Rick has extensive experience with high net worth individuals and families, working with them in both a financial and governance capacity. He thrives on understanding the business and entrepreneurial journey of individuals and families and then using creative and strategic thinking skills to help them succeed.
Be careful what you say—people may remember.
I had a client who once made a comment to his son-in-law that, “yeah, one day you’ll be running the family business.” The son-in-law had married the eldest of the founder’s four kids. So, in his mind, he was cemented as the de facto oldest son and the two younger brothers were further down the family tree.
Well, not quite. By the time I got involved, the founder decided to “misremember” and pass the business to the two younger biological sons. And the son-in-law? “Well, at the wedding, when I said I treat you like my own son, I didn’t expect that to be taken literally.” The expectations of the son-in-law were subsequently dashed and things turned ugly. Needless to say, Humpty was never put back together again.
Expectations will tend to shape motivation. To what extent does a person feel entitled to a business as opposed to having to work for it? If someone feels that they are “entitled” to something from certain people or institutions this may undermine a sense of self-reliance, pride in one’s hard work and accomplishment or taking initiative. What does this have to do with family wealth planning? Everything.
This raises the question of the expectations of various family members when it comes to taking over a business. This can be a big problem. In my experience, it is typically psychological dynamics, such as expectations and a sense of entitlement, that derail a transition strategy. It is rarely ever the technical aspects of the transition.
Further, addressing psychological dynamics as part of a family succession/transition plan means that it is more a process—and not so much an event. In my experience, this can take years. Much planning and meetings may be required to unpack a lifetime of people’s views and miscommunications.
There may be well-meaning parents who have wealth, whether a business or sundry assets, and who are thinking of passing it on to the next generation. The issues are many. How to “pass” it on? To sell it? To gift it? What about the other siblings? In a business, do you need to work in it to own some of it? The questions are an open-ended Pandora’s Box.
In the context of a family business, does the succeeding generation grow up thinking that one day they will simply take over the corner office? Should transition be based strictly on a meritocracy? Does their competence match the responsibility? Wealth passed on to people without the skill and wisdom to manage it will be a catalogue of disasters.
Yet, this challenge can be addressed and overcome, as many clients have demonstrated. Dealing with family dynamics often requires a deft touch and finesse. There are best practices. The transition process works best with unentitled, well-adjusted kids who are not economically dependent on their parents and who have expectations in harmony with their economic realities. See The Millionaire Next Door.
In short, within the family business recognize the necessity of dealing with a sense of entitlement. It usually needs to be acknowledged and unpacked. It can take a long time to undo a pattern of expectation that has taken a lifetime to develop. It must be done and can be done. It may take time, but this is no time to risk your life’s work.
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities commissions.