrick started his career with Deloitte in the tax practice. Since then, he has worked for two prominent family offices in the DFW metropolitan area and is now the Chief Investment Officer overseeing a family’s alternative investment portfolio. Read on!
I’m a native Texan and grew up in the DFW metroplex. I went to the University of North Texas where I got my undergraduate degree in accounting and my master’s in tax. I started my career with a small local firm and then Deloitte. Total of four years in public accounting where I spent a good amount of my time on tax matters for high-net-worth individuals.
From there, I’ve spent the rest of my career working in family offices; with the Hunt family to start and then most recently, with the Patterson family.
I always enjoyed public accounting. I liked dealing with the most difficult issues and I didn't even personally mind the hours. I was always around such good teams, but after getting married the job was tough on my spouse and I needed a little more of that work-life balance.
Ultimately the Hunt family here in Dallas reached out because they were looking to bring someone in-house to focus on high-net-worth tax for individuals, trusts, partnerships, and their charitable/private foundations. I already had that skill set and I really liked the idea of not having to work for five different partners and their hundred different clients.
It’s the ability to focus on just one family and figuring out the tax matters specific to them to help them. I was in the tax department for about six months before the CFO reached out and asked whether I’d be interested in helping drive the portfolio decisions. It took me about five seconds to ponder that decision and move into the finance side of things. You go from being reactive on the tax side to more proactive in the portfolio construction, as you think about the tax characteristics.
From there, you start thinking about all the other things you could grow for the family. That can be diving more into private equity, specifically in venture capital, or help the family with their charitable foundations. One of the Hunt’s had joined the Giving Pledge to give a majority of her wealth away, so that was a really unique experience to work through and understand all the tax implications.
I worked for the Hunt family for eight years and then eventually, as with most families, there's this cycle of wealth, broken into three parts. There is wealth accumulation, preservation, and distribution. The individual with the Hunt family I was working for was clearly in the distribution phase with the Giving Pledge. I decided to join Dan Patterson, of the Patterson Thoma family office as he was still very much in the wealth accumulation phase.
Dan was a private equity guy and believed in the alignment of his business with his family wealth matters. He provided an incentive for me to grow along with him. Our deal was always that I would help him with the family office - wealth transfers, setting up trusts, etc. - if he’d teach me private equity. That’s been the way we’ve done it going on 9 years now.
Sure. Like anything, it’s not what you make, but what you keep. When you think about a portfolio and whether it’s ordinary income vs. capital gains, there are many different strategies you can use. You could utilize a 1031 exchange, such as rolling proceeds from one property to the next so that you continue deferring your taxes. And that’s just for investments.
On the family office side, it can be utilizing the estate tax or gift tax rules or different trust structures that are very effective at moving wealth down the generations without incurring the additional haircut of taxes.
Ultimately, taxes are crucial to all aspects of that wealth cycle, and by bringing that background you can maximize the family’s outcome.
I do not prepare tax returns anymore, and help more in a review capacity. I have a team of CPAs now that are very capable and more up to date on the recent tax rules. But I can still have an intelligent conversation with the family to help them understand specifics of large filings or impacts of new rulings. Some simple things like what's my tax rate, or did I get this deduction we were talking about? That’s one of the benefits of bringing in someone like me full-time, so they have that insight readily available and don’t have to pay some high hourly rate.
Taxes cover maybe 5% of what I do now. And accounting is about another 10%. Most of my time is really spent on deal flow. Opportunities talking to founders or partners, trying to figure out how we can help them grow their companies.
If I had to summarize our mandate; if it’s legal and it’s profitable, we’ll probably take a look at it. Our primary goal is still private equity. We think small companies and good entrepreneurs are the ultimate inflation hedge, right? For us, their ability to outsize the growth, regardless of interest rates or commodity risk, that's what wealth generation is all about.
We’re passionate about founders who are passionate about their business. Whether they do that through technology, manufacturing, or real estate, it doesn’t matter. We're very agnostic to how they do it and how we want to finance it, whether through debt or equity. We look at whatever deal structure makes sense.
I’ve been lucky with both the family offices I’ve worked for that I’ve had the benefit of working with a ton of autonomy. The principal can be gone for weeks or months at a time, so initially there are a lot of conversations understanding the mandate; whether it’s to build out certain aspects of the family office or hire the right folks to build out the team. Once you get those pieces in place, maybe they’ve hired you because they don’t want to be in the office full time, and my job is to basically serve as their professional representative.
It’s also understanding what they are trying to accomplish in the next few years. As I alluded to my time with the Hunt family, a member had joined the Giving Pledge, so the central focus was on charitable giving. I had a lot of room to explore the different avenues within that space but understood I shouldn’t waste my time looking outside of that. If someone called me up saying they were trying to raise money for the next Facebook, then I knew that was a hard pass for that office.
Tax as the entry point into private equity almost never happens. The fact that I went to a huge family office that had a niche and an internal tax department was lucky door number 3 of about 20 in my career.
I would just encourage anybody that’s in tax at a public accounting firm, whether they are in individual or corporate tax, to really spend time trying to broaden their knowledge of all tax related topics. At the firms, higher level folks become absolute experts in one specific area but that may limit their exit opportunities.
I stayed pretty general initially, so that when an opportunity opened up to get into high-net-worth individuals I hadn’t already backed myself into a corner. I was more of an inch deep in a lot of topics as opposed to a mile deep in one specific area. If you wanted to transition to a family office and in addition to being their private accountant you were able to speak to how you could help with the payroll tax issues of household employees or pilots, or their sales and use taxes for their art collection, it will help you differentiate yourself from the pack.
I will say that once someone believes they figured out the path they want to take, then you want to be very deliberate about the career moves you make. I always tell people, no one cares about your career more than you do. The sooner you can direct yourself in the right path, the better.
Get as many experiences as possible early on in your career. I encourage young accountants, or anybody young in their career, to find a job where you can either learn, or earn, and preferably both. I know a lot of folks that make a lot of money, but they're not very happy because they're not still learning. They don’t have the ability to stimulate that intellectual curiosity.
They're excited about the paycheck, but it feels like work to them. I don't have problems going to work, because I feel like every day I get to meet new folks and hear about what they're working on. And it's intellectually stimulating while also being financially rewarding.
So early on in your career, focus on learning and find out what you like. Then it just feels a lot less like work.
Currently, I’m so engaged by what I do. It’s 10 a.m. and I’ve already had two new deals come through my inbox that I’m just ready to dive into and learn more about. I’m not sure what the next opportunity is.
Dan Patterson has set up this office to be aligned where the employees are participating in the investment process in all aspects that it’s just so rewarding. I guess I’ll just keep doing this until I stop having fun.