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‘You have to take the odd risk to develop and grow the business’

Family business experts share the best advice they’ve given to companies and individuals

‘We also said if no qualified candidates presented themselves, we’d look outside the family.’ Photograph: iStock

‘We also said if no qualified candidates presented themselves, we’d look outside the family.’ Photograph: iStock


From geopolitical uncertainty to real estate bubbles, the world is full of risks to investment portfolios. Yet the biggest threat to a family losing its wealth over generations may be internal. Fights over succession planning or individual investment decisions can pull a family and its hard-earned fortune apart. Here, wealth managers and multigenerational businesses share some of the most effective advice they’ve given on how a family can build a solid governance structure that will stand up against both external and internal threats to a legacy.

Amy Szostak is chief fiduciary officer and co-director of family education and governance at Northern Trust Global family and private investment offices: “We worked with one family who was struggling with the transition of decision-making power from G1 [first generation] to G2. The process of identifying a few shared values allowed the family’s vision to reveal itself. As it turned out, their definition of success was to create an environment that supported G3 preparedness to serve on the family boards. With G3’s ages spanning more than 30 years, the mission had to be flexible and customisable. We worked with the family to develop an education plan that would be reviewed annually and tailored to each G3 member’s needs with guidance from each family unit.

“Today the family has successfully transitioned the leadership of the family enterprise to the second generation and has seven G3s serving in various roles in their governance structure.”

Anthony DeChellis, chief executive of Boston Private Financial Holdings, says: “Often in large families with considerable wealth, there is a group usually older that winds up being stewards for the family. Resentment can grow, because some members who haven’t been active participants find themselves in their 30s or 40s and not involved. Later, they’ll find almost any reason to be critical.

“We advised one multigenerational family to set expectations about returns, because someone is going to go to a cocktail party and hear about some hedge fund up 40 per cent and say, ‘Why aren’t we making that?’ Rather than defend yourself, say, ‘This is the return we are aiming for; this is the risk we are taking. We may aim for larger returns with a portion, but the core portfolio is in conservative assets.’

‘Understand strategy’

“Family members need to understand strategy at a high level. It’s more peaceful after that.”

Matthew Fleming, head of family governance and succession at wealth management company Stonehage Fleming, says: “We have a UK-based client at the moment who is a successful entrepreneur. The client built up their business themselves and was concerned about its future and the relationship between the family and the business. They were worried about the impact of the business, which is a brand and quite cash-generative, on the motivation and values of their children. In their attempt to de-risk the intergenerational transfer, they were in danger of being so cautious and taking no risks at all that the lack of risk-taking might be a threat. There’s reckless caution when you get so frightened of making a decision that you end up being more of a danger to the future of the family business.

“While we are helping this family recognise appropriate risks and putting mitigating strategies into place, we’re also, when necessary, encouraging them to take the odd risk. You have to in order to develop and grow the business of the family.”

Willem Van Eeghen, former managing director of the Van Eeghen Group: “I think succession is different in every generation. The way we handled the hiring of [current Van Eeghen Group managing director and cousin] Jeroen was excellent. We outsourced the hiring process. In 2011, the supervisory board sent a letter to the broader family and said I was about to retire in a few years. We also said if no qualified candidates presented themselves, we’d look outside the family. People had to send a cover letter and CV. They made a committee with an external head hunter with a HR person, and they did the preliminary assessment. The more objective you can make things, the better it will be.”

This story appears in the Family Office special report from Bloomberg Markets