The biggest challenge for a private company board

The People Factor: The Biggest Challenge for SME Boards In the world of small and medium enterprises (SMEs), the most significant issues often boil down to one thing: people. Imagine a business run by five individuals, with a board overseeing their efforts. Now, picture two of those board members who simply shouldn't be there. This scenario is more common than you might think, and it underscores the critical need for retooling both the management team and the board itself.

Private Equity's People Problem Private equity firms consistently find that their biggest challenge is people. Recruiting the right board directors is paramount. It's not just about filling seats; it's about getting crystal clear on the specific skills and attributes needed for each board. A thorough skills assessment is essential, diving deep into the granular details to ensure the right fit for the board's unique needs.

The Perils of a "Gotcha" Attitude One of the most detrimental attitudes a board can adopt is a "Gotcha" mentality, where the primary goal seems to be catching the CEO and management team off guard. This approach is counterproductive and shocking, considering that the board's role is to support and motivate the management team. Boards must remember that they are there to help, not hinder.

Fiduciary vs. Advisory: Clarifying Roles Is your board fiduciary or advisory? This distinction is crucial. Everyone around the table must have clear expectations. Without alignment, the board and the company are destined to go nowhere. Understanding the voice of the shareholder is also vital. What do the shareholders expect? This clarity can guide the board's actions and decisions.

The Importance of a Board Charter Every board should have a charter. This document outlines the role of the board, helping to define its mandate. When new directors come on board, the charter serves as a valuable reference, detailing the terms of reference and the time commitment required. It ensures that everyone is on the same page from the start.

Independent Shareholders: A Valuable Asset The size of the board matters, and independent shareholders are becoming increasingly useful. Unlike shareholders with a vested interest, independent shareholders don't have skin in the game, which can help keep the board out of trouble. Their impartial perspective is invaluable.

Committees: Do You Need Them? Committees can be beneficial, but they should be used judiciously. Ad hoc committees can address short-term projects effectively. However, without a clear board charter, even the best people can't contribute at their highest level. Structure and process are essential.

The Need for Structure People need structure to thrive. An annual calendar with key meetings scheduled in advance is crucial. Board materials should be prepared thoughtfully. Sending out 200 slides 24 hours before a meeting is a waste of time and does not allow for meaningful discussion.

In conclusion, the success of SME boards hinges on the people involved and the structures in place to support them. By focusing on the right people, clear roles, and effective processes, boards can truly make a difference in the trajectory of their companies. Remember, it's all about people, process, and purpose.

Why Every Entrepreneur Needs a Financial Advisor

Entrepreneurs, let's face it: your business is your baby, but putting all your financial eggs in one basket? That's like betting your life savings on a game of Monopoly. Don't be a one-trick pony. A financial advisor can help you spread your wealth across stocks, bonds, real estate, and maybe even another business venture. Think of it as not just protecting your wealth but also giving it room to breathe and grow.

Master Cash Flow Management: Cash flow for entrepreneurs can be as unpredictable as the weather in April. Know where your money is going. A financial advisor equips you with the tools to forecast, budget, and sometimes, just hold on tight. They'll help you secure lines of credit when the sun is shining.

Prioritize Retirement Planning: Retirement? What's that? For many entrepreneurs, it's a distant dream. But many entrepreneurs are saving zip for retirement. A financial advisor can turn this dream into a reality with strategies like Cash Balance Plans or leveraging life insurance for tax benefits. It's like planting a tree today for the shade you'll enjoy tomorrow.

Develop a Succession Plan: "What happens when you're not around?" Whether it's selling, passing the torch, or dissolving, a succession plan is your business's exit strategy. A financial advisor helps you navigate this complex terrain, ensuring your legacy continues or your assets are distributed as you wish, not as the tax man wishes.

Protect Your Assets: Entrepreneurs, you're not just playing the game; you're the game. Legal risks are part of the territory. You know the importance of asset protection. A financial advisor can set up structures to shield your wealth from business liabilities, ensuring that if your business takes a hit, your personal life doesn't follow suit.

Conclusion: Wealth management for entrepreneurs isn't just about making money; it's about keeping it, growing it, and ensuring it lasts. With a financial advisor, you're not just planning for today; you're securing your financial future. Remember, in the marathon of wealth-building, having a guide who knows the terrain can make all the difference. So, let's not just dream of wealth; let's strategically plan for it. #Entrepreneurship #FinancialPlanning #WealthManagement

Retirement planning often takes a backseat for entrepreneurs

Many people start a business with dreams of getting rich – which is not necessarily unrealistic. Roughly 88% of millionaires are self-made, meaning they did not inherit their wealth, but instead earned it through entrepreneurship or other means, according to research from Fidelity Investments. But getting wealthy does not happen overnight, especially for entrepreneurs known for their risk-taking ability and innovative mindset.

Wealth management for entrepreneurs involves a comprehensive approach to handling personal and business finances, focusing on growing, protecting, and efficiently utilizing the wealth generated through entrepreneurial ventures. It differs from traditional wealth management due to the unique challenges and opportunities entrepreneurs face.

“Research suggests that financial literacy gaps impact wealth, and individuals who actively engage in comprehensive financial planning tend to achieve better long-term financial outcomes compared to those who do not,” says Charmaine Green-Forde, Founder and CEO of Chapter Too, an organizational and leadership development company.

Let’s look at five strategies entrepreneurs can use to build and manage their wealth so they can achieve their goals.

1. Diversify Beyond the Business

“Entrepreneurs often have most or all of their wealth tied up in their businesses. While reinvesting in your business can be a powerful growth strategy, it's equally important to avoid having all your financial eggs in one basket,” explains Todd M. Villarrubia, founding partner of Wealth Planning Law Group. You never know when something out of your control, like a global pandemic, can completely disrupt your business plans, jeopardizing everything you have worked so hard for.

“To mitigate risk it’s important to invest in a diverse portfolio that includes stocks, bonds, real estate, and possibly other businesses so that they are roughly equally weighted. This not only protects your overall financial health from the volatility of your business sector but also ensures steady growth through other channels,” says Villarrubia.

2. Cash Flow Management

“If you want to build and effectively manage wealth, the first and most important step is to gain full awareness of your financial position. This involves assessing your assets, liabilities, income, and expenses — including potential inheritances,” says Green-Forde.

“Entrepreneurs often face the challenge of managing irregular and unpredictable income streams. Understanding how to manage cash flow is vital to ensure that an entrepreneur’s business and personal finances remain stable and can support growth,” says Villarrubia. “Implement robust cash flow management strategies. Start by maintaining a clear separation between personal and business finances, establishing an emergency fund to cover fluctuations in income, and using forecasting tools to plan for future cash needs. Regularly monitor and adjust budgets based on business performance and personal financial goals.”

Looking ahead and planning is crucial. “Apply for a line of credit or a loan when you don't need it. The chances are, your numbers look a lot better when you are not in need of those. This means you will likely get a better deal, such as more funds or lower interest. Having access to these can bring peace of mind. Also it helps build business credit. Debts can be viewed as a negative thing, but in business, it can be neutral and used as a tool,” adds Maiko Sakai, Founder of Airtight Concepts Inc., a business strategy firm for small businesses.

3. Retirement Planning

Over one-third of entrepreneurs lack retirement savings, according to a report from SCORE. Without adequate planning, entrepreneurs can find themselves needing to work long past retirement age instead of living out their retirement dreams.

“While building and running a business, retirement planning often takes a backseat for entrepreneurs. However, unlike traditional employees, entrepreneurs don't have the benefit of employer-sponsored retirement plans. It’s important to treat yourself like an employee, even though you’re running a business. Work with a professional to create a retirement plan that will secure your future,” says Villarrubia. Entrepreneurs and business owners often seek guidance from CPAs, attorneys, and financial advisors, who might not always be fully versed in the nuanced, advanced planning strategies that can significantly impact long-term financial success.

4. Succession Planning

Every entrepreneur will eventually face the question of what happens to their business when they retire, become unable to run the business, or pass away. “The time to plan for the future of your business is now. Take the time to develop a clear succession plan that defines what will happen when you need to step away from the business permanently. This might involve grooming a successor, setting up a buy-sell agreement, or planning for the sale of the business. Ensure that this plan is legally sound and aligns with your personal wealth management goals,” says Villarrubia.

Estate planning is part of succession planning. “For entrepreneurs, estate planning is not just about deciding who will take over the business. It encompasses a broader strategy to ensure that all business and personal assets are distributed according to the entrepreneur’s wishes upon their death. This process involves legal documentation such as wills and trusts, which dictate the distribution of assets and can help minimize taxes and legal hurdles for heirs,” he adds.

5. Asset Protection

“Entrepreneurs are often more exposed to legal risks than regular employees. Lawsuits, business debts, and other liabilities can threaten personal assets. Use tools to protect personal assets from business liabilities. It’s crucial to separate personal and business finances and to have adequate insurance in place,” says Villarrubia.

Wealth management for entrepreneurs is not just about growing wealth but also about protecting it, ensuring its longevity, and aligning it with personal financial goals. These strategies require a balance of financial acumen, foresight, and the willingness to seek professional advice when necessary. Effective wealth management is a continuous process, requiring entrepreneurs to continually adapt.

Family Business Lawyers Go Beyond the Law

Special to THE GLOBE AND MAIL

David Simpson knows all too well the tough battles that need to be fought to successfully transition a family business. He has worked with many of Canada's leading family businesses and he has worked in one himself, with his brother. He now teaches the next generation of entrepreneurs at the Richard Ivey School of Business MBA program in London, Ont.

He also knows the important role played by lawyers.

"When talking about transition success, your long-time lawyer may not let you in on a little secret," says the founder of the Ivey Business Families Centre. "The lawyer may not ask if you realize that the legal documentation of your transition or success strategy is the easiest part of the succession process."

Is Mr. Simpson implying that family business lawyers have it easy? Not at all.

A family firm lawyer will know the law, but a good lawyer will also get to know the family very intimately and how the members interact. This close and frequently personal relationship brings its own set of challenges, often requiring a lawyer to step outside of the legal box. The lawyer is like a ring master, advising the owner on when to call in experts to deal with various non-legal family issues encountered when running a business and balancing the long-term succession planning.

"The toughest part of transition is asking three key questions, which have nothing to do with the law or the business itself, but they will challenge every family business," Mr. Simpson says.

His questions are as follows:

·       Does your family speak the same language? A successful transition requires a common frame of reference, and even the simplest everyday terms such as “soon” – as in we’ll meet soon on that – or “long term” can mean different things to each family member. A daughter might ask to run a philanthropy event, but when the founder says ‘we can do it later,’ it means next year. Meanwhile, the daughter thinks her father means next month and conflict arises. It is critically important to meet together as a family to work out common frames of reference to avoid misinterpretations within the family, which can then spill over and confuse staff, customers and other stakeholders.

·       Are the children dependent on the business? While children are growing up, they are dependent on their parents. When the business relationship is added to the family dynamic, it can be emotionally difficult for adult children. They have to be at peace with working for a parent while competing with their parents’ legacy goals for the other “baby” in the family: the family business. Children need to realize that their livelihood may not come from the family business if their skills are not a good fit with the requirements of the industry. Author and family business adviser David Bork said it best: “The purpose of family is to raise responsible adults, who have high self-esteem and can function independently in the world – acceptance is unconditional.” Now compare that unconditional love with Mr. Bork’s description of the uncompromising world of business: “The purpose of business is to generate profits! Acceptance is based on skills, competence, the ability to produce and perform.”

·       Have you discussed personal goals within the family? It is critical for the leader who is passing the torch to not snare the next generation in a trap. There can often be a conflict between the founder and his vision of how the legacy will continue and the next generation’s goals. For example, the younger generation might want to move marketing efforts online and use Google Adwords, Facebook and Twitter. The founder says, “What’s this Facebook – it’s for teenagers?” or “I don’t want to tweet or do TikTok,” and puts a kibosh on the plan. To pass the torch to a new generation, a founder needs to grant full freedom. Great families honour the founding entrepreneurs and understand stewardship of family assets, but they are also mindful that success lies in allowing the next generation to remain entrepreneurs. This means providing the new leadership with the fullest autonomy to take the business in new directions.

Building True Wealth Across Generations: Avoiding Three Pitfalls

Family business succession is not just about transferring assets and ownership, it’s about values and vision.

Every successful family business starts with a founder who pursued a dream, overcame challenges, got smarter, maybe a little lucky, and created wealth. But what happens when the founder is no longer around? How can the next generation build true wealth beyond money?

Jeff Noble, a family business expert with BDO, shares three stories illustrating three common pitfalls in family business success: lack of self-awareness, inadequate support for the next generation’s decisions, and getting stuck in the founder’s legacy.

Story #1: The Janitor's Dream

Irwin was a janitor who took courses after his work hours and became a licensed electrician. In a few short years, he started an electrical contracting company. His children, twin daughters and a son, did not have to work hard and struggle like their father. They grew up in a comfortable and affluent environment and never developed their own identity and passion. When it was their turn to take over, they felt pressured to follow in their father's footsteps, but they lacked the same vision or skills. The sisters were married with children of their own, and their brother was an avowed bachelor.  Instead of pursuing their own lives, they unsuccessfully tried to replicate their father's success. Irwin had no idea that by gifting them the business, he would crush his family.

Jeff says that this is a common scenario in many family businesses. The founder’s dream often traps the next generation in the same business. To break free, they need to discover their own purpose and discuss it with their family, finding a meaningful role in the business or pursuing their own path with support.

Story #2: The Successor's Challenge

Ian, a second-generation business owner, told his daughter Susan on her first day as CEO that her number-one responsibility was to find a successor. Ian knew the business needed to grow beyond his and Susan’s skills and had a succession plan that was not restricted to family. Susan knew she was not the ultimate owner of the business, but a steward of it. Without her father’s years of mentorship, Susan may not have had the confidence to adapt to the changing market conditions. Seeing that competitors were gaining ground and realizing her own limitations, she decided to sell the business, believing that was the best option for the family’s wealth.

Jeff says that Ian understood behaviour, and he prioritized letting his daughter exercise self-judgement. Ian and Susan understood that money was not the only measure of wealth and valued the quality of their relationships. 

Story #3: The Inherited Portfolio

Siblings Gordon and Liz inherited a portfolio from their father and chose to keep it unchanged out of respect and because they thought it was performing “well enough.”

Jeff says the portfolio was no longer Gordon and Liz’s father's legacy. It was one of the tools to steward and grow wealth. If the father were still alive, he would encourage his kids to adapt the portfolio to achieve their own goals and dreams, and those of their children.

Hear Your Next Generation’s Voices

Three stories show us that family business succession is not just about transferring assets and ownership, it’s about values and vision. The older generation can encourage their children to find their own purpose, even outside the family business.

Too often, the voices of the next generation are stifled by legacy, expectations, and fears. Successful wealth transfer requires a shared vision and collaboration with the next generation.

Get in touch: Jacoline Loewen - Burgundy Asset Management Ltd.

Technology Companies benefit from Board Governance

On May 2nd, I'll be hosting an ICD fireside chat at Gowling WLG in Waterloo with Barb Stymiest, known for her roles on the RIM board, CEO of the TMX and on the Forbes list of World's Top 100 Most Powerful Women. Founders of Technology firms will hear directly from Barb, about her views on the use of boards for technology companies. She will discuss the recent ChatGPT board governance flare-up and its implications for tech leaders, investors, VCs, and PEs.

Barb will share her corporate governance insights from the TMX/ICD report which she authored. Technology Founders and VCs, PEs, will gain insights on board formation and governance to help scale their companies and why it is so powerful in preparing a company for the stock exchange.

Reserve your spot for a conversation that could shape your company's future.
Register here: https://lnkd.in/ggycBCDy

Elevate Your Financial Wisdom with “Wall Street Vision” podcast.

Elevate Your Financial Wisdom with “Wall Street Vision” podcast.

Reshape the way you think about wealth. Wall Street Vision’s podcast interview with Ted Oakley, Oxbow Advisers, is an absolute game-changer for business owners.

Here are my top three takeaways:

1.      Know the Difference Between Inheritance and Business Sales: As Ted Oakley asserts, inheritance sales and business sales represent separate categories. Rather than approach them as one, the investment advisor needs to understand the varied emotional motivations guiding each group of clients. Understanding these diverse mindsets is key to providing tailored financial advice.

Ted digs into the mindset of post-sale business owners. Accustomed to winning, they often assume their prowess in one domain translates to expertise in everything. However, transitioning from managing a single asset to a diversified portfolio of many assets can be challenging. Many entrepreneurs find themselves investing in schemes with family and buddies, and so on, rather than adopting a wealth-preservation strategy (boring, but predictable). On the other hand, inheritors of wealth must navigate a delicate balance, oscillating between financial conservatism and extravagant spending.

New York City Winter - Watercolour Sketch, 8x10, by Jacoline Loewen

2.      Emotional Mastery Unveiled: In the crucible of financial storms like the COVID-19 crisis, seasoned investors recognize the impact of emotions on decision-making. We know Warren Buffett’s advice – buy when everyone is fearful – but rarely do we act on what seems contrarian at the time. People tend to go on a bit of a spending spree after inheriting wealth or selling a business; however, as Ted points out, this often doesn't lead to happiness. Ted says that one of the best books he has read in the last couple of years to counteract overspending is Michael Singer’s Living Untethered.

3.      Diversification Wisdom: Ted advocates not just for beating the market but preserving your hard-earned capital through diversification. It's not just about winning; it's about smart, calculated plays that safeguard your financial stronghold.

4.      Cash Flow Reigns Supreme: Ted's investment strategy is anchored in companies boasting predictable cash flows and robust business models. In the dynamic world of investments, cash flow is the bedrock of sustainable success. Beyond the thrill of the trade, it's the steady rhythm of cash that paves the way for enduring prosperity.

Check out the full podcast by Wall Street Vision with Ted Oakley for a deep dive into preserving wealth, conquering challenging markets, and making informed investment decisions.

#InvestingWisdom #FinancialStrategies #WallStreetVision #TedOakley #WealthManagement

Family Business Transition - The Key Obstacle

Is leaving a family business legacy essential? Dr. Tom Deans, former business owner and author of Every Family's Business, warns that gifting a family business may not be a good legacy. You could risk pigeonholing future generations based on past business interests. Deans notes that, "Many owners make the mistake of instilling pride in the family business, that life is about tradition and not about pursuing their own dreams – and definitely not about reaching their full potential. Imagine if Henry Ford had followed in his father's footsteps as a farmer and Steve Jobs in his father's footsteps as a restauranteur?"

Deans highlights a common struggle among family business owners considering selling their businesses: the challenge of envisioning life beyond the company. Owners often face difficulty separating their identity from the business, hindering the sale despite its benefits for the family.

To overcome this obstacle, Deans suggests reframing the question from 'what will I do now?' to 'who will I be?' This personal approach helps define a vision for the family legacy. 

“Geese over the Kawarthas - Watercolour, 14x20, by Jacoline Loewen

Money brings new challenges. Many family businesses reinvest profits into operations, delaying substantial financial rewards for many years. During a business sale, owners often neglect legacy issues like governance and long-term goals due to the rush of due diligence. The liquidity event will bring sudden wealth, which may be a new situation for the family and require careful management to protect it. Deans emphasizes the difference between making money and safeguarding wealth, urging owners to understand managing wealth is counterintuitive to their business building skills.

Deans highlights that "making money is very different from protecting wealth. Owners are good at solving problems, and they can see transitioning as another problem to solve. But managing new wealth is about risk aversion and relinquishing control.”

What to do first? It's common to delay the decision-making process because the first step is the most difficult. It's safer to maintain the status quo than to risk a family argument. Reading stories about other family businesses and distributing case studies can begin the conversation. Connecting with experienced owners can inspire action. Organizing a meeting with other family business owners who sold and have been through the journey to wealth management will also help inspire action.

Transitioning from family business ownership to family wealth management involves co-operation and preparation for heirs. Structuring and managing liquid assets can be challenging, requiring answers to the key question: What does wealth mean for the family?

Pay for family meeting expertise. Deans advises seeking assistance from financial experts to transition from running a family business to managing family wealth. "There are financial advisors to assist business owners through this transition to wealth. Families are complex and emotional. Using financial experts is not a sign of weakness, but of strength and wisdom.”

Understanding each family member's risk tolerance is crucial for effective wealth management. Each family member's level of risk tolerance is obvious when skiing or driving a car, but not when planning the family legacy. Constructing a risk framework as a family will foster a mutual understanding of family goals and reduce stress.

Plan to plan. The road from running a family business to managing the family wealth is well-trodden. It may seem an ideal situation to outsiders, but family businesses who have gone that route know the challenges. One thing is for certain: Those who make the conscious decision to build a family legacy and get the governance in place to manage their wealth will have a smoother journey ahead. As Tom Deans says, "Taking the time to plan the family legacy is how new money becomes old money."

What are the concerns of wealthy Canadian families?

In the intricate tapestry of wealth management, 2024 heralds a paradigm shift for Canadian family offices and high-net-worth investors. The article by Canadian Family Offices is well worth reading. It is titled": Four top concerns of wealthy Canadian families at year end. Four family-office executives pinpoint four urgent themes that are top of mind for their clients. Spencer Clark, portfolio manager at Richter in Montreal, highlights the evolving landscape. “Alternative assets, once a stalwart for long-term growth, now face a reckoning. Private equity and credit, often deemed 'alternatives,' reveal strikingly similar risks to their public counterparts, challenging conventional wisdom.”

The looming concern extends to technology venture capital (VC) funds. Clients, seeking refuge from the volatility of high-flying tech stocks, may find themselves exposed to comparable risks. The differentiating factor lies in pricing dynamics. Publicly traded equities and debt respond swiftly to economic shifts, creating a pricing gap that, having widened in 2022 and 2023, is poised to narrow in 2024. This shift threatens the established liquidity cycle of private investments.

Yet, the challenges faced by wealthy families delve beyond the financial realm, as James Dunne, managing director of Markdale Financial Management in Toronto, emphasizes. “For those with abundant resources post-business sale, the quest for meaning in generational wealth becomes paramount. Beyond acquiring opulent homes and enjoying luxuries, families ponder their legacy and societal impact.”

Dunne asserts that the purpose of substantial wealth becomes a profound question, particularly for those new to affluence. It transcends mere philanthropy; the focus shifts towards impact investing. The journey involves not just preserving wealth but fostering a sense of stewardship and responsibility for 'doing good' in the world.

Crucially, the involvement of younger family members is pivotal. The torchbearers of wealth stewardship, these individuals are expected to weave their lives and resources into meaningful contributions, far exceeding the transient returns on the next quarter's portfolio.

As we stand at the intersection of financial evolution and societal impact, the challenges faced by wealthy family businesses underscore the imperative to reevaluate strategies, embrace purpose, and navigate the complexities of a changing landscape with resilience and foresight. 💼🚀 #WealthManagement #FamilyBusiness #FinancialStrategies #ImpactInvesting #GenerationalWealth @canadianfamilyoffices

Passing the Family Business to the Next Generation

In family businesses, a departure from tradition is emerging. Family business owners are no longer automatically bequeathing the legacy to their children anymore.  Nowadays, the next generation isn't exactly clamoring to inherit the family business. Mike McCarron, a founding partner of MSM Transportation, witnessed this transformation in the trucking industry, particularly in the wake of MSM’s acquisition by Wheels Group. Mike started Left Lane Associates, which today is North America’s leading supply chain M&A [mergers and acquisitions] Advisors. In an industry characterized by fragmentation and a myriad of family-owned businesses, a subtle but profound change is unfolding. 

"The next generation," McCarron notes, "is opting for university education and the prospect of jobs with predictable revenues and hours. Having observed the arduous journey undertaken by their parents, the torch isn't as eagerly grasped. Moreover, the landscape is evolving with more financially liquid options, making M&A an enticing prospect. The huge jump in land valuations over the past decade offers a far more lucrative exit, than passing along the business to the kids.”  

In the dynamic world of transportation, McCarron says, “There is an emerging gig economy, where South Asians want to own their own business and bring their own truck, rather than be an employee. It is an increasingly fragmented industry.” 

But the road ahead for the next generation isn't paved with tire tracks; it's marked by new opportunities. M&As are now the cool kids on the block, along with cash for the business real estate, offering new financial options.  

Shift #1: From Stress to Predictable 

Stress? The last five years have strained many family businesses, waking them at 4 a.m. with worries of payroll and responsibilities. Business owners are hesitant to pass this pressure onto their offspring, who, in turn, are wary of the heightened level of accountability. Guess what? The next gen has clocked in, and the grind seen by their elders is viewed not as a rite of passage but as a cautionary tale. They've seen the movie, and they want a different plot.  

Shift #2: Education as the Catalyst for Change 

The conventional approach of handing over the keys to the next generation is no longer the only song on the playlist. Family business owners are embracing a new paradigm, investing time to understand succession best practices, particularly where next gens are required to complete business education. The family business next gens are figuring out that their lives are not about just coasting; they're discovering the value of education and learning about their own definition of purposeful work, not what is handed to them. 

Shift #3: Renting Succession Expertise  

Sophisticated sales processes for businesses are no longer the secret sauce of corporate giants. Family businesses are tapping into advisors, shattering the myth that only the big players get a seat at this table. With this opening up of M&A opportunities for more family businesses, a departure from succession tradition is emerging—family business owners are no longer automatically bequeathing the legacy to the next generation. The allure of a significant cash return on years of toil is reshaping succession plans.  

Shift #4: Next Generation's Desire for Autonomy 

The next gen wants out, not because they lack ambition, but because the game has changed. Daunting sale prices for the family business and the labyrinth of raising financing aren't their chosen battles. The next generation are attracted to the cleaner option of full sale of the family business. The significant pay-out, which will become their inheritance, is predictable. Why risk taking over the business built by their granddad, but which they may not fit? The pursuit of personal career choices is prioritized over familial obligations. 

Shift #5: Impact on the Organization 

Automatic succession of family members is not always well received. There is heightened awareness among family business shareholders regarding the impact of familial transitions on employees, and this is reshaping succession plans. Professional search firms are getting favored over automatic family member hires.   

Shift #6: Cash is King - Predictable and Unquestionable 

Family businesses founders are discovering that a wider range of buyers enhances the likelihood of fair value and a cash deal which are the crown jewels of succession. Cash in the hand is secure. This contrasts with relying on the family business managed by the next generation, with a more uncertain retirement income stream. 

Shift #7: Harmony Amidst the Price Tug-of-War 

A generational tug-of-war ensues—aging boomers pulling for max value, and the next gen tugging for a budget-friendly deal. Finding the sweet spot is not just a financial pursuit; it's a delicate dance to preserve family ties.  Mike says, “Snow plow parents are hesitant to anoint one child the leader at the expense of their relationships with the other children. Easier to sell, distribute the wealth and let them do their own thing.”  

As Mike McCarron observes, these seven shifts signify not the abandonment of legacy but a strategic recalibration. The M&A sale option is understandable as it removes the fighting and the uncertainty from the gig economy. 

Adaptation to the evolving contours of succession is the hallmark of resilience, ensuring that family businesses transcend generations without sacrificing financial acumen or familial harmony. The next gen, well, they're not just the future; they're the architects of it, and they are driving their own lives, which may or may not include the family business. 

Cultivating Long-Term Wealth: Lessons from the Aga Khan Gardens, Edmonton 🌿

I bumped into a long-term friend who had sold his business a few years ago. He shared his story about how he had invested his sudden wealth. He had bought into the investment fashion of the day – crypto and cannabis. It had taken a year to reduce his fortune by two-thirds. Now he informed me he was looking at AI. I asked about his long-term financial plan, but he had that dreaded disease of FOMO (Fear of Missing Out). As I met his young son, I wondered about the family’s dwindling wealth and the impact on this bright young man.

Business owners selling their businesses will reap the rewards from their hard-earned assets. There's a critical facet that must not be overlooked: the art of thoughtful planning for the long term. Remember, the ultra-high-net-worth families’ wealth isn't built on hasty decisions or fleeting trends. They have been cultivated and deliberately planned, with wise choices in order to withstand the market winters.

Later that week, amidst the scorching Canadian summer, I found myself in the serene beauty of the Aga Khan Garden in Edmonton, Alberta. As I wandered along its pathways, surrounded by the soothing harmony of nature and architectural design, I thought about my friend and why I had not been able to convince him to develop a long-term plan. I couldn't help but draw parallels between the meticulous planning that went into creating such a haven in nature as the Aga Khan garden, and the path to cultivating enduring wealth.

In a world that often glorifies instant gratification and rapid gains, the Aga Khan Garden stands as a testament to the beauty of deliberate, long-term planning. Just like the choice of trees against still ponds, and the carefully positioned shrubs and flowers, our wealth too demands careful selection and placement to withstand the metaphorical brutal snows that financial markets can bring.

While I marveled at the garden on that hot day, I couldn't help but envision the same place during the harshness of winter—reminding me of the importance of considering the unseen challenges that can impact our wealth. Much like tending to a garden that thrives through all four seasons, our financial planning should be resilient enough to weather any cruel, ice storm that may arise.

As business owners, we're no strangers to strategy and vision. Yet, with the excitement that comes from a sudden wealth influx after the sale of the business, it's easy to fall prey to the allure of immediate investment fashions. But let's take a lesson from the Aga Khan Gardens—a product of ten years of careful planning. A hastily planted garden, like a hastily invested portfolio, might yield initial fun blooms, but it's the sustained, strategic approach that transforms it into an enduring masterpiece.

While my stroll through the garden allowed me the space for reflection and planning, I encourage each of you to find your own serene oasis—be it a botanical garden or a place that inspires introspection. Just as the Aga Khan Gardens offer a sanctuary, let your quiet space in nature serve as a reminder of the importance of envisioning the long-term growth of your wealth.

The Aga Khan Garden, Edmonton, Alberta

So, as you stand on the brink of a new chapter, I implore you to approach your wealth with the same thoughtfulness that the garden designers put into every choice they made.

Pick your assets like you pick your seeds and trees, plant them strategically in your portfolio, and nurture them over time.

Don’t be like my friend and choose spectacular blooms that are gone forever at the first blast of Artic winds.

Just as the Aga Khan Gardens has grown into an oasis of calm joy, your wealth too can blossom into a long-term source of enduring prosperity.

Here's to the art of cultivating wealth that stands the test of time.

🚀 Planning Your Retirement? Choose the Right Wealth Management Advisor! 🚀

Life is a journey full of unique experiences, and your retirement should be no exception. As you envision your post-retirement life, you may have ambitious goals, such as giving back to your community, traveling the world, or supporting your family's aspirations.

However, one question often haunts us all: "Will I have enough money to support my dreams?" Investors are more anxious about their retirement wealth. A recent Blackrock report by the $9.4tn money manager found that the share of US retirement investors who feel they are “off track” has more than doubled since 2021 to 24%. The share who feel “on track” has fallen 13% from a 2021 peak to 56%, the lowest level since the survey began eight years ago. This is the psychology of money where gloomy media affects mood and decision making.

Selecting the right Wealth Management Advisor can make all the difference in transforming your retirement aspirations into a well-executed reality. Here are some key principles to consider when choosing your partner on this financial journey:

📝 Principle One: Start with a Plan 📝 Just like planning a trip, you wouldn't head out without a clear destination or route. You might think let’s go to Georgian Bay but you would plan a route before buckling your seat belt and driving to the highway. Your financial journey toward retirement should be no different. Your dreams and goals are unique, and a skilled financial advisor understands this. They will work with you to define what success means to you and craft a tailored financial strategy to pursue your objectives. By collaborating with a wealth management team that values your input and understands your vision, you can move forward with confidence and leave uncertainty behind.

📈 Principle Two: Partner with a Plan-Focused Advisor 📈 I listen to podcasts where the investment guru is very against paying fees for a wealth advisor. when it comes to securing your financial future, expertise matters. In addition, your Wealth Advisor will manage your psychology of wealth. Val Kilmer's acting roles in Top Gun and Batman made a fortune. Val’s father guilted him into investing in his real estate schemes and you know the rest of this predictable story. Val’s money was gone. If Val had a wealth management advisor who adopted a plan-focused approach rather than just focusing on specific investments, it may have prevented the losses. A wealth advisor will align your investments with your overall plan, considering your individual circumstances and life goals. They can help you to say no to investments that are not part of your life plan. Your financial future is too crucial to rely on a cookie-cutter investment strategy. Partnering with an advisor who sees the bigger picture will pay off in the long run.

🔄 Principle Three: Take an Adaptive Approach 🔄 Life is full of surprises, health, marital and more. Financial plans should be flexible enough to accommodate changes along the way. Markets and economies can shift unexpectedly, and personal circumstances can evolve. Regularly meeting with your financial planner and advisor to review and adjust your plan as needed will ensure it remains aligned with your current lifestyle. A well-thought-out and adaptable approach provides the foundation for a successful retirement journey.

📉 Evidence-Based Investing, Not Hype 📈 In today's fast-paced world, investment trends come and go with breathtaking speed. Today’s genius is tomorrow’s Sam Bankman. However, your wealth management decisions should not be based on media hype or the latest fads. Instead, rely on evidence-based approaches to investing. Your wealth manager should help you navigate the market using data, research, and proven strategies. It might not be as exciting as chasing the hottest trends, but it is the surest way to safeguard and grow your wealth over time.

👨‍💼 A Cautionary Tale 👩‍💼 Consider the cautionary tale of an entrepreneur friend who invested heavily in trendy markets of Caanibus and Cryptocurrencies. These rode a high wave of returns but came to an abrupt end. My friend told me he had lost $20M in the past two years. He told me that now he understood the strategy of maintaining wealth and spending the interest and dividends. While some high-risk investments can be part of a portfolio, they should be balanced with stable assets. The lesson learned was that while making money may be thrilling, preserving and growing it requires a sound, level-headed approach.

Choosing a wealth management advisor is an essential decision that will influence the trajectory of your financial future. Seek a partner who not only understands your dreams but also provides a comprehensive, evidence-based strategy to achieve them. Your retirement should be a journey that excites and fulfills you, not one clouded by uncertainty or gloom.

If you're looking for a wealth management advisor who shares your principles and values your unique goals, let's connect and start planning your exciting retirement journey together!

#RetirementPlanning #WealthManagement #FinancialAdvisor #RetirementGoals #Investing #AdaptiveApproach #EvidenceBasedInvesting #PlanFocused #FinancialFuture #Entrepreneurs #PostRetirementGoals

How Wealth Management will Grow: Three New Client Segments


The future growth of Wealth Management is characterized by distinctive opportunities that set it apart from traditional “financial advisory.” Let's explore the client segments that set wealth management apart from the traditional financial advisory.

Fast-Growth Segments: The industry is witnessing the emergence of three investor segments that show signs of significant and lasting growth: Women, engaged First-time Investors, and Hybrid affluent investors.

  1. Women are taking center stage as investors. With women currently controlling a third of total Canadian household investable assets, this share is expected to grow as baby boomer men pass control of assets to their female spouses. By 2030, women are projected to control a significant portion of the $30 trillion in investable assets baby boomers possess, presenting a wealth transfer not seen before. Younger affluent women are also becoming more financially savvy, contributing to the growth of this segment. Wealth Management firms are deeply embedded in their current business model to be able to deliver on highly personalized client service which the female segment values. In comparison, traditional financial advisors offer a one-size fits all service model.

  2. Engaged first-time investors are opening accounts at an unprecedented rate. The elimination of online brokerage commissions and access to fractional share capabilities, combined with pandemic-related trends such as high savings rates, have fueled the growth of this segment. While sustaining the exponential growth might be challenging, Wealth Managers can serve this segment by meeting their demand for direct brokerage-based investing and building deeper relationships based on their personal values. Wealth Management goes beyond trading and the typical Reddit advice. Wealth Management has a customized wealth plan for each client and keeps to the investment strategy plan to achieve long-term goals.

  3. Hybrid affluent investors offer an opportunity for differentiation. This segment, comprising investors with at least one self-directed account and a traditional advisor, has witnessed substantial growth. To capitalize on this trend, Wealth Managers need to offer both direct brokerage and advisor-led offerings with a seamlessly integrated experience. This requires careful management of channel conflicts and potential revenue cannibalization. Here is where boutique Wealth Managers may need to focus for future growth.



The Best Wealth Managers Do it Differently

With many expert voices advising how to invest, wealth managers face increasing challenges in remaining competitive. The FinTech and WealthTech founders speaking at the Collision Conference in Toronto give clues about the strategic direction for Wealth Management. To stand out to potential clients, the best wealth managers need to step up their technology and adopt unique strategies to attract and retain clients. While you are at the Collision conference, here are three key strategies by McKinsey to keep in mind that could set leading wealth managers apart from the rest: 1. Creating an institutionalized lead generation system, 2. Building new businesses close to the core or in adjacencies, and 3. Pursuing strategic mergers and acquisitions (M&A).

Create an Institutionalized Lead Generation System: While lead generation is a critical aspect of any business, few wealth managers have fully institutionalized and optimized this process. Often, the reason is political and how to allocate which Financial Advisors to pursue the wealthy, well-known prospective clients and families. Technology will sort out these issues.

By investing in data infrastructure, and advanced analytics technology, wealth managers can develop a centralized and effective lead generation system. This system can help accelerate organic growth by attracting new clients and deepening relationships with existing ones, even in lower-value offerings or adjacent business units. During times of volatility, when money is in motion, having a robust lead generation system becomes even more pertinent. It gives depth such as knowing Next Generation family members and increases the ability of the Financial Advisor to get ahead of succession plans.

The benefits of a well-executed lead generation system are numerous. It enhances the firm's attractiveness to highly sought-after advisors, fosters stronger client relationships, lowers compensation as a percentage of revenue, and creates new opportunities for strategic M&A. While implementing such a system requires investment, the costs should be weighed against the significant benefits they unlock. For instance, acquiring a $1 million relationship can generate $50,000 to $70,000 in advisory fees over a decade, justifying a higher client acquisition cost.

Build New Businesses Close to the Core or in Adjacencies: To ensure sustainable growth, wealth managers must go beyond relying solely on the past ten years’ method of growth which has been depending on market appreciation and advisor recruiting. Developing new, digitally enabled business models tailored to serve existing or new client segments is key. Additionally, tapping into adjacent revenue streams, such as banking, lending, asset management, retirement, or payments, can open new avenues for growth. Clients appreciate their Wealth Management firm acting as a Family Office and doing detailed direct payments to the private school or retirement home, not only their monthly lifestyle payment.

Success in building new businesses hinges on several universal factors. Wealth managers should adopt a client-centric approach, constantly iterate with clients to understand their needs, allocate appropriate funding to ventures, and maintain a link to the core business to leverage existing strengths while remaining agile. The Collision companies can bring fresh approaches and many banks, such as Desjardin, are bringing onboard FinTechs.

Pursue Mergers and Acquisitions (M&A): Strategic M&A plays a pivotal role in the growth strategy of leading wealth managers. Three major M&A themes are expected to shape dealmaking in the wealth management industry in the coming months. Firstly, there will be a focus on platform synergies. Secondly, firms will seek transactions that enable entry into adjacent revenue pools, such as asset management, banking, retirement, or payments. Lastly, wealth managers will pursue acquisitions to gain capabilities crucial for future growth, including digital advice, planning, and wealth technology such as tracking all your financial records with passwords to be able to deal with the unexpected, leaving you incapacitated.

Despite the challenging environment, the best wealth managers understand the importance of making bold moves early. By proactively building resilience through rigourous financial planning and decisive action, they position themselves to weather storms and deliver the sustainable growth UHNW clients expect. As the saying goes, fortune favors the brave, even in times of uncertainty.

In a competitive wealth management landscape, the best wealth managers differentiate themselves through their strategic approach. By creating an institutionalized lead generation system, building new businesses close to the core or in adjacencies, and pursuing strategic M&A, these firms position themselves for long-term success. It is essential for wealth managers to embrace innovation, take calculated risks, and adapt to evolving client needs to thrive in an ever-changing industry.

Why Board Directors need to spend more time on Foresight.

Exciting news! Join me and fellow ICD SWO members for our Annual Social: Navigating the Future with David Beatty on Thursday, May 25th from 4pm to 7pm ET at the Galt Country Club in Cambridge ON, with a virtual option available.

We are thrilled to have Professor David Beatty, a renowned corporate governance expert, join us to share his unique perspective on why boards need to work more on foresight, The Digital Tsunami and how Boards are transforming. You won't want to miss out on gaining valuable insights from his presentation.

Following David's talk, there will be plenty of opportunity to connect and network with other members of ICD SWO. For those who can't attend in person, the speaker portion will be livestreamed so you can still join in on the discussion.

Best of all, as a thank you for being a valued member, this event is COMPLIMENTARY for all ICD SWO members. We can't wait to see you there!

Value or Values?

Investing is not just about financial gain, but also about the impact it has on the world we live in. In recent years, there has been a growing interest in socially responsible investment (SRI) as investors seek to align their investments with their personal values. What constitutes socially responsible investing?

Firstly, let's define what we mean by SRI. It is an investment strategy that seeks to generate financial returns while also making a positive impact on society and the environment. SRI can take various forms, from avoiding investments in companies that engage in harmful practices to actively seeking out investments in companies that are making a positive impact.

The survey reveals that many investors are keen to invest in a socially responsible manner, with the younger generation being particularly interested. However, there is confusion around what constitutes SRI, and how best to invest responsibly. This confusion is not surprising, given the increasing number of new offerings in this area.

The survey also reveals that 51% of respondents actively undertake investments which are in keeping with their values. Of those, 25% employ an SRI strategy, actively seeking out investments that reduce environmental impacts or demonstrate employment best practice. 15% engage in 'impact investing,' either directly, in partnership with other families or through funds.

While it is encouraging to see that investors are seeking to align their investments with their values, the survey also highlights that very few have clear criteria for how much investment return they are prepared to forego to invest responsibly. This is an important consideration, as it is often assumed that socially responsible investing involves sacrificing returns in favour of doing good. However, there is growing evidence that companies with strong environmental, social, and governance (ESG) practices can outperform their peers over the long term.

So, how can investors approach socially responsible investing? One way is to consider incorporating ESG criteria into their investment decision-making process. This involves considering factors such as a company's environmental impact, treatment of employees, and corporate governance alongside traditional financial metrics. By doing so, investors can identify companies that are not only financially sound but also have strong ESG practices.

Another approach is to invest in funds or products that have a specific focus on social and environmental impact. These could include funds that invest in companies with strong ESG practices or funds that specifically target areas such as renewable energy or affordable housing.

In conclusion, socially responsible investing is about more than just financial returns. It is about aligning your investments with your personal values and making a positive impact on the world we live in. While there is still some confusion around what constitutes SRI, there are various approaches investors can take, from incorporating ESG criteria into their investment decision-making process to investing in funds that target specific social and environmental impact areas. Ultimately, by investing in a socially responsible manner, investors can not only make a positive impact but also potentially achieve strong financial returns over the long term.

Family Controlled Business Outperform Over the Long Run

If you're looking for a compelling read on business management and strategy, look no further than "Managing for the Long Run: Lessons in Competitive Advantage from Great Family Businesses" by Danny Miller and Isabelle Le Breton-Miller. This book about family-controlled businesses (FCB) offers a wealth of knowledge and insight into what makes family-controlled businesses so successful, using real-world examples from companies like Estee Lauder. These lessons can be applied to Founder led companies.

The superb TV show, Succession, gives a window into the behind-the-scenes personal dramas of being part of a family-controlled business. The show acts out the difficulty of combining family and business where impetuous comments linger far beyond the board room and decisions made by the patriarch still knife the grown-up children’s self-esteem and damage family relationships. The Roy family did have a session with an advisor to get out their feelings. The advisor ended up diving into a shallow pool and smashing his mouth. Symbolic. For family business aficionados, Succession is a veritable treasure trove of bad business practices in the areas of control and governance.

Family-controlled businesses are beset by inherent weaknesses from "clan" cultures to stable ownership that hobble success and erode competitive advantage. This book argues that those very traits are part of what has ensured the sustained success of some of the world's leading and long-lived family-controlled businesses.

This is not a book for "mom and pop" family businesses. Rather, it is for firms of all kinds and sizes who want to emulate the strategies of the best family-controlled businesses for long-term success.

One of the most interesting case studies in the book is Estee Lauder, the cosmetics company that owns a wide swath of make-up brands, including Bobbi Brown and Clinique. What sets Estee Lauder apart from other beauty brands is the onus on family members to ensure that the business remains successful for generations to come. They dig deep to build each brand and are dedicated to beauty care.

The Lauder family has a long history of involvement in the company, with members serving as CEOs, board members, and even brand ambassadors. This level of familial involvement creates a strong sense of ownership and responsibility for the company's success. When family members are directly involved in the business, they are more likely to make decisions with the long-term future of the company in mind.

One of the key takeaways from "Managing for the Long Run" is the importance of creating a culture of sustainability and resilience within a family business. Family-controlled businesses have a unique advantage in this regard, as they are often more focused on the long-term success of the company rather than short-term profits.

The book also highlights the importance of strategic planning and innovation in family businesses. Family members must be willing to adapt to changing market conditions and embrace new technologies and trends to stay competitive. This requires a willingness to take risks and experiment with new ideas, something that can be challenging for businesses that have been operating successfully for many years.

Overall, "Managing for the Long Run" is a must-read for anyone interested in business management and strategy, especially those involved in family-controlled businesses. The book offers valuable insights into what makes these types of companies so successful, and how they can continue to thrive in an ever-changing business landscape. If you're looking for inspiration and practical advice on how to build a sustainable and competitive business, this book is definitely worth a read.

There is plenty of folk wisdom about how family businesses perform versus non-family counterparts. This book, however, combines extensive data with insights that not only compare performance but explain the root causes. It is extremely helpful for executives, directors and owners of family companies. Not only that, but public companies could learn much from it.

Danny Miller is a Professor of Strategy at HEC Montreal and Chair in Family Enterprise & Strategy at the University of Alberta. Isabelle Le Breton-Miller is a human resources consultant and Senior Research Associate at the Center for Entrepreneurship and Family Enterprise at the University of Alberta.

Can Your Business Run Without You?

As a business owner, your business is your greatest source of wealth. Have you considered if your company can run without you? Whether you want to sell some or all of your business, or simply step away from day-to-day business activities, this is an important question to ask. Join our panel discussion at the Business Transition Forum (BTF) where we'll be exploring the key steps to ensure your business can run by itself and the wealth that can be gained long-term by starting with difficult short-term changes, such as hiring a new CEO or board of directors.

Pro-tip: a business that can run by itself is usually more appealing to potential buyers

Our BTF panelists will be sharing details. Julie Ellis, co-owner of Mabel’s Labels, Richard McCammon, former founder of Delago, John Hotson, and Jacoline Loewen, will be discussing the top questions that buyers ask when considering purchasing a business, and how to ensure that your business can run smoothly without you. Some key questions we'll be answering include: What are the top three pieces of advice for entrepreneurs wanting their business to run without them? What's blocking owners from having the business run without them? And the lead question a potential buyer will ask.

We'll be sharing some tough, real-life examples and stories of success and failures from our panelists' experience, such as finding a successor CEO. We'll also cover questions experienced during their sales process. Buyer questions include whether key processes and systems can run smoothly without your direct involvement. if you have developed a team with the necessary skills and autonomy to make decisions and take action in your absence, and if you have considered the potential benefits of stepping back from day-to-day operations.

Join us for this insightful discussion to position your business for greater growth, a longer legacy, and a more successful transition.