Old MacDonald Had Family Governance (E-I-E-I-O)

Old MacDonald Had Family Governance (E-I-E-I-O)

Over the past two weeks I’ve been at the cottage trying to unwind and unplug a bit.

I woke up early one morning, and by the time I got up to start the coffee-maker, the bare bones of this blog post were already complete.

If you’ve ever wondered, “what kind of person wakes up thinking about family governance, while on vacation?” you now have your answer.

Because of the happy coincidence of the first letter of the adjectives I’d been dreaming about, this “Old MacDonald” blog was born.

Without further ado, here are my “E-I-E-I-O” of family governance.

 

Egalitarian

Family governance should be egalitarian in nature.

Family goverance is not the same as business governance. A business should be a meritocracy, where everyone’s rights and obligations stem from their place in the hierarchy.

In a family, simply being born into the family gives you a place at the table, and everyone’s place is more or less equal to everyone else’s.

So in the “family circle” governance needs to be much more “egalitarian”.

 

Intentional

Family governance needs to be intentional.

When I use the word “intentional”, I’m getting at the idea it doesn’t just happen by itself. You need to work at it.

Most families don’t “do governance” because they don’t need to.

If, however, your family has sufficient assets that are expected to survive the current leading generation, and continue to be owned by a group of family members in the next generation, then you absolutely NEED family governance

And you must also realize that it needs to be intentional, so you will need to work at it.

Evolving

Family governance needs to evolve.

This may not be the best time in history to reference US politics, but I’ll do it anyway.

The “founding fathers” came up with their constitution, which has served as the base of their governance for over two centuries.

But in the meantime, those who have been governing the country have amended it a couple of dozen times.

My point is that governance must naturally evolve over time. Don’t expect to be able to figure it all out in the first go around.

“Start where you are, use what you’ve got, do what you can”. And then keep moving forward.

 

Incremental

Family governance should be incremental.

It usually shouldn’t evolve in big spurts. A little bit at a time will almost always be better.

A family is made up of various different members (with a “quack quack” here and a “moo moo” there), and you can only go as fast as the slowest member.

Those who want to go faster will often lament the others who slow everything down, but they’ll also help the family from acting too quickly.

 

“Our Own”

The family needs to OWN their governance.

The governance that any family puts in place will be unique to that family.

It needs to be created “by the family, for the family” if it is to be useful.

Only by creating their own governance, will the family “own” their governance.

They cannot buy it, “off the shelf”, anywhere.

 

And On That Farm He Had Some…

Because there are so many creatures on the farm, Old MacDonald needs to proceed very thoughtfully and carefully.

He would be wise to bring in an outsider, preferably one who has some experience and training, to facilitate the development of the family’s governance.

When I said “By the family, for the family”, note that I never said “by themselves”, in fact most will not get very far without an outside perspective.

 

Intentionality of the “Project”

In fact, the outside person who is brought in also should also act as the “project manager”, and a large part of their role is to keep things on track and moving forward.

Family governance is not a natural thing, and it needs to be nurtured along the way.

If your family intends to successfully continue to own assets together into the following generation(s), you cannot ignore family governance.

There are all sorts of different animals in a family, and if you want them all to sing together, you’ll need to work at it.

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Combining Strategy and Structure for Families

Combining Strategy and Structure for Families

I got an email a few weeks ago, inviting me to an upcoming Family Office conference, and the wording of the subject line caught my eye.

Now that my thinking on the issue has gelled in my head, I’ll try to turn it into a useful blog post. Here goes.

 

Strategy AND Structure

Let’s begin with the email subject line, so that you’ll get the context:

“Essential structures & strategies from leading families”

The event itself was billed as a “Family Office and Investment Conference”, but the tease in the subject line had succeeded in intriguing me to believe that they might be talking about topics that are much more up my alley (i.e. family issues)

When it comes time to plan the transition of a family’s wealth from one generation to the next, a lot of effort is usually put into finding the best way to structure things.

There are many different ways to accomplish the goal of transitioning the ownership of assets from the current owners to the future ones, and the choice of which way to go will often be driven by the family’s advisors, who each have their particular favourite techniques and structures.

The family client relies on advice from these trusted experts, who are believed to know what they are doing, and strictly speaking, they usually do.

So what’s my issue with this? I’m glad you asked.

 

The “What” Shouldn’t Come First

A family faced with this scenario is really only going to do this once per generation, and few families are experts in knowing exactly what they want, or even knowing what’s possible.

The tactical experts who advise them are just that, “tactical”, they specialize in the “what”, and when a client shows up looking for help, the expert will almost always go back to the “tried and true”.

But what if they’re pulling an old structure off the shelf that they used before for another client whose situation was completely different?

Too few advisors will take the time necessary to explore the “why” questions with their client families, and to think in terms of the overall family strategy, in order to make sure that “what” they are proposing actually makes the most sense.

 

“Why” Should Precede “What”

It’s really useful for the family to have the important planning discussions amongst themselves to plan strategy before engaging the outside structure experts.

As I wrote back in March, in “We Treat Them All Equally – (That’s Good, Right?)”, these discussions are not necessarily done quickly or easily, but they sure are important and worthwhile.

You may be curious as to my selection of the image I chose to accompany this post, perhaps wondering “what’s with all the different tents”? Each of them is a structure, and they are all different, some of them markedly so.

 

Are We All In This Together?

In “Going Far, Go Together” I wrote about families that are planning to stay together for the long term.

What I didn’t stress at the time was the actual question that the family needs to clarify beforehand, i.e. does the next generation of the family WANT to stay tied together, and continue to work together as a shared ownership group.

Too often there is a presumption that the answer to this question is YES, and when that happens you can end up with siblings who are forced into partnership with each other.

If such a scenario is going to turn into a disaster because of the family dynamics, wouldn’t it be better to figure that out in advance, and not go down that road?

 

Strategy Before Structure

At the risk of harping on this too much, I’ll say it again. Before you decide on the best structures to hold the family assets for the next generation, the family needs to sort out the questions of who is on board.

It can be very tempting to choose a complex solution proposed by a tax expert who shows you to the penny how much tax you can save by going with their suggested methods, but if that solution means the next generation will be stuck in the wrong kind of tent for their trip, what was the point?

A huge tent built for the desert may not be what most of the family needs. Work out the strategy first.

 

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Dealing with Spouses in a Business Family

Dealing with Spouses in a Business Family

This week’s post was inspired by an email I received from a colleague. She sent along a video blog she’d watched that spurred her questions.

Coincidentally, I’d just watched the video that morning. It was from Wayne Rivers of the Family Business Institute.

 

Your spouse is CRITICAL to your planning

The video talks about why it’s so important to involve the spouses of family business principals in all of the planning that gets done.

Rivers is speaking about the very early stages of planning, for the work business families face when transitioning a business from one generation to the next.

Not involving the spouses at this stage would clearly be a mistake.

 

All of the In-Laws ? 

The questions from my colleague, however, went much further than simple planning, to full blown governance questions, which take the issue to a whole new level.

When you’re talking about two or three generations, including many adult children with spouses and children, the question of involving spouses can get pretty tricky in a hurry.

 

Three-Circle Basics – Again

Here are some of the essentials that come to mind when dealing with these situations:

  • There are three circles, and each is its own “system”: Family, Business, and Ownership
  • Each system is made up of different groups of people, who then need to come up with ways to govern themselves, i.e. communicate and make decisions together
  • Some questions that business families face can become pretty ambiguous, so it’s paramount to think through which questions need to be addressed by which group. This is NOT a one-shot deal, it will come up over, and over, and over again.
  • Rules about who belongs in which group need to be clear, and they should be made by the members of each group
  • It’s easier to start with a small group when making the rules, and then to carefully enlarge the group afterwards
  • All rules that a group makes for itself should be logical and clearly defined

Multiple Governance Layers

There can also be more than one group in each circle.

In the business circle, at the most basic level, there are likely different groups or committees charged with certain day-to-day tasks.

At the other extreme, the business may have a board of directors or executive committee, charged with big-picture decisions.

(Yes, I realize that many founders act as their own self-contained, “one-man-show” board and executive committee.)

It’s possible to have a variety of people or groups who make decisions at different levels.

 

Family Assembly versus Family Council

For the family circle, when there are more than a dozen or so people involved, you may have a “family assembly” that brings together everyone with a stake in the family.

In order to translate their wishes and needs into a coherent forum for decision-making, they may elect to have a “family council” to represent them.

There would typically only be 5-10 family members on the council, whose role is to represent the views of the larger group.

 

Voice versus Vote

One of the most important concepts to always keep in mind here is the difference between having a voice and having a vote.

Everyone should have a voice, an opportunity to be heard. It helps when they’ve all been informed, so that when they do voice their points, they do so in an informed fashion.

If some members are voicing things from a position of ignorance of the issues, often simply clarifying things will go a long way to diminish the volume of their voices.

Many “complaints” simply stem from a lack of information.

Everyone usually wants to be informed, and to be heard.

 

Rules for Inclusion

The rules for inclusion must be clear and also “clean”, i.e. easily explained and interpreted by anyone. For example, if my wife is in, so is my sister’s husband.

There’s no room here for picking and choosing without solid reasons.

All of this is easier said than done, of course, and easier in theory than in practice

The key is to go slowly, it’s not a race. Taking the time to get it right will be well worth it in the end. Building consensus takes time.

 

How Many Is Too Many?

The photo I chose to accompany this post is a bit of a trick.

There are 15 people at that meeting.

That’s NOT a good number to begin with.

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Fluency: The Key to Becoming a “Personne de Confiance”

Fluency: The Key to Becoming a “Personne de Confiance”

Regular readers of this blog know that I’m a huge fan of the Purposeful Planning Institute and all that they do. So you shouldn’t be surprised that this post has its roots in one of the sessions of the latest PPI Rendez-Vous.

It was on Friday morning, and as usual there were at least two or three other concurrent breakout sessions that I hated to miss, but I had my sights set on Dean Fowler’s talk.

Something in his title, “Interdisciplinary Fluency: The Role of the Personne de Confiance” just spoke to me.

 

Inspired by Jay Hughes

I hadn’t even realized it at the time I walked into the room, but the term “Personne de Confiance” had been written about over a decade ago by none other than James E. (Jay) Hughes.

Hughes is a revered thought leader in the family wealth space, and he’s been a regular at the PPI annual Rendez-Vous up until this year.

Maybe I chose this session subconsciously just to get my Jay Hughes fix.

 

Personne de Confiance? 

You don’t need to be anywhere near fluent in French to understand what Fowler and Hughes mean when they use the term “Personne de Confiance”, as it translates rather simply to “Person of Confidence”.

What you may not realize is that the word confiance in French actually translates to the word “trust” as well as the word “confidence”.

So more than just being a “confidence person” (which has some negative connotations) we’re actually back to that old standby, the “Trusted Advisor”.

 

Who’s the Quarterback?

The beauty of most of the PPI Rendez-Vous breakout sessions is their interactivity, and this one was no exception.

Someone threw out the term “The Quarterback” which is so often used amongst advisors who understand the importance of a coordinated approach to serving family clients.

Fowler’s attitude seemed to be that you don’t actually have to be the quarterback to be the “Personne de Confiance”, and I have to agree with him.

 

A Good Number 2

Reading Hughes’s piece on the subject yesterday as I prepared to write this, it struck me that one of the keys to being that “Personne de Confiance” was knowing your place and being comfortable being “a Number 2”.

Of course the Number 1 in this case should be the client/family.

If the client family is Number 1, and I can be their Number 2, should I care if one of the other advisors considers themselves to be the quarterback?

As long as the client ends up getting what they need, I think not.

 

Fluency: Interdisciplinary and Otherwise

Fowler began the session speaking German at the front of the room in order to make the point that it can be very frustrating when you don’t understand the language.

Thankfully there was someone in the audience who also spoke some basic German to engage with him (OK, it was me) to make his point.

I’m pretty sure he used to refer to it as “Multi-Disciplinary” fluency when I first heard him at Rendez-Vous back in 2014. Either way, we’re talking about the ability to understand and be understood.

 

Complexity in Spades

The fact is, family wealth is complex business, and families who have a great deal of it need professional help managing it, figuring out how to keep it, and finding the best way to pass it down to succeeding generations of their family.

They need legal advice, they need experienced CPA’s and tax advisors, and they need a whole bunch of other qualified specialists from other fields too. (See Sharing Some Rocky Mountain Kool-Aid).

 

Who Understands ALL of This?

Most people who specialize in one area don’t naturally have the ability to see the bigger picture and many don’t even really care about the other pieces of the puzzle.

I Googled the word “fluency” and here is the second definition, (the first one dealt with foreign language ability):

 

“The ability to express oneself easily and articulately.”

 

Trust, Clarity, and Coordination

If the client family is Number 1, they’ll most likely crave having a “Personne de Confiance” who can make and keep everything clear.

The multiple advisors whose work must be coordinated also benefit from clarity.

The family client will trust the person who can articulate everything clearly.

That person, or Personne, will need to be fluent in many areas.

Est-ce que c’est clair? Alles klar?

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Ownership: The Forgotten Circle of Family Business

Ownership: The Forgotten Circle of Family Business

On the back of my business card, I’ve got a colourful depiction of the Three-Circle-Model that I often use to initiate introductory discussions about the kind of work I do.

Not that it takes long to draw the Venn diagram on a napkin, pad, or placemat, but since I was struck by its simplicity when I was first exposed to it, I now enjoy sharing the insights it can bring.

 

History Lesson

Harvard’s Renato Tagiuri and John A. Davis came up with the model in the 1980’s when they realized that the old “Two-Circle” version was incomplete.

It was always clear that the Family and the Business overlapped, but it was the addition of the Ownership circle that added an “A-Ha” factor.

 

In Flux Versus Static

Interestingly, while the Family and the Business are both pretty much in constant daily flux, the Ownership is usually static or fixed for decades at a time.

But when the time does come to make changes to the ownership of a family business (and it will), those changes usually affect pretty much everything and everybody.

So the term “forgotten” in the title of this blog, is meant to make the point that we don’t usually give it much thought.

But maybe we should.

 

Some Examples

Imagine a family where the senior generation still owns the business while the rising generation members have solidified their place in the day-to-day operations.

At first they will likely patiently bide their time and accept the situation and “obey” the owners’ directives. But as the years become decades, this situation can become much less palatable.

The issues that arise in this type of situation are often framed in terms of “family dynamics”, which isn’t necessarily wrong, but the best solution to the “problem” may actually come from a change to the ownership.

 

Voting Control

Sometimes families realize that ownership should transfer to the rising generation relatively early on, which often occurs at the behest of an outside expert who suggests some beneficial tax-planning strategies for making these changes.

But often the parents can’t resist the temptation to create complex share structures that allow them to maintain control.

Having ownership without control adds a complicating factor to the Three-Circle-Model.

I’m not exactly sure how to do it, but somehow a modified version of the model might be needed to illustrate those situations where ownership doesn’t include control.

But all I’m trying to do here is to illustrate ways that the ownership circle often affects many of the day-to-day family business issues, even if we don’t give it enough thought.

 

Life Events as a Catalyst

Important life events can sometimes be a catalyst to changing the ownership structure. It’s much more fun when these involve a birth or marriage than a death or divorce.

Unexpected deaths sometimes catch families by surprise and hopefully these cases serve as a poignant reminder to others to get their affairs in order “just in case”.

When there’s a long illness that precedes a death, it’s sometimes a blessing, because important moves and discussions can then take place.

Of course in some cases, family relationships are such that even when the writing is on the wall and death is imminent, the family just can’t come together and have a productive discussion and agree on how the future ownership should be structured.

 

Preparing Owners to be Owners

Luckily, for every situation where families are “stuck”, we now hear more and more about families who are working to get out in front of these situations.

Enlightened families are looking into outside coaches and/or education programs that help prepare future owners to become good owners.

While it’s true that no special training is required to own shares in a company, the people who work in the business can tell you that the ownership of the business, and how they interact with and guide the company, has a huge effect on performance.

 

It Starts at the Top

When things begin to go poorly in a business, the roots of the demise can usually be traced back to the top, and that’s the ownership.

If you’re working with a business family and there are some issues that you’re trying to put your finger on as to their source, don’t forget to ask about the current ownership structure.

There’ll often be some good clues there.

 

Photo credit: Richard Legler

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Sharing Some Rocky Mountain Kool-Aid

Sharing Some Rocky Mountain Kool-Aid

I just returned from another fantastic Rocky Mountain experience: four jam-packed days, over two conferences, hosted by the Purposeful Planning Institute.

This has become an annual trek to Denver for me, which will surely continue for years to come.

 

Four Going on Five

I first attended PPI’s “Rendez Vous” in 2014 and returned again the following year. Last year, they added something new, an additional conference called “Fusion Collaboration”.

I decided to do both in 2016, and I jumped in with both feet again this year.

There was some confusion again, on the part of some attendees at either or both this week, about the difference between these two conferences.

I came up with an analogy that got a great response from everyone with whom I shared it, and the title of this post gives you a clue as to what it’s about.

 

Try Some of this Great Kool-Aid

Fusion Collaboration, the newer portion, is aimed at technical professionals who deal with business families, and families of wealth, and its goal is to introduce these more transactional folks to some of the other, deeper ways that these clients need to be served.

The presenters at Fusion are mostly specialists who work on the less technical aspects of wealth transfer, in what I like to call the “family circle”.

Many people used to call these the “soft side” (and still do), but now it’s more often dubbed “relational”, or “family dynamics”.

Fusion Collaboration is PPI’s attempt to get them to try Purposeful Planning Kool-Aid and “get them hooked”.

 

Let’s Swap Kool-Aid Recipes

By Wednesday evening, Fusion was wrapping up, and many of the lawyers and accountants and transactional specialists were preparing to depart, only to be replaced by a fresh crop of attendees.

The people who came for Rendez Vous, for this, its seventh incarnation, didn’t need to be enticed to drink the proverbial Purposeful Planning Kool-Aid.

Most of these people already subscribe to “Kool-Aid Aficionado” magazine, and they bring their Kool-Aid mixing and serving tips and recipes to share with their friends.

Besides the relational experts, many traditional transactional professionals who’ve become Kool-Aid fans also attend this conference regularly.

 

What’s In this Stuff?

If you’re curious about the main ingredient in this enticing beverage, it was nicely summarized by PPI’s founder, John A. Warnick, in one slide, which read:

                      Purposeful Planning   =   “Client-centric”   +     “Family-centric”

Most professional advisors already recognize the importance of putting the client’s needs and desires at the heart of wealth transition planning,

They also usually understand (in theory, at least) how important it is to bring next generation family members into the picture, preferably early on.

 

Secondary Equals?

Many of those who’ve traditionally driven the discussions around the pieces of wealth and business continuity, and transitions to the next generation, would consider themselves the primary drivers of this important work.

That may be true in the strict “transactional” sense, but more and more families are demanding a more holistic approach, which naturally involves a host of other experts from different, perhaps “secondary” domains.

Ideally, a collaborative group, or better yet, a team of advisors, will work together to figure out and design a complete inter-generational solution, along with the client family.

In order to do this work efficiently, and effectively, it really helps if the advisor team can work as collaborative equals.

 

Who Are They?

To give you an example of the types of specialists I’m talking about, here are some words and titles from some of the business cards I collected this week.

  • Legacy Advisor
  • Independent Trustee
  • Family Enterprise Advisor
  • Facilitator
  • Coach
  • Consultant
  • Psychologist
  • Gift Planner
  • Communications Specialist
  • Family Dynamics
  • Philanthropy Consultant
  • Family Legacy Advisor

And I know I’ve easily missed at least a handful of specialties.

 

July in Colorado 

After the opening dinner of Rendez Vous, as a table exercise, the “Elders” in attendance were asked to share with the “Tenderfeet” why we keep coing back every year.

At my table, most agreed it was the people, all of whom seem to come for the right reasons, i.e. to serve families better.

It’s also a great place to fill up on information, ideas, best practices, contacts, and lots of hugs too.

Oh, and Kool-Aid, of course!

Hoping to see you in Denver in 2018.

Would you like a glass, or a whole pitcher?

Links to previous Rendez Vous blogs:

2016: SWEET SECLUDED RENDEZ-VOUS

2015: RENDEZ-VOUS WITH A PURPOSE

2014: THE RISING GENERATION IN FAMILY BUSINESS

 

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A Pitcher, a Golfer, and a Baby Bird

A Pitcher, a Golfer, and a Baby Bird

Whenever I hear a really good analogy, something in my brain gets triggered, and I want to find ways to remember it, perfect it, and share it.

When people ask me how I come up with blog ideas every week (for over 250 weeks now, and counting) I usually note that the difficult part isn’t in having enough ideas, it’s having too many.

So when I hear the same analogy coming from two completely different areas, I take notice, and I try to find ways to combine them into one blog.

 

The Pitcher

Last week I was watching a Cubs game on TV, and Jake Arrieta was on the mound. The colour commentator was John Smoltz, a former pitcher himself, and a Hall of Famer too.

He was talking about issues Arrieta had been having with control, and Smoltz mentioned that he was working on finding the right grip on the ball in his hand as he threw his pitches.

“You’ve got to think of the baseball as if it’s a baby bird”, he said (I’m paraphrasing here) “You don’t want it to fly away, but you don’t want to squash it either”.

This sounded very familiar to me.

 

The Golfer

Years ago, when I still played golf (or rather “tried” to play golf) I was having issues with a really bad slice.

A slice is when you aim the ball at the green, and you hit it and for the first second that you watch it, you’re really happy, but then the ball just decides to take a right turn, often into the woods.

I don’t recall exactly where the advice I heard came from, but I absolutely remember reading or hearing the story about the bird.

“Think of the golf club like a baby bird, you don’t want it to fly away, but you don’t want to squash it to death either”.

 

Business Family > Family Business

So what the heck does all of this baby bird stuff have to do with family business? I’m glad you asked.

When people think about family business, they usually think about the business part of it. In the term “family business”, the word “business” is the noun.

My preference is to talk about the “business family”, where the word “family” is the noun.

I think I’ve been pretty consistent with this, as even the secondary title of my 2014 book, SHIFT your Family Business, is “Stop working on your Family Business, Start working on your Business Family”.

 

Parenting

When I meet with members of a business family, it usually doesn’t take very long for issues to come up that have a lot more to do with “parenting” than they do with “business”.

And it’s the parenting part that brings us back to the baby bird analogy. As a parent myself, I too have struggled with the temptation to grip the bird too hard.

As a former child, I can tell you that at times I felt like I was a little too “directed” in my life. Being “directed” is a close cousin of being “squashed”.

 

If you love someone…

It saddens me when I meet people in their 40’s or 50’s who work in their family business, and it becomes clear after a short time with them that they’re not really there because they want to be.

If they could hit the “rewind button”, they would have made different choices. Unfortunately, there is no “rewind button”.

These issues almost always stem from the baby bird being gripped too tightly.

Instead of just throwing more balls than strikes, or too many lost golf balls, the consequences are much worse.

 

Go Fly Now

When the baby bird is held in your hands for too long, it will never learn to fly on it’s own.

Even worse, when the time comes that the bird HAS TO fly, and it can’t, because it never got the opportunity to learn to fly on it’s own, parents will often criticize them for not having what it takes.

 

Too Loose > Too Tight

While you may think that it’s simply a matter of finding the right balance between gripping too loosely and gripping too tightly, that may be true for the golfer and the pitcher.

For the parent, gripping too tightly causes far more problems.

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5 Things you Need to Know: Family Vision

5 Things you Need to Know: Family Vision

A few weeks ago in “Family Business: How Do Values Fit In?” I touched on the idea of a “Family Vision”, and I’ve been meaning to get back to it, so here goes.

I’ve decided to make this one of my occasional “5 Things” pieces, much to the chagrin of my wife, who wonders why five is always my go-to number. (It just is, Dear, it just is.)

  1. Values Should Come First

Before you do any work on a family vision, it really makes a lot of sense to do the values work first. The vision is about the future and where you want to go together.

“Oh cool, the future!” you might think, and you may be tempted to jump right in and skip over the values part, but I recommend against it.

The values are about where you are now, and hopefully what all family members agree on about where they are together.

It’s kind of important to know that before you try to figure out where you’re going to go together.

  1. Common Vision Is What You Need

Just as it is important to understand the values that family members have in common, it should go without mentioning that a family vision is supposed to be a “common vision”, for the family, by the family.

But I am mentioning it, because sometimes there is someone in the family who needs to be reminded of this.

A family vision that comes from one person only, and that has been carved in stone by its sole creator, will not be worth the stone tablet it is printed on.

  1. It’s about Discovery and Co-Creation

Once you’ve figured out the values and committed to the concept of the common vision, it really becomes an exercise in discovery and co-creation.

One key is just being curious about where different family members see possibilities, which can open up discussions that you hadn’t thought of before.

Discovering areas where younger family members have passions and finding ways to create a vision together can be very powerful.

If you’ve built a particular business that may or may not excite the younger family members, wouldn’t it make sense to at least hear their ideas and try to find ways for everyone to have a stake in the family’s share assets?

    4. You Can’t Rush This Stuff

One of the bigger misconceptions about any of this values and vision work for families is how long it takes to actually do it in a thoughtful way.

It may sound tempting to try to schedule a few hours or even a day to do all of this. Yes, you could do it that quickly and you could conceivably get some value out of such an exercise.

Ideally, and for best results, this kind of work is NOT done quickly, or in one shot. My preference is to do the values work in two separate sessions first, before even getting to the vision.

Also, the larger the family group, the longer you should expect it to take.

Remember, “If you want to go fast, go alone, if you want to go far, go together”, as I wrote last year (Going Far? Go Together).

    5. It Doesn’t Happen by Itself

One of my favourite expressions is “these things don’t just happen by themselves”, and that’s certainly the case here too.

There can actually be quite a bit of work involved just in getting a family together, and then to get them all to understand the importance of the task at hand.

Depending on their ages and their previous involvement in important family discussions, it may take some convincing for them to actually believe that their input will be welcomed and heard.

The word “intentional” really fits well here. There needs to be an intention to do the work that needs to be done to discover and co-create a family vision.

Make the Investment

In my book SHIFT your Family Business, the letter “I” in SHIFT stands for “Invest”, and it’s all about investing the time necessary to do this important work.

Of course there is a financial investment that goes along with this, but for families with considerable wealth it’s a drop in the proverbial bucket.

The time required is the biggest investment, but those who take the time to get it right will be rewarded by the resulting legacy.

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“Yellow Light Family” – Proceed with Caution

“Yellow Light Family” – Proceed with Caution

Last week’s post (Happy to Be Wrong on FEX) talked about the great symposium I attended in Halifax earlier this month.

If you’re a regular reader (thanks!) you know that one of my best sources of blog material comes from these kinds of events.

I often do some sort of “Top 10” of things I picked up, but I’m going to devote this blog to one specific presentation I attended.

In coming weeks, I’ll likely dig in to a few other memorable sessions from the FEX conference.

 

Green, Yellow or Red Zone?

The symposium had a good mix of sessions; a couple for families only, others just for advisors, but most were open to all.

In this advisor-only session, Jim Grubman of Cambridge Family Enterprise Group presented “Green, Yellow or Red Zone Clients”.

He introduced the concept of the “Two-Axis Model” of wealth advising, with technical issues along the X-axis (horizontal), and personal and family dynamics on the Y-axis (vertical).

In each case, the model ranges from low complexity to high, from left to right and from bottom to top.

The colour-scheme was reserved for the family dynamics axis; green at the bottom, yellow in the middle, and red at the top end.

 

Technical Bread and Butter

Grubman mentioned that as you go from left to right on the “technical axis”, more complexity is usually seen as a positive for advisors.

A family with complex technical needs is often a plus, in that it allows you to showcase your abilities to solve their issues, and to charge accordingly.

The more people, entities, trusts, and jurisdictions a family has to deal with, the more the advisors will relish the task. At least the best advisors do.

 

The Family Dynamics Axis

The vertical axis, on the other hand, where family complexities increase, can be a very different story.

This is where the “traffic light” comes into play.

The low complexity families, with little of no conflict, anxiety, addictions, etc. are where most advisors prefer things to be.

Green is good, because there’s no family stuff to trip you up.

As you begin to see any of those issues, you leave the safety of the “green zone” and get into the yellow territory. At this point many who advise on technical issues (legal, tax, trusts, accounting, cross-border, etc.) quickly feel like they’re out of their depth.

Sometimes it doesn’t take much to raise the proverbial red flag, and get the advisors to scratch their heads wondering if they will be able to resolve the family issues.

 

Break It Down

Here’s where the real value of the presentation came for me. Rather than simply looking at the family dynamics question globally, Grubman breaks it down into several components.

In many cases, one thing sets off alarm bells, but others are hardly any concern.

For example, the sensitive issue could be the family’s level of conflict, their communication style, addictions, perceived fairness, or lack of governance systems.

When you can put your finger on it with greater detail, you’re much better placed to deal with it.

It can also help to look at “state versus trait” variables. There could be a situational factor at play, which may just be temporary. (Traits are fixed, while states are transitory)

 

Isolate the Issues

When the advisor team can share their views using this type of breakdown, they can pinpoint the issue more easily.

A family that looked red, or “very yellow” can look much less daunting once you see that there is really one key issue that is flashing, and that the others are pretty green.

 

Coordination and Collaboration

Now I’m gonna switch from what Jim Grubman was saying to Steve Legler’s take.

No single advisor will be able to handle a family with any complexity above green, on either axis.

Technical professionals work together to solve the family’s asset-related issues. On the family dynamics side of things, the same should also be true.

Families will benefit from advisors who can coordinate their activities at a minimum, and hopefully even collaborate.

 

Inter-Disciplinary Fluency Helps

FEX’s FEA Program helps advisors develop the inter-disciplinary fluency they need to properly serve families.

Knowing what families need, and how the pieces all fit together, is key. And so is being able to work together.

Tools like Grubman’s help us all do a better job for families.

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Happy to Be Wrong on FEX

Happy to Be Wrong on FEX

Last week I had the pleasure of taking part in the inaugural FEX Symposium in Halifax, Nova Scotia.

It was the first national event of Family Enterprise Xchange, the successor organisation of both CAFÉ (Canadian Association of Family Enterprise) and IFEA (Institute of Family Enterprise Advisors).

The launch of FEX over the past several months has not been without its share of bumps in the road, as one might expect when combining groups with different histories, cultures, headquarter cities, boards and staff.

CAFÉ had been around for over 30 years and primarily served business families from its HQ near Toronto, while IFEA was still in its first decade, serving those who advise business families, out of Vancouver.

One Big Tent

The idea to take these two groups and put them together under one big tent was already pretty ambitious, but there were also a dozen or so local chapters that needed to be dissolved and centralized.

From the time it was announced in 2016, I liked it, “in theory”, yet I was sceptical about how it would play out “in practice”.

There were more times when I feared the worst. As we wrapped up the final session, I happily admitted that I was wrong.

 

Plays Well with Others

Back in the early days of CAFÉ (the 1980’s), my Dad had joined and really got a lot out of the organisation, especially his PAG (Personal Advisory Group), so I had my own historical connection there.

Now, as one of over 250 “FEA” designates who did the FEA program and passed their rigourous written and oral exams over the past few years, I have an even more personal connection.

I’m also well aware of the fact that some families aren’t really comfortable surrounded by so many advisors, feeling a bit like chickens mixing with foxes.

As an advisor who came from the other side, I feel like I “get it”, and know how to behave less like a fox. I had less confidence in my fellow advisors, however.

 

Fearing the Worst

I was worried that some advisors would not appreciate the families’ discomfort with having so many of us around, and that they might behave in ways that justified the families’ reluctance to attend.

Once again, I am happy to admit that I was wrong.

As it turned out, there was a critical mass of advisors, such that we mostly stuck together, with many friendly groups from the same class cohorts spending lots of time together.

 

Stronger Together

The families who attend FEX are there to learn, and the advisors who have done the FEA program have demonstrated that they too are aware of how important it is for them to learn and stay abreast of leading edge thinking in the field of family enterprise.

In the early days of writing this blog, my marketing people would ask me if I wrote these blogs for families or for their advisors.

My answer was always a sheepish “Yes (?!?)”

I write for the families looking for guidance AND for the advisors who are trying to provide the best guidance they can for those families.

It isn’t “either/or”, it’s “and/both”.

I also write for me, to force myself to clarify my own thinking.

Yes, some of my posts are more slanted to advisors and some are more directed at families, but how different are the messages? Not that much.

And so it is with FEX. There are families and advisors, and all of us are trying to do better and help each other do better.

 

Great Start, More to Come

The Halifax event was a great start, and I know that the FEX team is well aware that much work remains to be done.

They have planned the 2018 Symposium for late September, in Niagara on the Lake, so they will benefit from:

  • A few extra months to prepare
  • A time of year with less conflicts for many
  • A more central location
  • A very successful kickoff event in Halifax in 2017

Congrats to all involved in making it a success. It was an awesome event. I really did not expect it to be, and I am so glad to admit that I was wrong.

(It wasn’t the first time, and it won’t be the last.)

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