The human dimension of family business succession planning

Date: 29 January 2020
Take outs
  • A skilled family business adviser will place as much emphasis on resolving family issues as on resolving business issues
  • Many family business owners avoid succession planning, due mainly to personal and family reasons
  • Family business challenges are best dealt with at a family meeting, as opposed to a board meeting

Financial advisers have an opportunity to be more effective in supporting family business succession planning if they can help to resolve family relationship issues as well as technical business challenges.

David Smorgon OAM is the CEO of Pointmade, a consultancy that provides family advisory services, succession planning, family conflict resolution and family wealth protection.

In the Netwealth webinar How to transition a family-owned business, David guides participants through the process of helping to improve communication and commercial effectiveness in a family-owned business, drawing from his experiences at Pointmade and Smorgon Consolidated Industries, one of Australia’s largest family businesses.

From David’s perspective, while most financial advisers are adept at providing astute technical (financial and business) advice to support family business succession planning, they sometimes have less expertise in dealing with the human dynamics and nuances that affect family businesses.

Family members are often too subjective, emotive and biased to successfully plan their business succession. The input of a skilled, independent adviser (who is used to dealing with families) can, therefore, be critical to the long-term effectiveness of family business succession planning.

Advisers, therefore, have an opportunity to learn the skills that can enable them to serve as unbiased facilitators who can help enhance personal relationships between parents and children, siblings and other family members who are stakeholders in private businesses.

A skilled adviser will place as much emphasis on resolving family issues as on resolving business issues. They will facilitate effective communication between family members. They will help to resolve conflicts within families. They will also help to enhance trust between family members.

Succession planning avoidance

Many family business owners avoid succession planning, even well into their 70s and 80s, suggests David.

This is for several reasons. For example, succession planning can raise unpleasant family issues (e.g. which child should take over running the business). Succession forces owners to confront their mortality. Owners are often too busy doing day-to-day tasks. They may fear a loss of control. They may fear that a succession plan will reduce their options. They may also not know how to plan. “These are some of the issues family business owners have to overcome,” says David. “And global research says the best way to deal with this is by having family meetings, as opposed to board meetings.

“There needs to be a family meeting with an independent, trained facilitator to deal with some of these issues in a way that takes the emotion out of it – in a way that still pays respect to family attitudes and culture but develops (together with all family members) a way forward.”

David emphasises that the critical role of the trusted, independent facilitator should not be underestimated. They should participate in the family meeting as an adviser who is there to benefit everyone, not just the owners (or the “mum and dad”). This adviser should ensure that everyone has a voice in a safe environment.

Understanding family divisions

“The first thing I do in this situation is to meet with the parents,” says David. “And the most important thing would be to understand what they want to achieve? My first question is ‘What really matters to them?

I would then spend some time, individually, with each and every family member to peel back the layers, for them to share their answers to the same questions, ‘What really matters to you?’, ‘What are your concerns?’, ‘What's your vision for the family?’, ‘What values are important to you?’

“When you have the opportunity to speak to every single family member, you can then put down what issues connect them and what areas divide them? That's what you then have to work on.
“It’s a process of going back and forward and then, at the appropriate time, bringing the family together to explain exactly what you've heard.

“Obviously, you protect confidentiality, because otherwise, people are not going to be open and honest with you. If you can do this, the common themes and issues that divide them become a talking point, which leads to other discussions about values and vision.

“Once you have the words, you can proceed to a common vision and values, which then drive the actions and behaviours of the family. And you can work out a family plan.

“It's a process. An independent, trained facilitator will give everyone a voice. That way you can start achieving family unity.

“Family unity and continuity don't just happen. You have to spend the time and effort on it.”

Skills and temperament

Not every financial adviser, however, will have the appropriate skills or the temperament to be effective as a family facilitator.

“In my experience with families over the past 10 years, I’ve noticed that, unfortunately, there are a lot of very skilled, capable people giving very poor advice on family matters,” says David.

“A lot of these people are investment bankers, for example, as well as financial advisers. It's very difficult to become an expert in the qualitative sides of life. Most advisers are not comfortable asking someone about what's keeping them awake at night, or what issues really matter to them, or what concerns them about their children.

“These are difficult areas, and most financial advisers are much more comfortable with the quantitative side of life, involving numbers, margins and returns. That's their sweet

I'm also not sure their clients are going to be comfortable about their adviser going into this area, because they're stepping out of their comfort zone.

Find out more about family business succession planning

Listen to the Netwealth webinar How to transition family owned business for additional insights on family business succession planning, or contact Netwealth.

Hear more from David Smorgon OAM

David Smorgon OAM, shares his learnings in leadership, values and family business succession from his journey with Smorgon Consolidated Industries, his experiences with family-owned companies and saving the Western Bulldogs football club.

Read the transcript

You can also listen to this episode on iTunes, Spotify, Soundcloud or Stitcher.



Latest: Managed accounts during volatility and beyond

Four advisers share how managed accounts can enhance your client value proposition.

Download the report

Special reports: Take a deep dive

Our collection of guides take a deep dive on topics including AdviceTech, managed accounts and cultural trends.

Access the reports

Podcasts: Between Meetings with Matt Heine

Netwealth's Matt Heine chats to industry thought leaders on the opportunities  they see for financial advisers.

Listen to the episodes

Webinars: Grow your Business IQ

Recordings from our monthly webinar series, covering a range of  topics presented by industry professionals.

Watch the presentations


Views expressed are of the interviewee and may not be the opinion of Netwealth or its related companies.