Too Many Cooks In The Transition Kitchen?

Many family business leaders I speak with are confused about how all the various advisors fit into the transition and succession picture, and how the process and components connect (Unanimous Shareholder Agreements, Wills, Trusts, Estate Planning, Wealth Management, Insurance, and so on). The business owner has usually not gone through transition before, and so how it all works, and how various supporting experts add value, can be a bit of a mystery.

The first thing I tell everyone is that good advisors always honor the other team members in place for any given family and their business. Advisors are there for a reason – they usually have excellent and trusted relationships with the family, have provided good service over a long period of time (family businesses are generally very loyal clients), and are good practitioners. The odd time where I find there are no qualified advisors (and the client asks), I can recommend qualified advisors who I know does good work. However, Predictable Futures does not do any technical work for clients, be it legal, accounting, wealth management, or insurance.

When most family business clients meet with their advisors, they are there to address specific technical and transactional issues: wills, estate planning, financial advice, legal agreements, and so on. As a result, too often the underlying issues that need to be discussed and resolved in order to effectively address the technical needs do not get raised or addressed.

Of course, it is not that the advisors do not care, or are necessarily unaware of these underlying concerns. In fact, the advisors pretty much always care, and bring tremendous value on technical issues.  But do not typically have the time or skillset to help the family navigate the sensitive relational issues.

One thing I see frequently is that advisors to business owners tend to develop solutions to the technical issues which are specific to their profession in isolation from other advisors. This is natural, but there are often unintended consequences which stem from these disconnected solutions. Examples include accounting structures and shareholder agreements that do not align, insurance products in place which do not support the needs of the shareholder agreement (such as buy sells), and so on.

This is why it is important to take a holistic approach to transition planning, that incorporates all of the advisors, the structures and documents that govern ownership and the business as a whole, as well as the personal documents that come into play in the case of death or incapacitation.  It is critical to make sure that your transition, or family relationships do not go off the rails simply because the right and left hands are not coordinated. And this extends to others in the family as well, since it is common to have similar effects happen between spouses, children and parents, and sometimes between siblings.