About two-thirds of all businesses are family businesses. More than 70% of global production is attributed to family firms. What’s more, most private wealth creation comes from successful family companies. For financial advisors, these companies often represent an untapped and extremely lucrative market. But the starting point is understanding the families’ critical concerns.

Using a study of 336 middle-market family firms, we identified four of the most critical concerns they have. These problems are often interrelated (Figure 1).

Profitably Growing The Business
About three-quarters of family member senior executives at these companies said they were very or extremely concerned about growing profitably over the next few years. Most family firms are highly motivated and determined to build their businesses. At the same time, being able to continue to grow and add to the bottom line can go a long way toward alleviating any problems that might be affecting the family or the company.

There are multitudes of ways family businesses can profitably grow. Many of them have “assets” that are severely underutilized. More than nine out of 10 of the C-level family members surveyed said the family’s collection of contacts has been essential to the success of the business. These relationships allow them to find new clients, get superior terms with suppliers and open government doors.

About 85% of these 268 C-level family member executives, however, said they aren’t monetizing their relationships as effectively as they could be This is telling. It is not that the family members running these companies do not want to do a better job capitalizing on their relationships, it’s just that they don’t seem to know how.

The opportunities for executives to greatly grow their companies and handsomely profit are regularly “buried” in their networks. What is required is a systematic approach that can uncover these possibilities and structure the situations for greater—if not maximum—effect.

Ensuring Family Harmony
For about 65% of those surveyed, ensuring family harmony is a high-ranking concern. Family discord can be financially and emotionally costly. When it leads to either outright “warfare” or even subtle sabotage, conflict among family members can easily damage the operational effectiveness of the companies. This concern is more common among first-generation family businesses than it is in those companies in the hands of a second generation.

A significant complication is that in 217 of these family businesses—places where family harmony is of major importance—nearly nine out of 10 have “bad seeds.”

These are family members—usually children—who exploit the business for personal gain to the detriment of other family members and the company. Although subterfuge is regularly involved, in time everyone knows what is going on and—at a minimum—acrimony ensues. Most times the business seriously suffers as the family tries to hash out the conflicts.

Even though everyone would like the family to work together in a supportive and constructive way, the situations become difficult when there are family members who are very self-absorbed and commonly feel entitled. They expect preferential treatment even when their knowledge and abilities are substandard and thus generally act in ways that damage the business.

Most families have a hard time reining in these disruptive and oppressive family members. But it is possible to develop a plan to eliminate, or at least mitigate, the problems.

Creating More Personal Wealth
About three in five of the family members surveyed are concerned about creating more personal wealth. This is often closely tied to growing the business. At the same time, there are many steps family members can take to leverage and protect their wealth.

For very successful affluent families, the answer to creating more personal wealth and managing wealth is increasingly by using the family office. Fewer than 8% of those surveyed presently have their own family office.

More than half of the families in the survey have their companies performing some of the services that a family office could provide. Some wealthier families, instead of setting up a separate entity to help them address personal financial matters such as investment management, tax strategies, concierge health care, etc., use the resources of the business. While this can be a cost-effective approach, it can also lead to complications. Over time, with increasing demands placed on the company’s resources, these services are often spun out into a self-standing family office.

It’s notable that 70% of those surveyed without a family office are interested in having one. But that will not necessarily translate into action. And sometimes a multi-family office or a well-coordinated team of elite advisors would better serve most families.

Developing Effective Successions
Nearly half the family business executives are concerned about effective successions. Without a well-thought-through succession plan, family businesses can easily derail. It’s regularly necessary to make sure the appropriate people, perhaps those from the next generation, are ready and able to take over the reins of the family business. It’s also wise to ensure that the business is transferred to the next generation in the most cost-effective way possible, taking into account the structure of the family.

Only about a quarter of the firms that are concerned about succession planning have formal succession plans in place. In those family businesses without formal succession plans, the principal reason is that they think it will cause family conflicts. Among the other half of the family businesses who are not concerned, two in five of them have formal succession plans already in place.

It is a common and all-too-often repeated research conclusion that a large percentage of family businesses are not taking formal concerted actions to transfer their firms to the next generation. The consequences are frequently detrimental to the success of the firm and the wealth of the family.

Potential Ideal Clients
Family businesses have extensive concerns and need quality advice and financial products, which makes them potentially ideal clients for financial advisors. First, advisors need to be aware of the key issues. But, again, these critical concerns are many times interrelated, and a holistic multi-dimensional approach to dealing with the needs and wants of affluent families and their businesses is usually effective. 


Russ Alan Prince is president of R.A. Prince & Associates Inc. and executive director of Private Wealth magazine.

Brett Van Bortel is director of consulting services for Invesco Consulting, the sales consulting group within Invesco Distributions Inc. The opinions expressed are those of Russ Alan Prince and Brett Van Bortel, and are based on current market conditions and subject to change without notice. These opinions may differ from those of other Invesco investment professionals.