Family Business Governance

January 16, 2023 davidwerdigertransitionsLeave a comment

In times of chaos, economic uncertainty, and the crushing burden to lead the family’s assets out of the fire, the need for governance grows even stronger.

Too many families consider family governance as a side dish – a pesky bug that wants to take away all the attention and resources from the main priorities which are revenues and operations. There is also an emotional side to effective family governance which is often overlooked by the first generation.

The principles of governance for families are very simple: How are we going to make decisions together? How are we going to communicate? How are we going to solve problems together?

While the principles are simple, implementation can be challenging. Getting a clear mandate from the top is essential, as well as dealing with stakeholders who resist change. Having external help is essential.

Some families chooses either business first or family first. One is not better than the other, but you need to be honest about the choice and develop family governance based on your choice.

In order to stay focussed in your governance journey, remember that it’s all about relationship, communication and understanding between the family, the family businesses and the shareholders.

Consider This: Has your family’s governance (or lack of it) been a factor through COVID? (How well) does your family communicate? Is there the capacity for group decision-making?

Original articles: https://hubbis.com/article/revisiting-family-governance, http://www.mondaq.com/jersey/x/873496/wealth+management/Avoiding+rags+to+riches+in+three+generations+family+governance+in+the+Middle+East,
https://www.forbes.com/sites/forbesbusinesscouncil/2020/06/16/use-good-governance-to-steer-a-rudderless-ship/#4abdd14a1ffd, https://www.forbes.com/sites/forbesbusinesscouncil/2020/08/04/eight-concepts-to-help-plan-and-manage-your-family-business/#5fcaf80440ce, https://www.panaynews.net/family-business-governance-important-then-and-now/ https://business.inquirer.net/308365/time-for-that-governance-talk

[reprinted with permission] full article repost

Actionable Generational Wealth Succession:

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

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Rising Gen Philanthropic Social Wellbeing

January 12, 2023 davidwerdigertransitionsLeave a comment

There are very different generational attitudes to philanthropy in families. While previous generations saw philanthropy as “giving money to non-profits”, the rising generation of wealthy individuals has broadened and redefined the term, considering it to be “the action of transforming others’ social well-being through generosity”.

The rising generation is more engaged and involved in philanthropic endeavors, and do so at earlier ages than their predecessors. They’re also motivated by the value propositions behind sustainable and impact investments, and often drive such initiatives with their own or family businesses. Those of inherited wealth can experience a sense of unease or outright guilt fueled by societal judgment over their wealth, which may drive giving priorities.

A family office can take a holistic approach to the family’s financial and personal life. This can mean more time to spend with family or commit to philanthropic interests, which can also bring the family closer.

Generational families that endure for 100+ years share a number of factors. Near the top of that list is a shared commitment to community, service and philanthropy.

Consider This: Which generations in your family are involved in philanthropy decisions? Do you have a philanthropy strategy that sets priorities and the process for allocation? Do key family stakeholders across multiple generations know the answer to the question “why our family gives”?

Original articles:https://www.denverpost.com/2019/10/13/on-philanthropy-bruce-deboskey-the-secret-sauce-of-thriving-100-year-families/, https://www.forbes.com/sites/francoisbotha/2020/01/23/why-do-families-give-the-5-spheres-and-motivations-around-philanthropy/#5b02a5b07dc0, https://www.forbes.com/sites/whittiertrust/2020/04/01/a-family-office-can-give-you-back-your-personal-time/#1b1726ea20ee, https://www.marketcurrentswealthnet.com/interviews/family-philanthropy-a-new-book-qa-with-mitzi-perdue/, 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/#5eab0d8d5aad

[reprinted with permission]

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2023/01/philanthropic-wellbeing/

Pandemic Influence on Succession Planning

January 10, 2023 davidwerdigertransitionsLeave a comment

Abraham Lincoln famously said: “Don’t swap horses in the middle of the stream”. Is a global pandemic the best time to change leaders? Or is it better to avoid dramatic changes during uncertain times?

While we’d like to be well prepared, and knowing that succession planning is a process rather than an event, families may find themselves needing to accelerate the process at these times. Unplanned transitions don’t have to inevitably end in disaster, but when they happen, they do rely on a concerted effort by other family members and stakeholders.

The current business conditions necessitates that family businesses take stock, review and stress-test existing structures. While it is never easy to have discussions around death and succession, it is essential to avoid conflict in the unfortunate event of a loss within a family no matter what the external situation. The lockdown has been a catalyst to prompt families to reflect on succession planning in a wider sense.

A true succession plan is about fostering open communications and getting your family on the same page about its values and goals of both the incumbent and rising generation. A good succession plan leaves a positive legacy and unites the family around common goals and values.

Consider This: Has the pandemic brought forward discussions about succession in your family? Has it uncovered existing stresses in the succession process (or lack of)? Have you set realistic goals about the timeframe for an effective succession?

Original articles: https://hbr.org/2020/04/should-a-crisis-change-your-ceo-succession-plan, https://www.finews.asia/services/advertorials/31663-butterfield-singapore-brian-balleine-covid-19-corona-wealth-planning-succession-family-study, https://hbr.org/2020/05/steer-your-family-businesses-through-an-unplanned-transition, https://www.thenational.ae/business/money/why-now-is-the-time-for-gcc-family-businesses-to-review-succession-planning-1.1027184, https://www.bloombergquint.com/business/world-s-wealthy-are-spending-the-pandemic-weighing-succession, https://www.kiplinger.com/personal-finance/how-to-save-money/family-savings/601068/wealthy-families-need-more-than-a, https://cnaluxury.channelnewsasia.com/experiences/succession-estate-planning-asia-wealthy-families-12929668

[reprinted with permission]

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2023/01/pandemic-influence-succession-planning/

COVID Resilience

January 7, 2023 davidwerdigertransitionsLeave a comment

As we end the third year of this pandemic, it’s worth reflecting on the theme of resilience.

By retaining their long-term view, family businesses have been able to not just weather the storm but also grow and thrive. Their resilience comes from other factors as well: the entrepreneurial spirit of innovating in times of crisis, and the emotional and social bonds that exist both within the family and within the wider family business group and its stakeholders.

These strengths of family enterprises are built on a foundation of shared values and good governance. As it becomes clear that we are not yet ‘over’ COVID, it’s important for families to remain vigilant and keep these foundations strong.

While they differ significantly in terms of scale and scope, it’s interesting to contrast the response of family enterprises with that of countries. For every new COVID variant, existing policies are quickly overturned and new policy is developed on the fly. Many countries have also seen an increase in social unrest and polarisation in response to government decisions. In the absence of strong shared national vision, this is inevitable in times of such stress.

Consider This: Has your family formally reflected on the impacts of COVID? In what ways has COVID shown up resilience (or lack of) within your family?

Further reading: https://www.vaughantoday.ca/a-report-reveals-that-family-businesses-have-weathered-the-epidemic-better/, http://www.campdenfb.com/article/family-business-valuable-model-resilience-extraordinary-times, https://www.worth.com/family-owned-businesses-thrive-crisis-covid-deloitte-private/, https://www.scotsman.com/business/how-family-businesses-can-deal-effect-coronavirus-2896231, https://www.forbes.com/sites/robertglazer/2020/04/01/covid-19-will-permanently-change-the-way-every-generation-lives-h eres-how/#1844e046493b

This was also published at Family Business Australia.

Actionable Generational Wealth Succession

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2023/01/covid-resilience-2/

Virtual Family Office Considerations

January 4, 2023 davidwerdigertransitionsLeave a comment

A family office is usually structured around the individual needs and preferences of the family involved, and an increase in private wealth is fostering the creation of more and more single family offices (SFOs).

The space is shifting rapidly, and with it comes the changing face of the family office and new definitions of what this means. One pervasive mistake is not developing a deep understanding of the goals, objectives and agendas of the wealthy family. Some multi family offices (MFOs) and even SFOs are using a cookie-cutter approach, which works against the whole idea of a family office.

Rather, family office purpose, mission and vision statements should be crafted according to the family’s service needs. These can act as the foundation for strategic decision making, and link to measurable results.

Virtual FOs are rapidly proving to be a superior alternative to traditional MFOs as they offer a greater level of flexibility. In addition, private MFOs are forming, which enable groups of families to pool their resources and leverage co-investment opportunities.

Consider This: Have you considered whether/how a family office could be beneficial to your family? If you already have one, how do you review its performance and whether it is meeting the needs of the family? How often do you review the arrangement, with consideration of how the family’s needs evolve over time?

Original articles:

https://www.forbes.com/sites/francoisbotha/2020/01/28/could-now-be-the-right-time-for-the-virtual-family-office-how-banks-can-support/#7ee89aa65438, https://www.fa-mag.com/news/family-office-2020-going-strong-53779.html, https://www.forbes.com/sites/francoisbotha/2020/02/12/emerging-forms-of-the-family-office/#1b28b6ba2fc4, https://www.spearswms.com/rise-of-the-virtual-family-office/, https://www.fa-mag.com/news/russ-prince–a-critical-mistake-to-avoid-when-setting-up-a-single-family-office-54630.html, https://www.bmmagazine.co.uk/business/bobby-gill-on-family-offices-how-to-protect-wealth-for-successive-generations/, https://www.forbes.com/sites/francoisbotha/2020/03/09/considering-a-family-office-how-to-choose-a-fitting-form/#4ca91a5215a5, https://www.forbes.com/sites/francoisbotha/2020/07/03/6-best-practices-for-single-family-offices/#65d94e26336f

[reprinted with permission]

Actionable Generational Wealth Succession:

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

The post Virtual Family Office Considerations appeared first on David Werdiger.

source https://davidwerdiger.com/2023/01/virtual-family-office-considerations/

Family Office Advisor Succession

December 29, 2022 davidwerdigertransitionsLeave a comment

Financial advisors are an ‘old’ bunch – with an average age in their mid-50s and a big bulge of advisors now in their 60s and 70s. If that didn’t already pose a risk to their clients, the COVID-induced recession means that many of them will leave sooner than expected – either by choice or otherwise – and may choose to retire completely in the current economic environment.

Merrill Lynch, perhaps in response to both issues, is seeking to shift the age balance of its advisor ranks. Certainly larger wealth advisory firms are in a better position to develop succession strategies for their advisors than smaller firms and sole practitioners. But that doesn’t mean they are doing so, or that they are doing so well.

Some 37% of financial advisors in the US are expected to leave this decade, and they represent about 39% of wealth managed by US advisors servicing the retail market.

For families, this is a mix of key person and supply chain risk, and needs to be on the agenda.

Consider This: What are the key advisor relationships for your family? What is the plan if one of them leaves, retires, or falls ill with COVID? Has your family considered these risks for all categories of advisors?

Original articles: https://www.investmentnews.com/merrill-lynch-next-generation-advisers-succession-planning-193904, https://www.wealthprofessional.ca/news/industry-news/coronavirus-crisis-puts-advisor-succession-planning-in-focus/329694, https://www.cnbc.com/2019/10/29/financial-advisors-need-succession-plan-to-benefit-clients-and-firm.html

Actionable Generational Wealth Succession:

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

The post Family Office Advisor Succession appeared first on David Werdiger.

source https://davidwerdiger.com/2022/12/family-advisor-succession/

Family business crisis response

December 28, 2022 davidwerdigertransitionsLeave a comment

During a crisis, having a family business can be a double-edged sword. On one hand, there are often family elders with experience in overcoming previous recessions, support from the family unit, and the fact that family businesses tend to be more risk averse and therefore in a better position to weather the storm.

But some of those very attributes can also manifest as weaknesses. For example, family businesses have a concern for a wide range of stakeholders, including employees and customers, rather than a single-minded focus on shareholder value. Also, family tensions brought to the surface under pressure can often expose underlying stress fractures and exacerbate conflict in relationships, which may lead to more divisiveness.

How to capitalise on the strengths and avoid the weaknesses?

Be in regular communication with all stakeholders and be extremely open – this builds trust
Draw on family leadership, shared values, and governance
Be open to learning from others, e.g. military approaches to VUCA (volatile, uncertain, complex and ambiguous) environments

Consider This: How has your family business responded to the COVID crisis? Has it shown resilience or weakness (or some of both)? Have you considered what family members can be doing to help (aside from specific operational matters)?

Original articles: https://www.forbes.com/sites/francoisbotha/2020/03/31/family-business-challenges-the-3-issues-families-cant-ignore/#664087f23cf4, https://insight.kellogg.northwestern.edu/article/family-business-coronavirus-crisis, https://hbr.org/2020/05/what-family-businesses-can-learn-from-the-military, https://hbr.org/2020/05/4-tensions-in-family-businesses-and-how-to-work-through-them

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2022/12/family-business-crisis-2/

The Role of Non-Family Members

December 22, 2022 davidwerdigertransitionsLeave a comment

Most families have them, and all families need them. The trusted non-family members who have worked within the family enterprise for many years. In addition to their formal roles, they might be confidantes for family members, and informal mediators and channels for tricky conversations. They know everything important that is happening within the family. They can also serve as a bridge between the family and rank-and-file employees within the family enterprise.

They are not blood or married-ins, but in their own way they are considered “part of the family”. That has implications for how they are monitored, managed and rewarded. Their high level of trust is a double-edged sword – if the relationship with them ever soured, that could pose a huge risk for the family. They may not ever be rewarded with equity, but for some roles shadow-equity or profit share might be appropriate, as well as the opportunity to co-invest with the family. Understanding their motivation to be “part of” the family is essential in creating a suitable package.

Their role within the family should also be acknowledged by giving them a seat at legacy discussions such as strategy and succession. They can provide very valuable input as an external and can say things at the table that some family members may find hard to say, but that need to be heard.

Consider This: Who are the trusted non-family members within your family group? What distinguishes them from other employees? How are they rewarded for their roles?

Original articles: https://www.forbes.com/sites/forbesbusinesscouncil/2022/10/06/involving-your-non-family-executives-in-succession-planning/, https://www.campdenfb.com/article/considerations-family-businesses-recruiting-non-executive-director, https://chiefexecutive.net/for-family-run-businesses-heres-the-key-to-competitive-recruiting/

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2022/12/non-family-role/

My Father’s Advisor?

December 21, 2022 davidwerdigertransitionsLeave a comment

Research indicates that more than 70% of heirs will fire or change wealth advisors after they inherit. Clearly this poses a huge risk to advisors, but it says a lot about how advisors are currently dealing with family groups. It’s also worth considering the risks of this situation to families themselves.

A significant proportion of wealth advisors to family groups do not appear to be engaging with the rising generation, and certainly not taking the holistic and family-wide perspective of wealth that families need. When the wealth is a family and legacy asset, the client isn’t just the incumbent, but the whole family. If the advisor (and their firm) wants to stay in their role for a long time, they need to engage with multiple generations, and be relevant to them and listen to the concerns and needs of multiple stakeholders.

From the family’s perspective, changing wealth advisors can be disruptive and risky. If the rising generation are not part of (and on board with) the family’s long-term investment strategy, they may have a long learning curve when it’s their time to take the reins. Any shift in strategy should happen at the appropriate time rather than be triggered by a change in control. So it’s also in the family’s interest to have a wealth manager that is engaged across multiple generations.

Consider This: What is the involvement of rising generation family members in the family’s investment goals and strategies? What relationship do they have with the family’s investment advisors and/or family office professionals? What would happen to any of these relationships in case of the sudden death of a key family member?

Further reading: https://www.advisor.ca/my-practice/conversations/advisors-must-improve-how-they-work-with-wealthy-families/, https://www.bizjournals.com/albany/news/2022/08/18/what-makes-a-good-intergenerational-wealth-managem.html, https://gulfbusiness.com/how-wealth-advisory-must-be-customised-for-the-new-generation/, https://www.wealthprofessional.ca/news/industry-news/why-advisors-must-work-with-next-generation-of-business-owners/363811, https://www.internationalinvestment.net/news/4034632/financial-advisers-warned-most-heirs-change-inheriting-wealth, https://www.nasdaq.com/articles/help-clients-on-their-life-journey-youll-both-win-2021-01-15, https://www.prnewswire.com/news-releases/64-in-jcf-study-point-to-nextgen-inheritors-lack-of-knowledge-about-their-own-family-wealth-as-major-obstacle-301178504.html, https://www.ftadviser.com/investments/2019/02/05/how-advisers-are-missing-out-on-billions/

Actionable Generational Wealth Succession:

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

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source https://davidwerdiger.com/2022/12/fathers-advisor/

Preparing NextGen Custodians

December 15, 2022 davidwerdigertransitionsLeave a comment

How can families best prepare the rising generation for inheritance and/or joining the family business?

Parents may reasonably worry about raising spoiled or entitled offspring, and may feel uncomfortable discussing topics like wills and trusts before their kids are mature enough to grasp such concepts. However, a failure to prepare children for the responsibilities that come with being a custodian of significant wealth is not in the best interest of the child or the assets.

In addition to an estate plan, parents ought to provide children with a sound financial education, and develop the ability to communicate honestly and openly about family wealth.

Where there is an operating business, it’s important to embrace best practice in talent management, and identify/develop prospective leaders. Genetic factors play a role, but the majority of leaders are made not born. Personality development of the rising gen is an important factor – helping them individuate, and make an active choice to join the family business, rather than doing so from a sense of obligation. Finally, it’s worth noting that women-led family businesses have increased by 58% since 2007, so sons and daughters should be a part of the same conversations and be an active part of all discussions around the family business.

Consider This: Have you thought about how to prepare children for the wealth that will ultimately come their way? Do you have ways to talk about family wealth and family business? To what extent have you considered what the children want when it comes to these issues?

Original articles: https://www.forbes.com/sites/adamstrauss/2020/07/01/4-ways-to-prepare-children-now-to-oversee-their-inheritance-later/#28e7df7d193c, https://www.forbes.com/sites/francoisbotha/2020/06/23/3-simple-steps-to-develop-successful-family-business-leaders/#3cb8124474e7, https://www.thisismoney.co.uk/money/pensions/article-5263603/More-half-50s-prefer-spend-not-leave-money.html, https://hbr.org/2020/05/why-the-second-generation-can-make-or-break-your-family-business, https://www.forbes.com/sites/forbesbusinesscouncil/2020/03/04/start-preparing-daughters-now-to-take-over-the-family-business/#690970b91241, https://www.bizjournals.com/denver/news/2020/02/03/tips-on-talking-to-the-next-generation-about-your.html?s=print

[reprinted with permission]

Actionable Generational Wealth Succession:

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

The post Preparing NextGen Custodians appeared first on David Werdiger.

source https://davidwerdiger.com/2022/12/nextgen-custodians-2/