Is your business ready for the next generation?
Succession planning for a family who starts a successful business has its own set of complicated issues. One family had embedded their family office in their business of real estate construction and ownership of commercial property. The patriarch’s selection of a younger female sibling started a family feud. All of her siblings were brothers who were older than her. The patriarch made the decision with no advance warning and little explanation. Needless to say, it might be okay to run your operating business this way, but when the family office is a key component, decisions can have unintended consequences.
Succession planning is a topic many family offices put off. Practically, succession planning is often seen as a less-than-pressing issue when compared with all of the immediate needs of an operation. According to an RBC Wealth Management/Campden Wealth report, in 2021 only 50% of North American families had a succession plan in place. Of the existing plans, only 48% were formally written.
It can be hard to focus on succession planning when the work won’t be used for a long period of time. It is also unpleasant to think about a key member of your family office resigning or passing away. But the health of your office depends on a strong succession plan.
Leaders must invest quality time or the succession planning process will fail. Key stakeholders in the next generation need to play a role in creating a successful succession plan, and in building strong relationships with possible successors. Families should look to the future, and what the family office will need then, not what’s of importance now or in the past.
In a new FINTRX/Charles Schwab report on family offices, Eddie Brown, National Managing Director and Head of Schwab Advisor Family Office says family offices must “nurture the next generation of leadership for succession planning,” and that “the most successful modern family offices are addressing these challenges by investing in their people and establishing attractive incentive plans.”
It’s best to start small, focusing on filling key roles before moving on to less critical placements. You’ll also want to cultivate the younger members of your family, discussing career goals with them and making sure they’re in the loop regarding key discussions and decisions.
Unfortunately, in a serious challenge to succession planning, many offices see impediments in terms of activating younger people in the family. A BNY Mellon Wealth Management survey found that 45% of family offices believe that the next generation of family office leadership is generally more difficult to engage, and 25% of family offices say they are not equipped to engage the next generation of leaders.
One of the ways to ensure a smooth succession plan is to work with an experienced advisor who can find the best way forward for your family office. At Cendrowski Corporate Advisors we have over 35 years of proven financial advisory experience you can call upon for your family’s succession planning needs.