The headlines are everywhere – a high percentage of family businesses have no formal succession plan – and then the story launches in to 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

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The post Turning Succession Upside Down appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/upside-down/

“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.

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The post Family Business Transition Key Ingredients appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/key-ingredients-transition-2/

“How do I transfer wealth to my children without spoiling them?” That would be the most common question I am asked, and for most people, stands at the heart of the challenge of wealth transition.

But often this question masks what parents really want, e.g. “how do I get my children to do/be what I want?” That question is not about wealth, but about parental power and control. And when parents say “I don’t want to rule from the grave”, often they actually do, but just don’t want to make it quite so obvious.

There are no simple answers, nor even a set of tactics that can be applied. Rather, these questions are the starting point of a family relationship journey, which can lead to a stronger and more robust family that understands its purpose and shared values, and is well governed.

As much as wealth creators and incumbent controllers of family wealth want to control the future of their family, an important part of the journey is learning how to let go, which is often needed to help your children to become everything they can be.

Consider This: Do you (incumbent generation) have a clear understanding of your family’s (wealth) goals? Is there consensus on this amongst those now in control of the wealth? What steps have you taken to (a) find out what the rising generation want, and (b) communicate what you want to them?

Original articles: https://www.forbes.com/sites/rochellemclarke/2019/11/22/top-holiday-conversations-for-families-in-business/#6f82c4a52486, 

https://www.forbes.com/sites/forbesfinancecouncil/2019/11/25/keep-thanksgiving-about-thanksgiving-by-connecting-wealth-and-purpose/#642db627799c, 

https://www.thinkadvisor.com/2019/10/02/how-a-ubs-exec-gets-families-to-open-up-about-wealth-transfer/, 

https://www.nytimes.com/2019/11/06/your-money/tips-to-ease-family-inheritance-tensions.html, 

https://www.theatlantic.com/family/archive/2019/10/big-inheritances-how-much-to-leave/600703/, 

https://www.wsj.com/articles/trying-to-control-your-heirs-behavior-from-the-grave-often-backfires-11571623620

Actionable Generational Wealth Succession

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The post Letting Go – Transition Planning appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/transition-planning/

Women are at least 50% of the population, yet historically have been poorly represented in the wealth industry – as custodians and managers of family wealth, in family business, and as advisors. But that is changing on all fronts.

The percentage of wealth in the world held by women is steadily growing – as a result of inheritance (females generally outlive their husbands), divorce and entrepreneurship. In the Middle East, 20-40% of wealth is held by or for women. In Asia, there has been a surge of wealth creation by female entrepreneurs. A new female-led multi family office in San Francisco is taking a different approach to wealth management by incorporating socially-minded investment and personal branding.

Males and females have different investment strategies: for women wealth is a means to an end, while many men see the accumulation of wealth as a goal unto itself. We raise girls to be savers and boys to be risk-takers. Finally, there is significant talent within the female members of wealth families which is waiting to be unlocked, and potentially wasted if not given the right opportunities.

Consider This: What roles do female members have in your family (business, wealth management, philanthropy)? What if anything is holding them back? Are there cultural barriers in your family to their advancement? Are they sufficiently educated to be effective wealth custodians?

Original articles: https://www.worth.com/a-new-kind-of-family-office/, https://international-adviser.com/women-changing-the-wealth-landscape-in-the-middle-east/, https://www.ft.com/content/9bb4d056-d928-11e9-9c26-419d783e10e8

Actionable Generational Wealth Succession

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Family philanthropy can be a very effective way to bridge generations and engage the rising generation. However, according to a recent poll from Key Private Bank, there are significant differences between parents and children on matters of giving.

Most parents are not discussing philanthropy with their children, let alone agreeing on causes. 82% of advisors say very few clients involve the next generation in family philanthropy. Faith-based causes represent 73% of interest from parents, but only 3% from children. On the flip side, ESG causes are 3% from parents, and 59% from children.

It is self-evident that a lack of communication would only feed a further divergence of interests between generations. With increasing life expectancies and therefore a greater overlap between parents, children, and grandchildren, there are two likely outcomes: find common ground across generations, or fall into conflict.
Consider This: Who makes the philanthropy decisions in your family? To what extent are younger family members informed about choices or engaged in the decision making process?

Original articles: https://www.forbes.com/sites/francoisbotha/2020/07/29/how-the-worlds-next-generation-of-ultra-wealthy-are-redefining-what-it-means-to-give-back/#112919c85aad, https://www.prnewswire.com/news-releases/lack-of-family-conversations-about-philanthropy-fuels-differences-of-opinion-finds-key-private-bank-poll-300920068.html

Actionable Generational Wealth Succession

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The post Philanthropy decision-makers in your family appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/philanthropy-decisions/

The conflicts that take place within wealthy families are often on display through the media as a result of their public profiles (and because people want to read about them). For outsiders, they can be hard to understand: What are they fighting about? Surely there is enough there for everyone?

But in fact, wealthy families have all the same family issues as others: sibling rivalries, favouritism, jealousy, power struggles, and the search for identity. The only difference is that in wealthy families, the conflicts can be played out with much bigger stakes.

Throwing money at a family problem doesn’t make it go away – the best it can achieve is to “kick the can down the road”, or defer it. It’s rarely about the money, which cannot – in and of itself – make people happy. Solve the underlying issues, and the money component suddenly becomes easier.

Advising a family business, or developing a wealth/business succession plan with a family is part business advisory, and part therapy (often more of the latter)

Consider This: How many arguments within your family look like they are about money, but are really about deeper issues?

Original articles: https://www.townandcountrymag.com/society/money-and-power/a27191152/rupert-murdoch-family-therapist-dynasties/, http://www.campdenfb.com/article/keep-out-ring, https://www.theatlantic.com/family/archive/2018/12/rich-people-happy-money/577231/

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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The post Conflict resolution in family wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/conflict-resolution-family-wealth/

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

Actionable Generational Wealth Succession

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The post Are you a wealth steward? appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/wealth-steward/

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.

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The post Family Office Priorities appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/fo-priorities/

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.

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The post Wealth Guilt & Shame appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/wealth-guilt/

Kenny Rogers sang of the importance of knowing “when to hold ’em, and when to fold ’em”. Any succession plan worth its salt isn’t just a plan of who will succeed whom in running the business. It also needs a “Plan B” for the scenarios where the chosen successor is unwilling or unable, where there is no successor, or where a generational transition of the business might lead to serious conflict.

Some business founders/owners enjoy the early stages of creating and growing a business, but then tire as the management becomes more bureaucratic by necessity. Or worse, the founder is the one who does the “exciting” activities, and then passes it to the next generation who inherit a mature business with little scope for innovation.

Another possible obstacle when transitioning is the family dynamic of the rising generation: will they (collectively) be able to govern/manage the business without conflict? Will they end up being unwilling partners joined at the hip and with most of their wealth tied up in a single asset? Most families will choose to be financially separate and on good terms, than sharing assets and fighting over them.

Consider This: In your succession plan, have you done “scenario planning” to consider the ways thing might not go as you plan or aspire? To what extent has the rising generation’s own aspirations been taken into account at the planning stage?

Original articles: https://www.investmentnews.com/article/20190528/FREE/190529949/sometimes-a-sale-is-the-best-succession-plan, https://www.forbes.com/sites/forbescoachescouncil/2019/07/29/the-fifth-commandment-of-family-business-succession-know-whether-to-sell-or-transfer/#62382dc52307

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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The post Transition; hold or fold? appeared first on David Werdiger.

source https://davidwerdiger.com/2021/09/transition-hold-or-fold/