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.
 

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