Financial advisors are an ‘old’ bunch – with an average age in their mid-50s and a big bulge of advisors now in their 60s and 70s. If that didn’t already pose a risk to their clients, the COVID-induced recession means that many of them will leave sooner than expected – either by choice or otherwise – and may choose to retire completely in the current economic environment. Merrill Lynch, perhaps in response to both issues,…
During a crisis, having a family business can be a double-edged sword. On one hand, there are often family elders with experience in overcoming previous recessions, support from the family unit, and the fact that family businesses tend to be more risk averse and therefore in a better position to weather the storm. But some of those very attributes can also manifest as weaknesses. For example, family businesses have a concern for a wide range…
When family wealth is controlled or owned by a single person (usually the wealth creator), things are simple. But at some point, the wealth will likely pass to more than one person – the wealth creator’s children. In respect of the family wealth, the members of the family are bound together through three circles of involvement: family, business and ownership. That adds a huge degree of complexity, as no decision gets made in isolation. Strong…
Most wealth is created through entrepreneurship: taking a risk to start a business, and growing that business. Some families with generationally “old” money (i.e. more than 3-4 generations removed from the wealth creator) may have their family wealth in passive assets, and the entrepreneurial spirit that created it is long gone from memory, sometimes irretrievably lost. For families that hold (or acquire) operating assets, it’s important to maintain that entrepreneurial spirit in subsequent generations, but…
When it comes to advisors, I have two simple rules: Get good advisors Listen to them Family advisors need additional skills because they must work with the various members or governance structures of a family, and key people & structures may change with time. They need to know about communication, in order to help the family members themselves communicate well. They need to understand family dynamics, and get to know the ins and outs of…
David reflects on the attitudes of second generation Holocaust survivors to individual Germans and the German people [featured post on Times of Israel].
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…
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)…
Successful entrepreneurs are often control freaks. But they can’t control whether their children can take over the business or the assets and keep them growing. Entrepreneurs may be visionaries, but sometimes it takes an external advisor to identify choices that they might otherwise overlook. Transferring full control of an operating asset to children isn’t the only option. Neither is continuing the way things have always been done just for the sake of it. The drive…
The cobbler’s children go barefoot: Advisors don’t spend enough time thinking about their own succession and exit planning. Like most people, many are too involved in the day-to-day work. But like family businesses, exit planning for advisors is not just a financial transaction, but is also the chance to leave a legacy. The wealth management industry is ‘old’ – the average age of financial advisers today is about 55, with 20% of them 65 or…
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