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Advisors can stand apart by helping clients groom the next family leaders

Some families might welcome the resources needed to undertake the next generational transition

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Those who work with enterprising families in general, and in the family office world in particular, often notice that a vast majority of everyone’s focus is on the tangible assets that the family owns.

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That should not be much of a surprise, as wealth can be measured and is easier to think about, talk about and try to maximize.

Some specialists, though, myself included, lament that with so much focus on what we might call the “business circle,” not enough attention is paid to the “family circle” or the “ownership circle.”

Lest this talk of circles seem bizarre or new to you, allow me to share the Three Circle Model, from 1982, by then-Harvard professors Renato Tagiuri and John Davis.

Three interdependent systems

Davis, working with Tagiuri, first started with a “Two Circle” model of Business and Family, and added Ownership later on.
For the purpose of this article, I will rewind to the earlier days as well, and focus on the Business and the Family. The rest, as they say, is “beyond the scope of this article.”

Consider the interdependent systems, such as those in the model, and notice the overlap areas of the Venn diagram.

Those overlaps are where all the important things happen, and where things tend to become murky.

Experienced practitioners in the family enterprise space will tell you that each of those circles is a sub-system of the overall system.

So, you may be wondering, what are the characteristics of each of those sub-systems?

Membership, leadership, governance

The first and simplest item to consider is the membership of each system, by which I mean the people who comprise the system.

In a family business, the overlap of people who are part of the family and also part of the business is often an area where things can get hairy, especially compared with other family members who don’t work in the business, as well as employees who are not part of the family.

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In the family office world, it’s often the case that when you list the people in the family and then those in the business, there is much less of an overlap. That brings with it both plusses and minuses, as we will soon see.

The other areas that are important to consider when looking at these systems are their leadership and their governance.

Because each of the systems is comprised of different groups of people, it follows that they should also each have their own leadership, and their own governance.

This is because both systems, the family and the business, also each have their own purpose and goals.

Family office vs. family business

For people who aren’t part of the family, whether you work in an operating business or a family office, it’s easy enough to do your job blissfully unaware of the family’s needs, or even their existence.

But I’d suggest you do so at your peril.

In a family business, if you work for someone who has offspring who come to the office as children and for whom a future role is discussed as they grow up, it is harder to ignore the fact that these rising-generation family members may become your work colleagues someday in the future.

In a family office, that is less often the case, although it certainly can happen, and it does, just much less frequently.

In any event, everyone needs to realize that for a family office, the ultimate stakeholders, by definition, are the family members.

And while I stated that I wouldn’t spend much time on the Ownership circle, all employees of a family office need to recognize who the ultimate owners are.

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Developing family leaders

For those who work in a family office and who are not part of the family, the subject of developing family leaders may seem like something that is none of their concern. My advice is to look at this as if it is very much your concern.

Much like any professional service providers to wealthy families, developing a relationship with the next generation of family clients is of huge significance, to ensure the long term nature of the relationship, up to and through the next generational transition.

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There is surely at least one family leader in the current generation who leads the relationship with the family office. That person or people will not live forever, I can guarantee that.

So it behooves the family office leaders to make sure they get to know the future leaders.

And what if those leaders do not yet exhibit any visible signs of leadership? Hmmm. What if you could help them develop that leadership?

The generative alliance

Dennis Jaffe, a veteran of this space, talks about a “generative alliance” that always forms a key part of any multigenerational family. (See: Legacy Families Rely On a “Generative Alliance.”)

I have dubbed it a “generative trinity” because it’s made up of three groups of people: the current generation of the family, the rising generation of the family, and “non-family employees, advisors, and board members.”

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I see key family office employees as an ideal combination of non-family employee and advisor, considering the fact that the family office’s “customers” are the family, and everything they are doing is (ostensibly) for the family and its members.

An opportunity to stand apart

Most of the people who work in a family office are not very aware of the family and its members, and for them such ignorance may be bliss.

However, I see it as an opportunity for some to try to make a difference. Some of the families who own a family office have not sufficiently thought through their next generational transition.

Some might welcome the resources required to help them work through this thorny question. Ultimately, a family office exists to serve the family and its needs.

Family office leaders who recognize the need to help develop leaders in the family can stand apart. If you only concentrate on the Business circle of the family office, while ignoring the Family and Ownership circles, that might come back to bite you some day.

Becoming a key part of the next successful generational transition can and should be part of the role a family office can play, and that is a sure win-win. Being the bridge between the generations of the family will pay dividends for everyone.

Steve Legler is a Family Legacy Guide based in Montreal. He grew up in a business family, destined to take over the company his father had founded before he was born. After an unexpected liquidity event while he was still in his 20s, he ended up managing their family office instead. In 2013 he stumbled into the Family Enterprise Advisor (FEA) program, which turned into a career-changing calling for him. Since then, he’s been working with other business families as they face the challenges surrounding their intergenerational transitions. He works with family clients as a facilitator and sometimes as a mediator. He also does individual coaching with family members. He is the author of SHIFT Your Family Business (2014) and Interdependent Wealth: How Family Systems Theory Illuminates Successful Intergenerational Wealth Transitions (2019). He is active in many associations for professionals who work with families; as a member of the FEA Council of Family Enterprise Canada (FEC); as head the Wisdom Expedition of the Purposeful Planning Institute (PPI); and as a member of the faculty of the Family Firm Institute (FFI) global education network (GEN) program.

Steve Legler
Steve Legler

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