Familosophy v5#12 - December 2022

My Father's Advisor?

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/

#goals #strategies #advisors

The Role of Non-Family Members

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/?sh=23df184964ba,?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/

#trust #nonfamily #legacy