The role of family offices has evolved from being an investment platform to guiding the next generation(s) back into the family business. A next-generation development program will help the next generation become good owners and future leaders.

According to HBR, these programs focus on five key objectives:

• business ownership skills and competencies;
• family business principles and
• practical knowledge of the family business’ assets,
• understanding the family history and values; and
• developing personal leadership competencies.

Boston Private’s 2018 report “The Why of Wealth” surveyed respondents with new investable assets of $1-20M, and found that “individuals pursue financial wealth to achieve emotional well being”, rather than for the pursuit of material goods.

Across generations, there was slight variations in attitudes. Older generations prioritise peace of mind, Baby Boomers place more importance on financial capital, and Millennials see wealth as a “gateway to happiness”.
The most interesting difference in attitudes was between genders – 28% of males valued power and influence compared to 20% of females. Men valued forms of external/reputational wealth, while women found more significance in inner emotional wealth. (This is reminiscent of a great Al Pacino scene in Scarface, immortalised in ICE T’s rap classic Money, Power, Women).

Consider This: Does your family have open discussions about what wealth means to them? Or is this a big secret that is a taboo discussion? Only by being able to discuss it and understand both our own attitudes and those of other family members can we hope to translate it into something meaningful and relevant to the entire family.

Original articles:
https://www.scmp.com/print/presented/business/topics/defining-family-office-landscape/article/3076192/lifelong-learning-drives
https://www.businessinsider.com.au/how-rich-people-view-wealth-every-generation-2018-6, https://go.bostonprivate.com/wowsurvey

[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 #successionplanning #workfromhome #governance #leadershipdevelopment

The post The Value of Intergenerational Wealth appeared first on David Werdiger.

source https://davidwerdiger.com/2021/11/generational-wealth/

A fascinating research article discusses public debt and intergenerational burden shifting. Using laboratory experiments, it seeks to understand how voters make choices about the way public debt should be accumulated in the presence of multiple and/or overlapping generations.

The study finds that in the presence of future generations, voters are comfortable with the government loading up with debt in the knowledge that this debt burden will have to be satisfied by future generations. But without considering future generations, voters are far more conservative about how much debt the government should take on.

Now, while the study is in the context of people voting about how much debt government should take on, how much it should spend on services, and who will eventually repay it, the principles and attitudes are relevant to multi-generational family wealth.

In a family, decisions must be made to balance present day distributions and investment risk profile (which may include debt) with the needs of future generations. Of course this is a function of the size of the family wealth and the anticipated future needs of generations to come. It is also a function of the historic attitudes to risk (particularly those of the wealth originator).

Consider This: To what extent does your family consider its investment risk profile and gearing levels with a view on the burden that may be transmitted to future generations? Are those next generations part of the discussion?

Original article: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0202963

[Re-posted 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 Public debt: Intergenerational burden shifting appeared first on David Werdiger.

source https://davidwerdiger.com/2021/11/intergenerational-burden-2/

I’m thrilled to have joined the experts panel at &Simple, who are focussed on helping FOs and their service providers professionalise and be future-ready through insights, services and data.

In my first insight published on their platform, I articulate three principles of good family governance:

1. The stewardship (rather than ownership) mindset: family wealth does not belong to any individual, rather to the family – both present and future. The people who happen to be responsible for it at any time act as stewards, taking their turn to look after it for the benefit of the whole family.

2. Because they have this steward role, open communication and transparency is essential. Lack of communication leads to negative assumptions and an erosion of trust. Being open and accountable to family members builds trust and fosters a sense of accountability to the entire family.

3. More broadly, this is about the responsible use of power. Families have an inherent power dynamic based on generations and control. Those in power have a responsibility to use that power carefully and judicially.

Consider This: What are the attitudes of the incumbent generations to the family wealth? What are the differences in those attitudes between generations (particularly 1st and 2nd)? How openly does your family communicate about matters relating to the family wealth?

Further reading: https://andsimple.co/insights/principles-of-good-family-governance/, https://gulfbusiness.com/why-good-governance-makes-sense-for-family-businesses/, https://www.campdenfb.com/article/differentiators-help-family-businesses-thrive, https://mibiz.com/sections/economic-development/roundtable-communication-transparency-among-keys-to-managing-successful-family-businesses, https://qz.com/work/1711650/what-succession-gets-right-about-power-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 #successionplanning #workfromhome #governance #leadershipdevelopment

The post Principia Familia appeared first on David Werdiger.

source https://davidwerdiger.com/2021/11/principia-familia/

There is more to maintaining family wealth through generations than getting the best financial advisors and managers for operating assets.

Families of wealth must learn how to work together in the sharing of assets. A key part of that is to integrate their wealth management with their values. That means the values need to be articulated within the family. Then, the family needs clear and open dialogue discussing values as well as financial assets, and why preserving wealth matters to the family and the world around us. That is the foundation upon which successful transition is built.

To raise the next generation responsibly with wealth may require adapting the family’s middle-class orientation to add new strategies where solid values are taught and demonstrated. Large sums of money can have damage on children’s ability to craft their own lives and break out of their parents’ shadow.

When people base their self-worth on financial success, they experience feelings of pressure and a lack of autonomy.

Few families who come to wealth have been prepared for these tasks. They often don’t know these new strategies are even necessary. That is where external advisors can be helpful.

Consider This: Has your family articulated its values? Does that include the values of the rising generation? What is your family’s approach to educating the rising generation with the appropriate values so they can be comfortable in their own skin and good custodians in the future?

Original articles: https://www.coastalbreezenews.com/articles/the-value-of-your-values/, https://bigthink.com/politics-current-affairs/great-wealth-transfer, https://www.valuewalk.com/2020/02/family-wealth-planning/, https://www.scmp.com/presented/business/topics/defining-family-office-landscape/article/3076183/what-chinese-family, https://nypost.com/2020/04/10/investing-life-in-money-leads-to-lack-of-community-study/

[reposted 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 The Foundation of a Family Business appeared first on David Werdiger.

source https://davidwerdiger.com/2021/11/family-business-foundation/

Family businesses aren’t just businesses that happen to be owned and/or managed by a family. Factors like a long-term perspective, and the multiple/overlapping roles of owners, employees and family members are both strengths and weaknesses. These factors mean that family businesses need another set of principles to help them stay strong.

Because many stakeholders have multiple hats, separation of powers is very important. Everyone needs to understand what their roles are (employee, manager, owner, etc) and the scope of each role.

Because family business transitions fail most often because of poor communication, a governance structure that includes independent director(s) is essential for mature family businesses. This helps the business and family stay true to its values, put policies in place to manage conflict, and maintain open communication and accountability. Good governance ensures that issues are dealt with in the appropriate forum at all times.

Another reason for failure is lack of strategic renewal. External voices on a board can ensure regular strategic planning happens, established ideas are challenged, and all stakeholders’ voices are heard.

Consider This: Does your family operating business have a board? Does your family have a council (or similar), separate from the governance of any operating businesses? At family meetings, who is the chair? Does everyone who attends genuinely have a voice?

Original articles: https://www.forbes.com/sites/forbescoachescouncil/2020/01/17/15-tips-for-navigating-family-business-challenges/#462bab2b8a92, https://www.smartcompany.com.au/business-advice/family-business-constitution/, https://hbr.org/2020/01/managing-the-trickiest-parts-of-a-family-businesses, https://hbr.org/2020/01/every-family-business-needs-an-independent-director, https://hbr.org/2020/02/should-your-family-business-have-a-no-in-laws-policy, https://hbr.org/2020/02/what-makes-a-family-business-last, https://www.forbes.com/sites/rochellemclarke/2020/02/29/6-tips-for-working-with-family-and-friends/#4de7af5612f9

[Reposted 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 #successionplanning #workfromhome #governance #leadershipdevelopment

The post Family businesses need another set of principles appeared first on David Werdiger.

source https://davidwerdiger.com/2021/11/family-business-principles/

The pandemic crisis is forcing the hand of family businesses to address the pace of change in new ways. Every day we must act and even make some tough choices—despite the lack of any reliable information about the best direction to take. Some owners make tough decisions on their own, rather than seeking help from others. Some choose impulsive or blind allegiance pathways.

I wrote the following on the Bloomberg press about the Singh brothers – heirs to an Indian health-care empire – and their relationship with guru Gurinder Singh Dhillon. What makes this interesting is the financial relationship between them, and the dramatic fall in their fortune over the last few months.

It brings to mind another story with plenty more still to happen – that of Clare Bronfman’s involvement with a New York self-help group called Nxivm, which appears to display cult-like behaviour. In addition to Bronfman sisters using their substantial fortunes to underwrite Nxivm in a variety of ways, most recently there have been accusations of criminal behaviour including conspiracy and criminal racketeering, and Ms Bronfman herself has been arrested and is out on USD 100M bail.

Stories like this are a warning bell to wealthy families of their vulnerability to people of all kinds with ulterior and sometimes nefarious motives. Many families employ gatekeepers to protect them, but this is a never-ending game of cat and mouse. Social media and techniques like social engineering can readily be used by protagonists to worm their way in. When it comes to trust, families should observe a healthy (but not obsessive) measure of vigilance.

Consider This: Does your family have policies about the use of social media, and acceptance of ‘friendship’. Do family members have an awareness of spotting ‘hangers on’, and maintaining the right degree of scepticism and vigilance when meeting new people?

Original articles: https://www.forbes.com/sites/dennisjaffe/2020/03/24/how-family-businesses-can-respond-to-the-pandemic–collaboration-openness-and-sharing-the-burden/#58b2b7a94e34 https://www.bloomberg.com/news/features/2018-08-16/billionaires-and-the-guru-how-an-indian-family-lost-2-billion and https://www.cnbc.com/2018/08/12/new-york-times-digital-from-heiress-to-sex-cult-defendant.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 #successionplanning #workfromhome #governance #leadershipde

The post Cult Behavior in Wealthy Families appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/cult-behavior/

How to deal with family members by marriage poses significant challenges to wealthy families. Should they be allowed to work in the family business? If so, should there be a ceiling on their authority (stock, voting rights, etc)? Do they have a seat/voice at family meetings? What if the only person in the rising generation with the skills to be involved in the family business is a child-in-law? What to do when a marriage is on the rocks (and the child-in-law has a role)?

There are no clean-cut answers to these questions and not even best practice, because each family is different. It comes down to a few general guiding principles, together with the family’s own culture and beliefs regarding the role of children-in-law (some families have blood line rules that have existed for generations and challenging them is near impossible).

Here are some of my favourite aphorisms:

• You enter a family by birth or marriage, and leave by death or divorce (and divorce is not as final as death).
• If a child-in-law doesn’t have an actual voice at the table, their partner may be their proxy voice.
• Don’t hire whom you can’t fire (applies to any business, and any person)
• What works or doesn’t work in another family is no guide to what will work or not work in your family.

Rather than be reactive, develop and articulate your own family’s guiding principles and then setup governance to ensure they are applied as equally and fairly as possible.

Consider This: Does your family have a culture regarding how in-law children are treated? Have you ever had to fire a family member? How do you deal with pillow talk about family business/wealth? Do you have any (formal or informal) induction process for in-laws?

Original articles: https://www.forbes.com/sites/francoisbotha/2019/11/30/when-families-welcome-new-family-members–cultures-what-to-consider/#766fa5ca3f1e, https://www.jdsupra.com/legalnews/family-matters-can-a-family-business-78318/?, https://www.chroniclelive.co.uk/special-features/look-family-businesses-divorce-17022880, https://www.heraldtribune.com/business/20191028/nepotism-is-keeping-it-all-in-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 #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

The post Family Office In-Laws appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/family-office-inlaws/

The family office space is constantly evolving. This is driven in part by the investment flavour of the month, global economic/political trends, wealth transition within families, the family follow-me-go-round (families looking at what others are doing), and the general competitive environment amongst FO offerings.

Essentially, a family office is a set of services used by a wealth family to manage its wealth and other associated needs. There are no rules for how a FO can or should operate; it ought to be driven by demand and need. The other important issue is market segmentation: the FO needs of a family with 5B+ of assets are very different to those of a family with 500M, and these differences are qualitative as well as quantitative.

Because the SFO and MFO models have expected structures and associated constraints, new service models are being developed, like the virtual family office. Offerings like this evolve to meet demand, and are needed because so many families are global, because technology can deliver such an offering in a distributed and secure manner, and because no single solution can incorporate the best of everything.

Consider This: Do you have/use a family office? Do you know why? Have you mapped the set of services you need against your set of providers and scored/benchmarked them? Have you considered the changes that your family may face over the next 5-10 years and whether the set of services you have now will meet your ongoing needs over that period?

Original articles:
https://www.forbes.com/sites/francoisbotha/2019/10/11/why-family-office-advisors-are-fast-becoming-extinct-and-how-to-avoid-it/#6547275049cf, http://www.campdenfb.com/article/family-office-principals-unconvinced-next-generation-readiness-succession, https://www.forbes.com/sites/robclarfeld/2019/10/28/what-is-a-family-office-and-do-i-need-one/#34c6e8395da1, https://www.forbes.com/sites/francoisbotha/2019/10/30/family-office-insights-10-trends-that-will-affect-family-offices-in-2020/#5a9ad1123fb8, http://www.campdenfb.com/article/big-shifts-family-office-succession-and-recruitment-2020, http://www.businessworld.in/article/Multi-Family-Office-Over-Single-Family-Office/04-01-2020-181434/, https://www.forbes.com/sites/francoisbotha/2020/01/08/opportunities-abound-within-the-family-office-space/#57a083828693, https://www.fa-mag.com/news/russ-prince–innovations-in-the-family-office-model-53377.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 #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

The post Navigating Trends in Family Office appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/navigating-fo-trends/

How we deal with conflict in family business is totally different to a regular workplace. Why? In family business, we wear multiple hats: family member, co-worker, owner, and those roles can lead to conflicts of interests. The work hierarchy is overlaid by the family hierarchy, and that can lead to … conflicts of interests. And unlike a regular workplace, it’s not quite so easy to just quit for another job. By their nature, families and their businesses are deeply interdependent systems.

Understanding these key differences helps us work out how better to manage those conflicts.

A lot of conflict mitigation revolves around the principle of establishing boundaries. That helps provide clarity over the various roles we play, so that we have spaces where we are co-workers, and other spaces where we are relatives. Of course, we can’t instantly switch from one identity to the other. However, having codes of conduct, sacred spaces, formal meetings, and independent advisors make it less difficult.

The hardest part is learning how to debate tough issues, and criticise. This requires well-considered communication so that the message gets across in as positive a way as possible, with minimum spill-over to other aspects of the relationship.

Consider This: What tools or policies does your family use to reduce conflict in the family business? Is there a strong awareness of them? How often do you break your own rules or codes of conduct?

Original articles: https://www.forbes.com/sites/forbesbusinesscouncil/2021/09/21/keep-it-in-the-family-6-cs-of-managing-family-business-conflicts/, https://www.ibtimes.com/how-run-family-business-without-straining-relationships-3276000, https://www.forbes.com/sites/dennisjaffe/2021/07/29/how-to-prevent-family-dynamics-from-undermining-your-family-business-a-code-of-conduct/, https://www.entrepreneur.com/article/370008, https://www.franchising.com/articles/the_petty_crap_of_a_family_business.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 #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

The post Conflict in Family Business appeared first on David Werdiger.

source https://davidwerdiger.com/2021/10/family-business-conflict/

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

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 #successionplanning #workfromhome #governance #leadershipdevelopment #familybusiness #entrepreneurship

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

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