“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 Keys to Family Business Transition appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/keys-to-transition/

There are many consultants out there who advise non-profits on things like strategy, marketing, grant-writing, etc. The market for the philanthropic dollar follows the usual 80/20 rule: 80% of the funding comes from 20% of the donors (it’s probably far more skewed than that – more like 95/5). A particular area of focus for consultants is therefore how to capture the high-end of the market – HNW family giving. We can think of this as the ‘sell-side’ of philanthropy.

On the ‘buy-side’, there are the families. Because of supply-demand economics, it is a buyer’s market: causes are most always chasing families rather than the other way around.

Families choose causes for a variety of reasons, but too often those reasons are unorganised and reactive. They may be a response to a personal connection, or a direct solicitation. That may leave family members looking back at a schedule of the gifts for the year and wondering why, and what their impact has been.

It behoves families on the ‘buy-side’ to take a more strategic and proactive approach to their philanthropy. That starts with having a strategy and goals, and then choosing to allocate in a more sophisticated way. This can be balanced by an ‘allocation’ or ‘bucket’ for opportunistic or reactive giving. 

Consider This: What proportion of your family’s giving is reactive vs proactive? Does your family have articulated goals for its philanthropy? How does it measure against those goals?

Original articles: https://www.forbes.com/sites/johnjennings/2022/04/30/top-tips-for-effective-charitable-giving/, https://www.forbes.com/sites/forbesfinancecouncil/2022/03/28/philanthropy-four-steps-to-giving-strategically/, https://www.wealthprofessional.ca/news/industry-news/its-a-great-time-to-help-clients-think-about-their-philanthropy/362908

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 Buy- vs Sell-side Philanthropy appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/buy-sell-philanthropy/

Friends and family members often turn to lawyers (and other professionals like accountants and wealth managers) they know in because they naturally trust a lawyer who is close to them rather than a stranger. But is this the best approach?

Advisors can provide the best services when they are objective and are governed by reason and not by emotion. Often, and especially in a family situation, they specifically need to be the voice of reason while clients are the ones whose decisions may be driven by passion and emotions.

For lawyers in particular, the issue of ‘who is the client?’ is important. Initially, the client is usually the patriarch / matriarch as wealth owner. But as the family grows, things can get complicated. It may not be possible for the lawyer to act ‘for the family’. Where there is a ‘family office’, consideration will be needed as to what the family office actually is and who is, in fact, the client.

Similarly, wealth managers may not be permitted to talk to the children of their client without a formal engagement. And of course, don’t engage a wealth manager if you’re going to be uncomfortable sacking them if they don’t perform well.

The relationship between a family and all its advisors needs to have just the right amount of ’emotional distance’.

Consider This: How close are you to your advisors? Are they too close that you can’t get rid of them if you needed, or adequately assess their performance? Do you have genuinely independent voices at the table?

Further reading: https://abovethelaw.com/2022/06/lawyers-shouldnt-get-too-emotional-when-representing-friends-and-family/, https://www.lexology.com/library/detail.aspx?g=47051b35-6556-4bfd-b130-58fa573336f5

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 Lawyer or Friend? appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/lawyer-friend/

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.

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

The post Owners and Managers of a Family Business appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/ownership-management-2/

The challenges of bringing up children with wealth are predicated on the idea that said wealth will transition to said children. But what if it won’t?

Some families are thinking more about giving away the bulk or almost all of the family wealth to charity. In the US, families are talking about giving a maximum of $15M to each child (and the rest to charity).

There are different reasons driving this (don’t want to leave children with “too much” or overly entitled, want to make philanthropy the family legacy), and different approaches (e.g. setting up a foundation and having family members involved, so they remain part of the legacy). Of course depending on the numbers involved, giving away “the bulk of” can still leave more than enough for generations to come.

It’s important for families to understand their “why”, and take their children on the journey.

Consider This: If you plan to give significant family wealth to charity, have you considered the reasons? Which family members were involved in the decision? Are you doing it for positive or negative reasons? Will the distribution of the wealth result in a lifestyle downgrade for future generations?

Original articles: http://www.campdenfb.com/article/families-giving-away-their-children-s-inheritance-charity, https://www.bloomberg.com/news/articles/2019-04-22/hong-kong-property-scion-has-no-house-no-inheritance

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 Inheritance or Purpose? appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/inherited-purpose/

One of the biggest challenges in wealthy families is when/how to talk about the family wealth to children. There are a number of factors to consider:

1. Being aware of other ways children will learn about it themselves, e.g. from the media, direct research, and from friends (it’s a bit like sex education). Would you rather your children find out about the family wealth from reports and rumours that are laden with assumptions? It’s better to tell them more than have them fill in the gaps in what you do tell with misinformation.

2. Children will also make assumptions about family wealth based on the lifestyle you live. This is the “indirect” way you tell them about the family’s wealth, status and influence. Be aware of what messages you are sending about the family wealth by your actions (aside from your words).

3. Age-appropriateness is essential at all time, as well as taking the children on a controlled journey as they grow older. It takes some balance and nuance to ensure children know as much as they should as teenagers, young adults, and as they mature. Taking a step-by-step approach works well to avoid any “shock” that can have negative consequences.
See a number of good articles linked below for additional insights.

Consider This: When did you tell your children about the family wealth? How much do you think they already knew by then? Have you considered the risks of not telling them (i.e., not giving them authoritative information straight from the horse’s mouth)?

Original articles: https://www.ft.com/content/4d9ebbdc-03a1-11e9-9d01-cd4d49afbbe3, https://www.fa-mag.com/news/advisors-can-help-aid-generational-wealth-transfers-by-starting-conversations-about-values-44782.html, https://www.ft.com/content/b39c1ea8-4009-11e9-9499-290979c9807a, https://www.forbes.com/sites/dennisjaffe/2019/05/29/what-do-we-tell-the-children-intergenerational-talks-about-the-family-business-and-wealth/#36fb7baf78e0, https://www.kiplinger.com/article/retirement/T021-C032-S014-to-prepare-heirs-for-wealth-don-t-hide-the-truth.html, https://citywire.co.uk/wealth-manager/news/wisdom-of-wealth-when-is-the-right-time-to-talk-about-money/a1221573?ref=author/emahmoud

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 Let’s Talk About Family Wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/lets-talk-wealth/

Can you have the best of both worlds? Family businesses have to tread a fine line: they must compete like any business, while also maintaining harmony amongst the family – both those who are involved in the family business and those who are not. There are a few common themes that help families maintain this balance:

1. Trust is essential, and what builds trust are good communication and transparency. Anywhere information is not provided, people make up answers to their questions instead, which can lead to the spread of incorrect information, and the erosion of trust. A good governance structure can help avoid this and preempt the potential loss of trust.

2. Disagreements and disputes within businesses always arise, and in family businesses, they can spill over into personal and family life. Families need to learn how to “disagree well” – to raise issues about the business and about the family in a structured way rather than ad hoc over the dinner table, and to agree on how disputes will be resolved – that usually translates to internal processes.

3. Because family members have multiple roles, setting boundaries is especially important. This means boundaries between work life and home life, and treating family space as ‘sacred’. Short breaks from work to indulge fully in family time can be very healthy. The issue of roles becomes especially important as family members transition from doing many different things within the business to bringing in professionals/externals – this is a time to narrow and define their roles within the family enterprise.

Consider This: If it was “family vs business” in your family, which one wins? How often do you mix family & business? Do you have agreed processes for tabling issues and resolving them?

Original articles: https://brandequity.economictimes.indiatimes.com/news/business-of-brands/top-biz-family-mantra-company-first-kin-second/67682903, https://www.smartcompany.com.au/partner-content/articles/family-feud-how-to-stop-family-business-disputes-from-following-you-home/, https://www.valuewalk.com/2019/01/successful-balance-between-business-and-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

The post Trust; Family vs Business appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/trust-family-vs-business/

The term ‘retirement’ evokes a certain scenario: someone spends their working life in employment, accumulating savings along the way, then ceases work (perhaps in their 60s or beyond), lives off their savings and enjoys a life of leisure instead of work.

While that scenario may fit for a large proportion of people, there are many for whom it is completely meaningless and foreign.

Plenty of entrepreneurs ‘retire’ after a business sale, quickly get bored, and look for a new challenge. For many younger people, the notion of full-time employment is being challenged: the ‘gig’ economy allows people to choose what they do, when, and for whom, without the traditional constraints of a boss, or a career path. Where there is a family enterprise, or family wealth, the role of ’employment’ within that system may again be something entirely different.

The term ‘retirement’ is very loaded, and in certain contexts even the mention can lead a family into a challenging situation. In family business, the longer an incumbent waits to consider ‘it’, the harder ‘it’ gets.

Certainly within the family enterprise space, it’s time to stop using the r-word entirely. Rather, we can think of stages of life, roles, and the transitions between them. That framing should start as early as possible for everyone.

Consider This: Have members of your family found the thought of retiring confronting? Do you know of any family members who never actually moved forward from the role they held for many years? What was the impact on them and on the wider family?

Original articles: https://www.thinkadvisor.com/2021/12/15/what-to-do-when-your-married-clients-cant-agree/?slreturn=20220005230529, https://www.fa-mag.com/news/russ-prince–framing-your-expertise-using-high-net-worth-psychology-53351.html, https://www.thestreet.com/retirement/just-how-differently-millennials-feel-about-retirement-compared-to-baby-boomers-14564624, https://www.goodhousekeeping.com/uk/consumer-advice/money/a575763/baby-boomers-retire-early/

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

The post What Is ‘Retirement’? appeared first on David Werdiger.

source https://davidwerdiger.com/2022/07/what-is-retirement/

Sudden change of any type is risky. When someone’s personal wealth circumstances change quickly, it can lead to all sorts of adverse and unintended consequences.

Here are some examples:

* after being drafted, sportsperson gets a huge contract

* winning the lottery – research shows most lose it

* entrepreneur sells business for huge gain

* ‘sudden’ inheritance

Specialist wealth managers have emerged to support people through such transitions. Once the shock subsides, recipients sometimes feel pangs of guilt. For entrepreneurs, a realised exit is often affirmation of their success, but inheritance can sometimes lead to feelings of unworthiness – “the inheritors dilemma”. 

Younger people who advocate against inequality and then find themselves on the wrong side of that equation can feel shame and guilt.

Of all the examples, ‘sudden’ inheritance is the most easily avoided. After all, the only certain thing is death, and there is usually ample opportunity for parents to discuss family finances with future inheritors.

The lack of willingness of parents to discuss family finances and succession planning with the children usually comes from the politeness of not discussing money, or the fear of spoiling children. But the risks of not preparing heirs is just as bad or worse.

Consider This: Incumbent generation – what (if anything) have you done to prepare your children to be responsible heirs? Rising generation – do you feel sufficiently informed (to the extent this is possible) about the intergenerational wealth transition within your family? Both generations – talk more, not less!!

Further reading: https://spearswms.com/how-to-manage-sudden-wealth/, https://www.wealthmanagement.com/high-net-worth/ten-ways-talk-about-family-wealth, https://425magazine.com/qa-with-stacy-allred/, https://www.forbes.com/sites/forbes-shook/2022/03/01/when-and-how-to-tell-your-children-about-wealth/

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

#suddenwealth

The post Sudden Wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2022/06/sudden-wealth-2/

A ‘family business’ is more than just a business owned and operated by a family. In addition to being a vehicle of wealth creation and entrepreneurship for the family, these businesses can bring other non-financial benefits – known as “socioemotional wealth” or “social capital” – to family members.

Being part of the family enterprises brings feelings of pride, personal reward and satisfaction, and can constitute a part of family members’ identity.
These additional intangibles are very important when it comes to succession planning, from bringing in new family members to handing over the reins at the appropriate time.

It’s worth noting that this additional emotional bond between family members and the business can be a double-edged sword: it can also drive poor decision-making and conflict. The key is to be aware of these additional non-financial dimensions in a family business, and to manage them proactively.

Consider This: Do you talk about your family business? I don’t mean “business talk” – I’m talking about how family members feel about the business, what it does, its history, and importantly its future.

Original articles: https://www.forbes.com/sites/robclarfeld/2019/03/19/family-businesses-social-capital-is-key-to-successful-succession-planning/#5a97d8b05713, https://www.crainsdetroit.com/special-report/beyond-profits-family-businesses-can-create-socioemotional-wealth

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 #leadershipdevelopment

The post Family business socioemotional wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2022/06/family-business-socioemotional-wealth/