Maximizing the impact of your family business across generations

SUMMARY

Extending the wealth and legacy of a family business long into the future requires more than just good leadership and smart investments.


How long will the legacy of my family business last? Founders and executives of family-run businesses ask me this all the time. While they may have different goals for their growth and wealth, most want to know that their life’s achievements will endure, supporting as many subsequent generations as possible. But this is easier said than done.

Just because the founder of a family business is successful in their leadership, more is needed if those who follow in their footsteps are to succeed, too. Often, a family’s wealth barely lasts three generations, so how can we expect a family business to do any better? What can we consider doing now to pass down that business more effectively? With a comprehensive plan that includes nurturing the next generation of responsible adults prepared to make a meaningful impact on the world, we can avoid problems and better ensure an enduring legacy. The sooner we start planning, the better.

Develop a thoughtful wealth plan

Extending the wealth and legacy of a family business long into the future requires more than just good leadership and smart investments—it takes a well-developed plan. Business leaders need to clearly understand their financial goals and values, use those to guide investments, and build a diverse portfolio aligned with long-term objectives. It should include a strategy for asset protection and tax efficiency, as well as a timeline for regular review and adjustment as necessary depending on market changes, laws and the family’s evolving needs.

Another challenge in next-generation wealth planning is determining who wants in or out of the family company. Who will take over, how will other family members balance that power, and what happens when someone chooses not to be involved? Does that person keep an ownership stake, or will the rest of the family pay them to exit the business completely? Managing these dynamics requires a harmonious and well-communicated strategy, including thoughtful and thorough discussions around each family member’s wishes. Defining these early on prevents bigger problems down the line.

Planting the seeds of sustainable wealth management

Seeking to ensure family businesses continue growing wealth requires bringing the next generation into the business’s wealth and development planning. Unless those inheriting or taking over a family business align with its values and priorities, they may make decisions that hinder reaching the

company’s long-term objectives. Current leadership should have a plan in place to prepare the next generation for successfully carrying on the family business.

Include mechanisms that will nurture those with ambitions to take on leadership roles so they understand its goals and core values from a young age. Host education and leadership programs that expose them to best practices from other successful family businesses that have lasted generations.     

To help our multi-generational clients prepare their next generation of leaders, we at Citi Private Bank engage academic institutions worldwide on education and engagement initiatives. These include a business leadership summit, an idea-sharing conference and a deep dive into best practices. Bringing together multiple generations of family members with world-class professors, we examine case studies and explore experiences of multi-generational business success. 

Additionally, if you have a multi-generational family business, invite family psychologists to attend family board meetings and let them observe, guide and ensure everyone’s thoughts and feelings are on the table. By promoting, teaching and discussing the best practices of good family governance, we encourage chances of long-term success and harmony. 

Embrace the guidance

Planning for the future of your family business can be complicated, so look for service providers that do what you need well: investments, banking or lending, or comprehensive wealth management and advisory. They should be familiar with the needs of your industry and market or other specific circumstances, like family members operating as business agents from outside of the home country, as well as the different laws and tax structures that will apply to them. Quantitative analysts can help current leaders conduct regular business health checks, which provide a detailed analysis and holistic perspective of all holdings—both liquid and illiquid—in one place to identify areas for improvement.

Planning for the next generation of leaders is not glamorous, but it’s necessary. The more proactive current leaders are about building that plan, the better off the company’s legacy will be.

  • Start nurturing your family to carry that legacy on long into the future.
  • Begin planning for wealth transfer and managing next-generation wealth as soon as possible.
  • Include education and sharing of best practices with those who will be managing it.
  • Engage an attorney, write a will, and ensure your wishes are clear to your trustees.

The sooner current leaders start planning, the better prepared their family businesses will be to grow in the right way, in the hands of the right leaders, making the right investments for sustained health over longer-term horizons.

 

Trust & wealth planning

We help you create a thoughtful wealth plan that seeks to preserve your legacy, protect your life’s achievements, and ease the transition to future generations.

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