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Turning Succession Upside Down

The headlines are everywhere – a high percentage of family businesses have no formal succession plan – and then the story launches into the usual tropes about estate planning, life insurance, choosing a successor, etc.

But maybe we should be turning this upside down? After all, by necessity, a family business succession involves two generations – the incumbent and the rising – and so much of the thinking about succession focusses on (a) the perspective of the incumbent generation, and (b) the legal, structural and procedural.

What does succession look like from the rising generation? Are they plagued with self-doubt or burdened with high expectations? What of their own personal dreams and needs to individuate? While they may be chosen/groomed from a young age to do the job, it’s very important that they are taking it on for the right reasons, and have the space to make the role truly ‘theirs’.

And just like company mergers most commonly fail on culture, family business successions are seriously put at risk if there are family “elephants in the room” that are not dealt with. Issues that might seem petty (especially to parents) can fester over many years, and explode once the incumbent generation have stepped aside or passed away.

Consider This: Is the rising generation in your family business interested in taking over? What are their dreams and aspirations (both about the family business, and in general)? Have you discussed this with them early in your own succession planning process?

Further reading: https://www.kiplinger.com/business/small-business/603023/what-role-should-your-children-play-in-your-business-succession-plan, https://www.campdenfb.com/article/how-next-generation-can-conquer-their-fear-and-anxiety-family-business-succession, https://ifamagazine.com/article/psychology-of-family-governance-appreciating-the-importance-of-family-dynamics-in-succession-planning/, https://www.saltwire.com/nova-scotia/business/exit-planning-family-matters-have-to-be-ironed-out-before-business-succession-273087/

Actionable Generational Wealth Succession: 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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The Spirit of Entrepreneurial Legacy

Most wealth is created through entrepreneurship. When wealth creators think about the legacy they leave to future generations, the most common thing that comes to mind is the wealth itself, which is the product of entrepreneurial activity. But what of the entrepreneurial spirit itself?

Gates, Bezos, Musk and others received support from their families in the early stages of their ventures. Family members who are so inclined can more readily access seed capital to fund their ideas. However, it’s important to bear in mind that decision-making and risk-taking abilities are influenced by the socioeconomic background of the founder.

Some midlife entrepreneurs are forming businesses alongside a younger member of their family or with a co-founder decades younger. This is a wonderful intergenerational bridge and a great way to transmit those values as well as generational wisdom and experience.

Some rising gen family members are carrying forth her family’s legacy in their roles, and adding new dimensions, such as women’s empowerment in entrepreneurship. Another approach is to honour the family’s entrepreneurial legacy while also approaching their industry in a new way.

Of course, this is not for everyone. Just because someone comes from a family of entrepreneurs doesn’t necessarily make them one. Entrepreneurship has several ingredients including appetite for risk, grit and determination, and leadership.

Consider This: Does your family have a cultural memory of the entrepreneurial spirit that created its wealth? How is this expressed? Is entrepreneurship encouraged/developed in the rising generation?

Original articles: https://www.forbes.com/sites/forbesbusinesscouncil/2021/11/01/considering-generational-wealth-as-a-factor-for-entrepreneurs/, https://www.forbes.com/sites/bernhardschroeder/2021/06/26/advice-and-insights-for-millennial-entrepreneurs–from-a-millennial-entrepreneur/, https://www.forbes.com/sites/nextavenue/2021/01/17/how-to-launch-an-intergenerational-small-business-in-midlife/, https://www.forbes.com/sites/stephanieburns/2020/05/24/how-to-build-a-legacy-for-your-business/#608a408d1380, https://www.entrepreneur.com/article/338538, https://www.weforum.org/agenda/2019/08/family-businesses-lifeblood-of-the-middle-east/, https://www.smh.com.au/business/small-business/hyatt-heir-says-there-is-no-secret-sauce-when-it-comes-to-succession-planning-20190609-p51w1x.html, https://www.forbes.com/sites/jaredhecht/2019/01/15/how-the-great-recession-killed-the-entrepreneurial-spirit-of-millennials/#5ff01d1811ff, https://www.fastcompany.com/40513553/can-the-wave-of-boomer-entrepreneur-retirements-create-a-surge-of-worker-owned-businesses

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadership #entrepreneurship

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Fair or Equal?

A recent survey has found that only about a quarter of HNW parents plan to split their wealth equally amongst their children. Factors in the decision include their children having different approaches to money, estrangement, not wanting to support a child’s partner, and adjusting for previous significant financial support. There are also variations for the different care responsibilities of children, and the number of grandchildren.

There are two key lessons here: firstly, equal is not the same as fair. We like to think “equal” can be measured objectively, but even then, there are different ways to measure it – we can adjust for inflation because of the age gaps between children, or for many children each child has, or for previous gifts. So even “equal” has many interpretations. Seeking to be “fair” starts to bring in other more subjective factors like the specific needs of each child, or other sources of wealth they may have.

There is no right or wrong way to do this, and just as in parenting generally, the needs of our children may conflict and have us making trade-offs between them. It’s important to avoid viewing (and framing) matters as a zero-sum game – that one child ‘wins’ at the expense of another (who therefore ‘loses’).

The second lesson follows directly from this: having open discussions about wealth transfer helps children understand the ‘why’ and therefore achieve buy-in to the parents’ plan. Parental edicts can be just that until their children reach about teenage-hood. Beyond that, we can’t expect our children to simply accept what we want at face value. We need to consider their perspective. Communication is the foundation upon which any wealth transfer must be built.

Consider This: Does your family favour “equal” or “fair”? How does this work in practical terms? How do family members feel about it?

Further reading: https://www.wealthbriefing.com/html/article.php?id=193349#.YgR1UN9BxqZ, https://www.forbes.com/sites/forbesbooksauthors/2021/10/01/how-to-start-wealth-conversations-with-your-family/

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Family Business Transition Key Ingredients

“How to transition the family business to the next generation?” The answer depends on (a) who is asking (incumbent or rising generation) and (b) when (in the life-cycle of the business) they are asking. More often than not, the question is raised too late – when the incumbent generation is thinking of retirement, when there are already unstated expectations from both generations, and when there is already latent conflict.

The key ingredients to a successful family business transition are open communication between the generations working in the business and with other family stakeholders (current and future owners), a shared vision both for the future of the business and for the family itself, and a good governance structure.

Those things are the foundation required for succession. They come before identifying the right family member to occupy any particular management position.

Most families don’t set the foundations first, but that doesn’t mean all is lost. A process of vision alignment, improving communication and establishing strong governance can get things on track and reduce the risk of the latent conflict blowing up.

Consider This: Has your family business thought about succession? Have your imagined or visualised what succession looks like (for both the incumbent and rising generation)? Do both generations have a clear understanding of what will happen and when?

Original articles:

https://www.forbes.com/sites/forbescoachescouncil/2019/10/16/the-10th-commandment-of-family-business-succession-create-family-unity/, https://knowledge.insead.edu/family-business/the-key-to-making-succession-work-in-family-business-12546, https://www.propertycasualty360.com/2019/09/26/six-lessons-to-successfully-moving-a-family-business-to-the-next-generation/, https://www.asianjournal.com/life-style/lifestyle-columnists/family-unity-is-critical-for-business-continuity-part-2-of-2/, http://www.campdenfb.com/article/bringing-next-generation-family-business, https://www.forbes.com/sites/forbesbostoncouncil/2019/09/16/how-to-transition-a-family-business-to-the-next-generation/#2d9ab33c173d

[reprinted with permission]

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadership #entrepreneurship

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Priorities of Family Office

Family offices (FOs) come in so many shapes and sizes that the term ceases to have specific meaning. It’s simply a set of services provided for a family.

The origins of the FO often determine their primary focus: there are plenty of FOs that are simply vehicles for co-investment, or glorified reporting platforms.

Having a FO essentially means taking a professional approach to managing the affairs of the family. It’s interesting that 92% of FO leaders believe the most successful FOs have external hires in key leadership positions.

What your FO will include depends on with your goals, so it’s important to consider them before you set one up (or start searching for a suitable MFO), and then to review against goals regularly.

The stuff everyone seems to look for are financial and investment services, but it’s hard to truly differentiate in those services.

The most ‘value’ you will actually get from FO services are the things that are the hardest to measure: creating continuity, cohesion and engagement across families for generations, helping the family define its purpose, and promoting family unity, harmony and happiness.

The rising importance of sound formalized investment management governance goes hand-in-hand with enhanced family governance.

Consider This: Does your family office have clearly articulated goals (both financial and non-financial)? How often do you measure performance against those goals? How often do you review the goals to ensure they are relevant to the family as it evolves?

Original articles: https://www.forbes.com/sites/forbesfinancecouncil/2021/07/19/how-a-family-office-can-uncover-goals-with-a-family-meeting/?sh=7b59ff99c1f5, https://www.forbes.com/sites/forbesrealestatecouncil/2021/06/29/how-to-build-a-family-office/, https://www.forbes.com/sites/paulwestall/2021/06/08/family-office-to-keep-it-in-the-family-or-not-to-keep-it-in-the-family-that-is-the-question/?sh=1cfe05b53f70, https://www.finews.asia/services/advertorials/34441-trust-administration-fiduciary-services-estate-planning-wealth-structuring-family-office-family-governance-trusts, https://www.kiplinger.com/retirement/estate-planning/602492/do-i-need-a-family-office-a-guide-for-the-rich-and-not-so-famous, https://www.campdenfb.com/article/rising-importance-social-capital-family-offices, https://www.lexology.com/library/detail.aspx?g=8b8eae4c-061f-47c9-8399-c5468b03e742, https://www.forbes.com/sites/johnjennings/2020/08/04/how-to-decide-what-your-family-office-should-outsource/#20f2c87e221c

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Wealthy; Pride Guilt or Shame

Wealthy people are a soft target at the best of times. The media revels in sensational stories about wealthy families, especially when things go wrong. And if that wasn’t enough, neo-socialists in the US preach redistribution and question whether the world should have billionaires.

The emerging “wealth minimisation” movement encourages inheritors to redistribute “excess wealth” for the betterment of society. In some cases, this is about making up for the “harm” done by the wealth creation in the first place, which plays to feelings of guilt. There is some overlap with those who advocate destruction of statues that are no longer politically correct.

What does all this mean to someone born into a wealthy family? Forming a positive identity about their wealth can be a huge challenge. The “acquirer’s and inheritors dilemmas” can lead to feelings of shame.

Families need to get ahead of this, and have open discussions about their family’s wealth to encourage positive feelings. Family philanthropy and impact investment can be framed as ways to serve the wider community, rather than being an act of penance.

Consider This: At what age did you start talking to your children about the family wealth? Do they have the tools to be comfortable with their wealth in dealings with with friends, colleagues and advisors? Are they able to discuss concerns within the family?

Further reading: https://www.yesmagazine.org/issue/how-much-is-enough/2021/08/10/rich-redistribute-money, https://www.kiplinger.com/personal-finance/603205/ok-boomer-vs-avocado-toast-how-to-talk-money-across-generations, https://www.rgj.com/story/news/money/business/2021/02/18/8-important-money-conversations-have-your-family-brian-loy/6793796002/, https://www.forbes.com/sites/rainerzitelmann/2019/12/16/the-six-most-overrated-factors-in-getting-rich/#59a7f68e7f75, https://www.kiplinger.com/article/retirement/T064-C032-S014-wealth-shame-when-wealth-changes-your-life.html, https://www.nytimes.com/2019/08/02/your-money/parenting-wealth-discussions.html

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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[caracolemanau]

Succession & Strategic Renewal

Family business succession plans (or the ideas for them that are embedded in the minds of the incumbent generations) are often loaded with assumptions. For example: that the “presumed/nominated successor” wants to join the family business, that they are a like-for-like replacement of the incumbent, that the business should largely keep doing what it does for the foreseeable future.

Any robust business (or organisation such as the family that controls the business) should be prepared to challenge assumptions on a regular basis. Unfortunately, family business do this less than other businesses for several reasons. Firstly, the attributes of grit and self-belief so essential for any founder make it hard for them to adapt and change. Also, family members stay in executive roles in family businesses for much longer, which can lead to them becoming stale.

Rather than using terms like “succession” which can carry assumptions like the ones mentioned, it’s more helpful to think of “continuity” and to do so in the broadest terms (i.e. not just the business in its present form, but the family as a evolving system).

In many fields, education has shifted from training people for specific occupations to teaching people the skills to learn new skills, and to take on jobs that don’t yet exist. One of the most important skills the rising generation must learn is to be adaptable and open to regular strategic renewal, rather than to be carbon copies of their parents.

Consider This: what assumptions are implicit in your family’s (documented or not) succession plan? what skills is the rising generation in your family learning that will serve them in future leadership roles?

Original articles: https://www.campdenfb.com/article/generational-handover-family-business-it-better-appoint-internally-or-externally, https://www.entrepreneur.com/leadership/heres-why-your-children-should-not-inherit-your-business/446621, https://www.campdenfb.com/article/redefining-wealth-succession-comes-fore-family-businesses, https://business.inquirer.net/371556/succession-in-family-businesses-heres-the-perfect-solution-if-the-next-generation-doesnt-want-to-take-over, https://www.forbes.com/sites/mindydiamond/2021/01/27/choosing-a-successor-5-lessons-learned-in-our-own-succession-planning-process/?sh=2657968c15c8, https://www.inc.com/christine-lagorio-chafkin/carlson-family-business-gold-bond-stamps.html

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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[caracolemanau]

Speaking at Prestel & Partner Singapore

David will be speaking at Prestel & Partner’s Family Office Forum in Singapore on 16-17 May.

Topic: Pruning the Tree Many families that share significant assets may at some point consider whether to continue managing their wealth, business, or philanthropy together or going their separate ways. These questions can arise when a conflict or crisis hits, and they are forced to make decisions.

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[caracolemanau]

How Much is Enough?

The question “how much is enough?” and its corollary “how much should I give my children?” is one many families ask but very few consider how to go about answering. I’ve gone as far as modelling decades of projected expenditure for a family, and the returns needed to provide for it. To be sure, such a model makes many assumptions, but it’s a starting point and one that does roughly put a family’s financial assets and liabilities in perspective.

Economist Ben Graham, known as the father of value investing, was an inspiration for Buffett and Munger. But while the latter continued investing as a full-time occupation well into old age, Graham retired to pursue his passions: literature, and the arts. When asked by a journalist why he quit investing, he replied: “Why should I try to get any richer?”

Graham reached an understanding few people do. He had enough money, but he didn’t have enough time. So he refuse to invest more of his most valuable asset to create ‘just’ more money. For Graham, investment was a means, not an end – an occupation but not a life-long passion. Graham knew the answer to “how much is enough?”

Consider This: Do you know how much is enough for you and your family? How much do your children think is enough? What is the best use of your most precious resource – your time?

Further reading:

https://www.forbes.com/sites/forbesfinancecouncil/2022/08/25/purposeful-wealth-transfer-planning/?sh=3f57240d6588, https://www.forbes.com/sites/forbesbooksauthors/2021/08/25/your-legacy-how-to-create-a-multigenerational-estate-plan/?sh=344df5943e27, https://www.bizjournals.com/charlotte/news/2019/09/16/planning-for-the-business-transition-keeps-owners.html, https://www.fool.com/retirement/2019/07/28/15-downsides-to-being-rich.aspx

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Are you a Wealth Steward

Wealthy people broadly come in two flavours – wealth creators and wealth inheritors – and each have very different characteristics.

Attitudes to money and wealth are usually established as we grow up and largely remain with us for the duration of our lives. Creators often grow up without a lot of money and therefore have different attitudes to spending and the value of a dollar, are uncomfortable talking about it with their children, and often look at the wealth they created through an “ownership” rather than a “stewardship” lens. If they have created the wealth through starting a business, they also have a set of beliefs (resilience, confidence, sense of invincibility) common among business founders and entrepreneurs.

Inheritors view the world very differently, sometimes feeling conflicted or guilty for the “sin” of not having to earn it like most others. Depending on their upbringing, they may not have a sense of the value or spending power of money. They are often challenged to develop their own identity – not wanting to be known as “the child of …”, and needing to make their own mark. Their mark may often be in the non-financial arena (because their parents already made it financially).

In order to effectively transmit or transition the wealth to the next generation, both creators and inheritors need to understand their difference, and learn new skills (raising children with healthy money attitudes, adopting a “stewardship” approach, finding meaning beyond money).

Consider This: Have you considered how your attitudes to wealth might differ compared with your parents or children? Have you had family discussions about these differences and what they mean to each of you?

Original articles: https://edition.cnn.com/2019/07/23/success/financial-enabling/index.htm, https://www.fa-mag.com/news/russ-prince–among-super-rich–self-made-wealthy-and-inheritors-think-differently-45566.htm, https://www.fastcompany.com/90372281/5-lies-youve-been-told-about-generational-wealth, https://www.forbes.com/sites/forbesbooksauthors/2019/08/06/better-together-stewarding-wealth-and-wisdom-to-prevent-affluenza/#2e9f03807a58

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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[caracolemanau]

The Purpose in Family Business

Family business has positives and negatives – our aim should be leverage the positives and seek to mitigate the negatives. One important distinguishing feature of family businesses is that they can embody a sense of purpose.

The original purpose of the business founder may have been wealth creation. However, as the business evolves and additional family members join, it’s an opportunity for the family as a group to discuss and articulate their collective values and purpose, and then make them an essential part of the family business.

Purpose and profit are not mutually exclusive; purpose must drive profitability. It need not be political either. While early thinking was that purpose of the corporation is to “maximise shareholder value”, more recently this has broadened into thinking about “stakeholders” which includes employees and society at large.

This can be challenging for many corporations. But a business that is owned by a small group who are connected by familial ties are in a better position to both articulate their purpose, and take a long-term view in terms of how they manage and operate the business. That way, the business is just one piece of the family’s “social capital” that helps it achieve the broader family mission.

Consider This: To what extent is your family business “values driven”? Has your family discussed and considered your shared purpose? and how that translates into how you use the family capital (both operating and non-operating assets)?

Original articles: https://www.campdenfb.com/article/nine-principles-purpose-why-doing-good-good-family-business, https://www.entrepreneur.com/article/364853, https://www.forbes.com/sites/dennisjaffe/2021/02/24/from-shareholder-primacy-to-stakeholder-primacy-how-family-businesses-lead-the-way/?sh=c477f2321ede, https://www.rte.ie/brainstorm/2020/0623/1149060-family-business-ireland-coronavirus/, https://www.industryweek.com/leadership/article/21119925/does-your-family-business-have-what-it-takes-to-endure

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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[caracolemanau]

The 3-Generation-Trope

It’s a most quoted statistic – “just 13% of family businesses survive the third generation” – and it has finally been challenged. It comes from a single study of US manufacturing companies in the 1980s, and for some reason it has stuck and become almost axiomatic.

But it is deeply flawed. Most importantly, it never compared family businesses to non-family businesses (family businesses on average do last longer), and it also never considered the reasons why those businesses did not continue. Besides, not all businesses are meant to last that long – among other things it’s a function of their industry and their ability to do regular strategic renewal (and for some family business, the latter is a huge challenge).

The other issue is the conflation of this trope with the well-known “shirtsleeves to shirtsleeves” proverb. Enduring family business is not the same as enduring family wealth. Plenty of families have been able to parlay an operating business (which is usually how the wealth was created) into a healthy mix of diversified assets that can support the family for decades.

So forget blanket generalisations about family businesses and focus on their unique attributes that are a mix of strengths and weaknesses.

And view the proverb as a statement about the culture of wealth and how it affects those who created it, those born into it, and those well removed from its creation.

Consider This: How do attitudes to wealth in your family differ between generations? How long do you think your business (or any business) ought to last?

Further reading: https://hbr.org/2021/07/do-most-family-businesses-really-fail-by-the-third-generation, https://www.thinkadvisor.com/2021/05/25/what-wealth-really-means-to-4-different-generations/, https://www.forbes.com/sites/dennisjaffe/2021/04/28/how-family-business-leaders-make-room-for-new-generations-the-right-time-and-the-right-way/?sh=45833f283933, https://www.kiplinger.com/retirement/estate-planning/601798/how-to-help-your-family-wealth-last-for-generations, https://thriveglobal.com/stories/what-successful-family-businesses-do-to-survive-beyond-the-three-generation-curse/, 

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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The future is female

Research has shown that in HNW families, daughters were rarely encouraged nor received support to pursue entrepreneurship education. Entrepreneurial families often prepare their daughters and sons differently for their careers. Cultural factors and their associated gender biases may result in the problem being far more pronounced.

Things are changing. Some 82 per cent of women from wealthy families expect to inherit substantial wealth over the next 20 years, but 41 per cent of women are currently not involved in family financial decision making. They need to start preparing themselves. The role of women within wealthy families is also shifting, in part due to the rising generation having a less traditional outlook on life. Family businesses are able to play a critical role in helping break glass ceilings that perpetuate gender roles.

There are changes in the wind on the investment and advisor spaces too. Millennials and women value investment principles that have a positive impact on challenging issues. HNW women are often less confident about making family financial decisions, prompting the need for investment relationship dynamics to change. To remain competitive, advisors must consider a truly consultative approach; female advisors are well-suited for the job. Women – more of whom will control significant wealth over the next 10 years – prefer to work with female advisors.

Consider This: Does your family treat male & female children differently? Are they given the same choices & opportunities within the family enterprise? Are there cultural or historical gender biases in your family? Is this a source of intergenerational conflict?

Original articles: https://www.eurekalert.org/pub_releases/2021-06/uoo-gbi060721.php, https://www.greenqueen.com.hk/women-prefer-to-work-with-female-advisors-now-is-the-moment-for-esg-customisation/, https://www.forbesindia.com/article/bharatiya-vidya-bhavan039s-spjimr/addressing-the-novel-fault-lines-in-family-business/67115/1, https://www.jdsupra.com/legalnews/cracking-the-glass-ceiling-empowering-6627462/, https://www.campdenfb.com/article/how-raise-your-succession-game-next-gens-family-business, https://www.bnamericas.com/en/news/almost-25-of-family-businesses-have-a-female-presence-on-their-boards, https://www.wealthadviser.co/2020/12/15/293551/growing-financial-power-next-generation-wealthy-women-prompting-change-within

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Is communication important?

Research has shown that 60 per cent of failed intergenerational family wealth transition are due to problems with trust or communication. Communication isn’t important in families. It is everything. If a family cannot communicate, it cannot function as a group. It’s that simple.

What does poor communication look like? An absence or lack of communication (e.g. “it’s none of their business”, “they don’t need to know”, “we know what is best for them”) is patronising, infantilising, and leads to a loss of trust. There is often hesitance to discuss family wealth or estate planning with family members because of the conflict it might cause. But not discussing simply leaves the latent conflict to fester. Some cultures have a strong concept of strictly obeying the mature generation – this has the potential to create interpersonal and internal communication barriers. Negative, emotional, distracting and damaging interactions among family members can lead to the “Family Drama Vortex”.

What does good communication look like? Creating a space where family members can ask and answer difficult questions like “What is our wealth for?”, “What is our family’s purpose?”, “What is our true value?”.  To communicate effectively, we need to listen. This may sound like a platitude, but not everyone can do it, especially when talking to someone we think we know well, such as our children.

A history of poor communication in a family means you have to work extra hard to regain trust and learn now to communicate well. To address toxic situations like the Family Drama Vortex, we must recognize that the drama and dysfunction are rooted in underdeveloped communication and interpersonal skills.

Because communication is difficult, especially across generations and borders, it can help to have external guidance and facilitation. That is best coming from a specialist, and not necessarily the ‘default’ choice of lawyers and accountants.

Consider This: How would you rate your own family’s ability to communicate? Are there some issues that “we don’t discuss” or that are shut down whenever they are raised?

Further reading: https://sg.asiatatler.com/life/rise-and-fall-of-family-wealth-how-to-achieve-financial-longevity, https://www.coutts.com/insight-articles/news/2021/investments/speech-therapy–our-guide-to-talking-wealth-with-your-family.html, https://www.wealthadviser.co/2020/12/04/293097/asias-wealth-management-industry-needs-ready-itself-great-wealth-transfer, https://onwallstreet.financial-planning.com/opinion/how-to-keep-multigenerational-wealth-in-the-family, https://e.vnexpress.net/news/business/generation-gap-communication-a-concern-for-family-concerns-4106858.html, https://www.ft.com/content/825947e6-bf2d-11e9-9381-78bab8a70848, https://www.forbes.com/sites/forbescoachescouncil/2019/04/26/is-your-family-business-in-turmoil-the-solution-could-be-communication/#792eb2e525ec, https://www.clevelandjewishnews.com/features/special_sections/legal_affairs/succession-planning-big-part-of-family-businesses/article_6cd9a79e-45b6-11e9-ab20-ff24b4e7b8fd.html, https://www.wealthmanagement.com/high-net-worth/hardest-part-planning-hnw-families-hnw-families, https://www.marketwatch.com/story/breaking-the-taboo-how-to-prepare-your-heirs-for-your-death-2019-03-07

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Fostering Entrepreneurship

Not every entrepreneurship story is “rags to riches”.

Many high-flying entrepreneurs came from from upper-middle-class families. While they don’t owe their success entirely to mom and dad, without their parents’ help, be it financial or otherwise, they may have never gotten their ventures off the ground. Research has shown that 75% of entrepreneurs from 48 countries said that their family was involved in starting their businesses.

Family money and background plays a critical role when it comes to starting up a business. In some cases, it can provide a financial safety net in the case of failure. As much as economically, the family environment that has a big impact on the startup entrepreneur.

Entrepreneurial behaviour is driven by families, not just family businesses. Families can act entrepreneurially together to create growth, and foster entrepreneurship and positive impact in society.

This doesn’t happen by default. While the entrepreneurial spirit of the founder may be passed along to their children, the spirit and drive may dissipate in subsequent generations. Passing on the creativity and innovation of the founding generation across new generations is a challenge of the highest order

In some families, the elders were able to build intergenerational bridges to their grandchildren by mentoring them as young entrepreneurs. The value created in doing that is far more than financial.

Consider This: Does your family ‘remember’ the entrepreneurship of the founder(s)? What do you do to foster the continuity of the entrepreneurial spirit? (e.g. share stories? invest in entrepreneurial risk asset class? mentor rising generation entrepreneurs?)

Original articles: https://www.forbes.com/sites/nextavenue/2021/04/22/im-turning-my-young-grandsons-into-entrepreneurs/?sh=37814eb51c0c, https://www.theguardian.com/business/2021/jan/31/small-business-entrepreneurs-success-parents, https://entrepreneurship.babson.edu/family-entrepreneurship-family-business/, https://www.entrepreneur.com/article/357381, https://www.forbes.com/sites/dennisjaffe/2020/05/05/preparing-for-deep-change-in-a-family-business/#7efb375a7942, https://www.fa-mag.com/news/russ-prince–the-downsides-of-being-a-rich-entrepreneur-55401.html

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Family Business blood non-blood

Unless your family business is a “mom & pop corner store” (which is more akin to owning a job than owning a business anyway), you will need to have a mix of ‘blood’ and ‘non-blood’ people working in it.

As any business matures and grows, there becomes a need for professionalisation and systemisation. While owners may put a high value on the people in the business (especially family), the true value created in any business is through systems. A business that cannot function as well without family members is not worth very much to a potential buyer.

Family or non-family CEO? That is a huge question for many family businesses, especially as the founder generation seeks to retire. Even if there is a family member who is willing and able, is that what is best for the business itself?

For a non-family CEO to succeed in a family firm, they must understand the values of the family. The family also needs to be able to articulate those values to the CEO, and monitor their adherence in some way (which is by no means simple).

The challenge for any incoming CEO of a family business is to maintain and respect the ingrained culture, and at the same time drive the business forward. It is important to create an atmosphere of inclusion and purpose, and ensure people outside of the family are also seen and heard.

In larger business with many family members involved, possibly from multiple branches of the family and multiple generations, the kinship tensions are multiplied to a great degree.

When family differences get in the way, it doesn’t necessarily make you a bad employee, or a bad child, sibling, or cousin. It’s important for family members to retain their own identity and not become overly subsumed within the family enterprise and its mission.

Having people outside the family circle who can provide objective feedback – whether as advisors to the board or mentors to family employees – can be very helpful.

Consider This: Does your family business have policies around how family members qualify for a position and their performance measured? Do you have a board with externals and/or mentors available so family members can have a forum to discuss issues of concern?

Further reading: https://knowledge.insead.edu/family-business/why-family-ceos-outperform-their-non-family-predecessors-16601, https://www.institutionalinvestor.com/article/b1rnywtxhyr5kq/How-Family-Offices-Can-Strengthen-Next-Gen-Relationships, https://hub.jhu.edu/2021/04/27/dynamics-of-family-owned-businesses-phillip-phan/, https://www.smartbrief.com/original/2021/04/expanding-family-business-while-preserving-its-culture, https://www.forbes.com/sites/chriswestfall/2021/03/29/leaving-the-family-business-how-to-know-when-its-time-to-go/?sh=569aa4571e7e, https://www.thomasnet.com/insights/how-to-prepare-to-lead-your-multi-generational-family-business/, https://www.campdenfb.com/article/transfer-family-business-power-next-generation-effectively, https://www.dailyherald.com/business/20200716/6-tips-for-running-a-successful-family-business

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

#familyoffice #wealthmanagement #conflictresolution #strategicmanagement  #nextgensuccession #intergenerationalwealth #governance #leadershipdevelopment #entrepreneurship

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Family Business Owners and Managers

Family is (hopefully) for life. If the family business starts to interfere negatively with the relationships in the family, then there is imbalance. Family businesses are challenging because of the overlapping of family, business and ownership (known as the “three circle model”). Researchers from Harvard have extended this into four “rooms” by adding in the board room.

Because family members wear multiple hats, are in multiple circles, or sit in multiple rooms, they need an awareness of how those roles influence the decisions they need to make. Father or boss? Director or cousin? Manager or owner?

It’s most important to be able to have open and trusting conversations about needs of the business and expectations of the family. Those are underpinned by the core values and the common values across both personal and professional life. Each successive generation should ask why they are in the business. Successful family businesses foster a sense of stewardship among all members of the family (no matter what their specific roles).

Making multiple roles work requires setting boundaries between work time and family space. Conflict will happen, so rather than “fake harmony” (see previous article), the ability to communicate, deal with issues, and have “constructive conflict” is essential.

Some kind of a conscious separation of ownership and management is very helpful. Avoid having “too many chefs in the kitchen”. Family members who work in the business should be recruited and evaluated with the same criteria as anyone else. And “don’t hire whom you can’t fire”.

Consider This: Do family members involved in your family business understand the different hats they wear? Have you ever had to performance manage a family member employee? Do you have the governance structures to deal with conflict?

Original articles: https://www.forbes.com/sites/forbescoachescouncil/2021/04/22/how-to-balance-a-family-business-with-family-values-13-tips/?sh=1e3380cc11c7, https://www.country-guide.ca/guide-life/family-business-handbook-how-to-build-and-sustain-a-successful-enduring-enterprise/, https://www.businessobserverfl.com/article/five-steps-every-family-business-should-take-for-a-successful-succession, https://economictimes.indiatimes.com/news/company/corporate-trends/how-can-family-businesses-keep-themselves-from-splitting-by-separating-ownership-and-management/articleshow/81427776.cms, https://www.jdsupra.com/legalnews/defining-and-documenting-roles-in-a-1032865/

Actionable Generational Wealth Succession 

For more in-depth, thought-provoking discussion points and further commentary on family and business conflict resolution, access my Familosophy newsletter archives by signing into our newsletter https://DavidWerdiger.com. We will send you the archive links from there.

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