2022 Arlington Annual Report

Build a Better Family.SM

A LETTER FROM OUR CEO

Dear Arlington Families,

As we look back on 2022 and ahead to 2023, I am once again honored to share news of our firm’s work on your behalf. In addition to detailing key figures and performance metrics, I am also proud to provide a snapshot of Arlington’s culture and a look into the family of advisors and associates who are committed to serving each of your families.

Over the last year, Arlington has continued its path of controlled growth in adding new families and aggressive growth in spirit and sensibility. Reflecting on the last twelve months, it’s clear that learning and growth enriched so much of our work. Looking to the future, preserving and enhancing our culture of learning and development will be critical to fulfilling the vision established by our Perpetual Purpose Trust, a memorialized commitment to not extract value out of the organization through a sale. That commitment fulfills our long-term promise of lasting independence, enduring continuity, and unwavering focus on each family’s generational wellbeing.

During 2022 our long-term perspective was highlighted in practice as the year brought about the end of another decades-long season of market speculation and excesses. In these periods of overabundance, those who forgo chasing returns to preserve fortunes, like Arlington, could seem out of step. When those periods end, however, the patience and discipline of those who did not chase extravagance is clear.

This capricious cycle is evidence as to why Arlington will always be in the practice of preserving fortunes first and foremost. Our methodology is grounded in principles and refined in methods by learning and insight. This approach is the key to growing and compounding capital not just over decades, but across generations.

That understanding is further confirmation that our capacity to learn is directly linked to our ability to last. From professional to personal, philosophical to physical, our company-wide commitment to deliberate, meaningful development was and is unwavering. More than just an accomplishment for our team, our progress demonstrates a critical shared belief: that to support your family as you grow and evolve, our Arlington family must always grow and evolve as well. Our entire team must see and celebrate the link between learning and longevity, between curiosity and continuity.

Which is exactly what we’ve been doing over the last year. Hopefully this annual report will provide a window into our unceasing evolution, as well as into our distinct approach to investing, administration and estate, trust, and legacy planning.

I am, as always, grateful for all you entrust to our team.

Kenneth H. Polk Founder and CEO

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Arlington by the numbers

Inspired by a genuine commitment to generational success and stability, Arlington Family Offices is a family-led, legacy-focused boutique firm that invests for decades, plans for centuries, and serves for generations.

Our dedicated teams of expertly skilled specialists support a select group of families with best-in-class investment, trust, tax, and human capital services.

We are managed by an engaged group of equity partners who balance entrepreneurial instincts with seven-generation insights, upholding a mission that delivers performance with stability and continuity.

56 EMPLOYEES

35 ADVANCED DESIGNATIONS

71 FAMILY OFFICES SERVED

443 SOULS UNDER ADVISEMENT

25 YEARS SERVING FAMILIES

$9.7 B

ASSETS UNDER MANAGEMENT

Entrepreneurialism

Innovation and creativity foster enduring organizations (and families). Many businesses lose adaptability and originality as they grow. They become bureaucracies. We are determined to stay true to our entrepreneurial origins.

ASSETS UNDER ADVISEMENT

$6.0B

Our Guiding Principles

Independence

Our independence is to be protected by the absence of external shareholders. Strategy, operational decisions, and culture should be formed by active owners and those closest to the families we serve.

Long-Term Thinking

We think beyond the short-term and focus on decisions that are seven-generation principled. This allows the organization to be purpose-driven and values-led. And, it underpins the thinking that lies at the heart of successful investment performance.

I CAN SEE CLEARLY NOW

Sometimes learning happens fast. From subtle ‘ahas!’ to dramatic discoveries, we talked with Arlington executives Stephen Rowe, Jena Dunay, and Craig Stephens about the realizations and revelations changing the way they think.

Stephen, Jena, and Craig share common values, but all see the world a bit differently. Stephen is a Partner and serves as President, General Counsel, and Chief Compliance Officer. Jena is Chief Learning Officer and helps families navigate challenges that accompany wealth. Craig, who was recently named Partner, is a Senior Wealth and Tax Advisor and a member of the Fiduciary Oversight Committee.

Q: Have you had any valuable epiphanies recently?

(JD) “Definitely. My pregnancy is teaching me to live out the motto, ‘Have a plan, but be nimble.’“

(SR) “Epiphanies? In 2022, my wife and I had our 25th wedding anniversary, I turned 50, my oldest daughter turned 21, our twins left home (and we became empty nesters), and I had open-heart surgery. So, no shortage of epiphanies recently... how much time do we have?”

Q: Have your family goals changed over time?

(CS) “A decade ago, my wife and I just wanted healthy babies with ten fingers and ten toes. That has certainly evolved. Now we want open communication, family dinners, and self-confidence for our daughters. It’s now clear that raising a family requires deeper goals than simply having a family.”

Q: Are there any realizations that you find yourself talking about regularly?

(CS) “The power of listening. I stress to my children that you should talk one-third of the time and listen two-thirds of the time. If you ever leave a setting and can’t figure out who was talking the most, it was probably you.”

(SR) “I recently read Peter Zeihan’s book, The End of the World Is Just the Beginning. It pushes back against some of the prevailing narratives in our world today. I think about it, and talk about it, quite a bit.”

Q: Any life-changing advice to others?

(SR) “Write letters to people you care about.”

(CS) “Take that big trip with your family. Enjoy the experience. You’ll recover the cost later, you’ll catch up on work, and you actually won’t be missed at work as much as you think.”

(JD) “Get involved with the foster care system. While not everyone is called to foster children, everyone has the unique ability to impact the lives of these kids and the people who serve them.”

Q: What are a few pieces of wisdom you wish your younger self knew?

(JD) “The best things in life come from surrendering to a divine plan.”

(SR) “Be present. Be where your feet are.”

(CS) “Don’t limit yourself to low-hanging fruit. It’s easy to get, tastes good, and there’s nothing wrong with it, but it won’t keep you full forever.”

Q: What recent experiences have changed your perspective?

(SR) “2022 was a year of transition for my family. I’m now seeing much more clearly about the things that matter most to me, my wife and children. Honestly, it’s a relatively short list, and I spend very little time now on anything that isn’t on it.”

(JD) “After launching my own business several years ago, I thought I’d never be interested in working for someone else again. Then came Arlington. This experience has taught me that with the right opportunity, at the right time, for the right mission, and with the best leaders, you can never say never!”

(CS) “When I became a partner, I wouldn’t say it changed my perspective, but it certainly enhanced it. I take my responsibilities to our families more seriously than ever.”

Q: What books immediately changed the way you see the world?

(JD) “It’s hard to pick just one! Three that come to mind are The Four Hour Work Week by Tim Ferriss, The Ruthless Elimination of Hurry by John Mark Comer, and The Artist’s Way by Julia Cameron.”

Q: Speaking of realizing things: how does it feel to help Arlington families realize their goals?

(JD) “For me, this work is very fulfilling. It’s a joy to come alongside families and help them intentionally invest time and resources in their most important assets—their family members. It’s sacred, special work.”

(SR) “There’s something truly rewarding about impacting families in ways that help them impact the world around them.”

(CS) “Leading a family through a values workshop, learning assessment, or family mission statement process is often an eye-opener for parents… It can be a subtle realization that the years of parenting lectures and lessons made an impact. We didn’t create the values for the children—we just helped bring them to the surface.”

Q: What epiphanies have made you laugh at yourself?

(JD) “In Italian families it’s common for the men to have some variation of the same name. For instance, my great-grandfather was named Alphonse Peter and my grandfather’s name was Peter Alphonse. It took me 13 years to realize that my great uncle’s name wasn’t ‘Junior’!”

(SR) “I was embarrassingly old when I realized I have really bad hair. I think my wife or one of my kids may have broken it to me.”

THE POWER OF CURIOSITYURIOSITY

A couple of years ago I was catching up with a mentor-figure in my life who just came back from a family vacation with her grown children. In an exchange of pleasantries, I asked her how it went.

She said, “You know, Jena, it was great. I learned so many new things about my kids. As they’ve gotten older, I’ve realized that it’s not my job to tell them who they are or what to do. But rather, to get curious about who they are becoming. So, when we’re together, I just try to ask a lot of really good questions.”

By Jena Dunay Chief Learning Officer

This struck me, not only because it is great motherly advice, but because I could personally see the fruits of this mindset in her family relationships and dynamics. While not perfect, they were healthy, communicative, and thriving. Even in conflict, they remained humbly curious about one another. I tucked those words away to use in my own family. And now, as I’ve gotten to serve families at Arlington, I’ve seen this wisdom come to life.

The most successful families are those who lean away from conformity and into curiosity.

After all, curiosity fosters independence.

One of the biggest concerns we hear from parents is, “How do I make sure this money doesn’t mess up my children or grandchildren?” Another way to ask this is, “How do I ensure they remain driven and find their own purpose?” Parents desire for their children—no matter the age—to have their own interests, passions, and work. But sometimes, in families of wealth, expectations and responsibilities can overshadow this goal.

By encouraging family members to get curious about their strengths and interests, families are automatically solving for independence over dependence.

Curiosity allows space to fail.

Often in families of prominence, there can be pressure to live up to the successes of predecessors. Although this expectation isn’t often explicitly stated, it can be a nagging voice in the back of the rising generation’s mind. This can result in analysis paralysis with a fear of making any misstep.

But by creating a culture of curiosity and celebrating healthy risk-taking, family members are encouraged to forge their own paths.

Curiosity is a conflict-resolution tool.

Even in the healthiest of families, conflict is inevitable. When conflict is met with conformity, you’ll often see disagreements lead to escalation. Unfortunately, little gets solved and family members feel disconnected. But when conflict is met with curiosity of another’s perspective, frustration is dismantled, and connection is quickly reestablished.

Especially in families of wealth, curiosity can be an equalizer and a peacekeeper during times of conflict.

It’s clear curiosity is necessary for a thriving family, but what are some practical ways that families can cultivate curiosity?

Get curious about the past.

One way families can create a culture of curiosity is to encourage the retelling and recording of family stories. Not only does it preserve history and legacy, it’s a great opportunity to bring multiple generations together. Grandchildren

can enjoy interviewing grandparents, family values are memorialized for future generations, or parents can bring to life the successes and failures they’ve experienced that led to their wealth creation.

No need to overcomplicate it. All you need is a list of thoughtful questions and a recording device (an iPhone works great!).

Curiosity creates rhythms in the present.

If you still have children in the house, a great way to promote curiosity within relationships is to hold a weekly family meeting. In that preserved time, we recommend that families share a meal, revisit their values, and have meaningful conversations. Not sure what to talk about? Conversation card decks are a great resource to prompt intentional discussions.

Plan experiences for curiosity to bloom.

For many families, love is spelled T-I-M-E. By planning new experiences for the whole family to enjoy, curiosity and diversity of thought are exemplified as values. For some families that looks like travel, for others it’s trying new cuisines or music. Your family may be into the arts or adventure sports! Whatever your family chooses to do, those experiences will allow curiosity to bloom.

As we’ve seen, curiosity has the power to create richer relationships and healthier family dynamics. So as you step into the new year, I’d encourage you to ponder, “Curiosity or conformity—which one am I cultivating for my family?”

ADDING EVEN MORE EXPERTISE

The growth and development of our team is a critical way Arlington meets the generational needs of our families and ensures continuity of support for years to come. This year was no different, and we continued to diversify and strengthen our talented team. We welcomed a number of new colleagues whose range of experiences and expertise are already proving indispensable to our multi-faceted work with families.

Scott Peppet Advisory Board Member

The newest member of our Advisory Board, Scott Peppet has worn several hats. “Most of my career I have been a law professor at the University of Colorado Law School in Boulder, Colorado,” says the published author, ordained Zen priest, and current-day president of a single family office and private trust company. “I use my legal, finance, and conflict resolution background to shape structures, process, and patterns of behavior to help the family I serve flourish over the long term.”

Richard Pearson Associate General Counsel & Compliance Director

“Well, I’m a talker,” says Richard Pearson, with a laugh. Among other things, Richard enjoys talking about Claudia, his wife of 47 years, his four sons and 10 grandchildren, and all things Tar Heel sports. He’s also quick to talk about how he was drawn to Arlington recently because of everyone’s clear commitment to serving clients. A proud UNC graduate and Alabama Law School alumnus, Richard joined Arlington in March of 2022, bringing invaluable experience including eight years at BBVA USA (formerly Compass Bank) and 35 years in private practice at Balch & Bingham.

Michelle

Harbison Family Wealth Advisor

Once a year, each and every year, Michelle and her husband Joe wake up their two kids and take them on a surprise vacation, checking off yet another destination on a family bucket list they compiled years ago. A self-described “keep your head down and get the job done” kind of person, the Auburn graduate is accustomed to setting and reaching goals, especially when it comes to her work (like her CTFA and CFP ® certifications). “Every family has a unique financial puzzle, and I have the privilege of helping them figure out how everything fits together,” she says. “We all have a role to play in the big picture of a family’s success, but honestly I love the small things most, like when someone calls years later to say thank you.”

Laura Flaum Family Wealth Advisor

If Laura isn’t smiling, her colleagues are likely to ask if something’s wrong. With Arlington since the summer of 2022, the upbeat Family Wealth Advisor is a Vanderbilt graduate and recently completed her MBA at Northwestern. What makes her happiest of all? Watching Chicago sports, playing any game with a racquet, and of course working closely to help families reach their objectives. “I thoroughly enjoy getting to know the families we serve,” she says, with a smile. “It’s humbling that families entrust us to be their partner, and I take that role very seriously. There’s no task too big or too small.”

CELEBRATING INCREDIBLE TENURE

A familiar face, Cyndi Smith is the longest-tenured employee at Arlington. Since her first day in 1998, everyone has noticed how generous she is with her time. Unsurprisingly, she’s quick to tell you her passion is serving others. “I’ll do anything to help someone,” she says. It’s a trait that’s readily apparent, not only with her family and in her church but in her various roles at the office. “I’m HR, corporate bookkeeper, client bookkeeper, assistant, and light bulb changer. You name it and I do it,” she adds. Cyndi’s can-do attitude and a propensity for putting others first have always been a constant. She says her favorite thing is hearing about children and grandchildren in Arlington families. “I feel like they’re my family,” she beams.

SAID, READ & HEARD

Have you read this? Have you listened to that ?

Those are some of the most frequently asked questions around Arlington’s offices in Birmingham and Nashville, both among our team members and with our families. We love sharing books and podcasts that are shaping our thinking and keeping us inspired, engaged, and entertained. Once again we’re passing along a few of our favorites from the last year. Hope you enjoy them as much as we have.

The Psychology of Money

By Morgan Housel

A great read parents should recommend for their children, this insightful work explores how money moves around in an economy and how personal biases and emotional factors play an important role in our financial decisions.

Ken Polk, Founder and CEO

The Defining Decade

By Meg Jay

In this provocative read, the author provides the tools necessary to make the most of your twenties and shows readers how work, relationships, personality, identity, and even the brain can change more during this decade than any other time in adulthood.

Clayton Brawley, Manager of Information Technology

The Obstacle Is the Way

By Ryan Holiday

This thought-provoking read imparts the wisdom of stoicism, noting how past figures used it to overcome obstacles and transform them into valuable opportunities for growth and success.

Stephen Rowe, JD, President, General Counsel, and Chief Compliance Officer

The Autobiography of Andrew Carnegie & the Gospel of Wealth

By Andrew Carnegie

This book recounts the real-life, rags-toriches tale of an immigrant’s rise from being a telegrapher’s clerk to becoming a captain of industry and an equally impressive philanthropist.

John Lueken, President, Arlington Nashville

We Need to Talk: A Memoir About Wealth

By Jennifer Risher

Many books offer advice on how to get rich. Some inspire us with the fantasy of being rich. We Need to Talk takes an honest look at what it’s really like to have substantial wealth.

Laura

Flaum, Family Wealth Advisor

Burn Rate: Launching a Startup and Losing My Mind

By Andy Dunn

In this unconventional entrepreneurial memoir, the author shines a light on the dark side of success and challenges readers to take part in the deepening conversation around creativity, performance, and discourse.

Natalie Gibbs, Investment Operations Analyst

Since inception, we have asked our families, "What do we need to become to better serve you?" Our growth follows your answers to that question.

MASTERING CHANGE

The Law of Entropy isn’t a topic most people associate with family office management. But of course author and veteran family advisor James “Jay” Hughes isn’t most people. When Jay talks about continuity and perpetuity in a family context, for example, he is as likely to talk about thermodynamics—and specifically the Law of Entropy—as he is about family dynamics.

The Law of Entropy dictates that order and chaos are constantly in flux, so nothing naturally stays the same in perpetuity. This constant change, Jay contends, makes certainty an illusion—and makes thoughtful long-term planning so vital. In order to endure, families must be fundamentally ready for change.

As humbling as it is disruptive, this insight is just one of the many ways Jay’s unconventional wisdom has transformed how people think about family offices over the last fifty years. Arlington has been fortunate to have known Jay as a personal mentor and Advisory Board member for the last twenty of those years. Soon, Arlington will be sharing a new series of ‘Master Classes’ with Jay. These short films delve into a range of topics relevant to families and the advisors who support them. Watch for their release in the coming year.

For more than five decades, James E. Hughes, Jr., has been a leading expert in family office management. An invaluable personal mentor to our team and an Arlington Advisory Board member, Jay is now Chairman of the James E. Hughes, Jr. Foundation, Inc. For more about Jay and the foundation, visit jehjf.org

PLANNING FOR A POSITIVE IMPACT

Although philanthropic opportunities vary, we find ourselves offering families two consistent pieces of advice about charitable giving. The first is to approach it with the same intentionality as you would any investment. The second is to link the gift to issues and initiatives that genuinely matter to your family.

This approach to philanthropy ensures that where and how we give of our time, talent, and treasure isn’t just an expression of a family’s values, it’s also a way those values can be shaped and solidified. More than just a gesture of goodwill or a calculated opportunity for a deduction, charitable contributions can help families connect with each other and with the world around them in profound ways.

We follow both pieces of advice when it comes to Arlington’s own outreach. Each year, the Arlington Charitable Committee works with team members throughout our company to identify and support local organizations focused on our Alabama and Tennessee communities, national groups engaged in outreach across our country, and international initiatives supporting people around the world. That support takes many shapes: from countless hours of volunteer work to critical donations to nonprofits. This year’s deserving charities—several of which are highlighted to the right—are creating powerful, positive change that aligns with Arlington’s vision and values. We couldn’t be more proud to support these and other purpose-driven organizations who share our commitment to creating meaningful, lasting impact on the lives of others.

FIRST LIGHT SHELTER Birmingham

More than a shelter, First Light is a hospitable, dignified space where homeless women and children can feel safe and respected. Their mission, like Arlington’s, is to help families achieve their full potential.

VAPOR MINISTRIES International

Compassion knows no borders. Vapor Ministries is a non-profit serving hundreds of thousands of people globally. Their goal is to meet urgent local needs and establish sustainable centers to alleviate poverty.

GRACE HOUSE Across Alabama

For more than three decades, Grace House has been providing stable Christian foster care for young women in Alabama. Arlington is proud to support their work to end cycles of poverty and abuse.

BUILDING TO LEARN. LEARNING TO BUILD . BUILD UP Birmingham

One of this year’s most exciting charitable partnerships has been with Build Up, the nation’s first and only early-college workforce development high school. The innovative program empowers youth with the knowledge, skills, and agency to break centuries-old cycles of urban poverty—equipping a new generation to transform not only their own lives but also the communities and systems around them.

NAVIGATION by EXPLORATION

While we may hope for fixed coordinates as we journey through life, successful navigation requires near-constant calibration to changing conditions and circumstances.

Those with an explorer’s sensibility understand this all too well. They know the value of a map for establishing objectives and destinations, but they rely on a compass to confirm the countless adjustments and course corrections necessary to make sense of their map. They ask questions. They inquire. They dig. For them, exploration isn’t simply an occasional trek into the unknown or a model for dealing with uncharted territory, it’s the way they navigate everything and inspire everyone around them. Their big picture is fixed on an unwavering North Star, but their daily path is comprised of constant learning and adapting.

Author John Hagel writes about this mentality in an article for the Harvard Business Review. His examination highlights three distinct traits these lifelong learners and explorers all exhibit—these characteristics may offer valuable insight to families as they navigate their unique journeys.

Explorers are unshakable. They demonstrate an unshakable, unwavering commitment to achieving impact in a specific domain that excites them. From manufacturing to movies, financial services to surfing, their actions are driven by an undeniable passion.

Explorers are excited in the face of challenges. In fact, they see these hurdles as an opportunity to learn and create even greater impact—and without the chance to grow and adapt, they often get bored or distracted.

Explorers engage others. When confronted with new challenges, explorers have an immediate desire to seek out and connect with others who can help them get to better answers faster so that they can keep moving forward and making meaningful impact.

By creating a firm foundation of shared beliefs and common passions, a family won’t necessarily eliminate twists and turns ahead of them. What they will do, however, is establish a clear North Star for themselves and future generations— a fixed point of reference they can orient themselves to as they learn, grow, and explore their way through the world.

Great Families Ask Great Questions

A list of exploratory questions for families, inspired by Arlington friend and colleague John C. Maxwell (author of Great Leaders Ask Great Questions).

What has been our greatest accomplishment?

What was our most challenging season together?

What are we learning now?

What kinds of problems are the most difficult for us to solve?

What impact do we want to make on the world?

What is our most treasured shared experience?

What do we want to accomplish together in the next year?

We will help you prepare your family for the future as it will be.