Sam Beemer had asked his two sons to come to a family business meeting. Having just celebrated his 70th birthday, he was feeling his mortality.1 And he'd been thinking about how to transition the family business interests worth $100 million. Sam had decided to begin the process of bringing his 43- and 45-year old sons, Jeffrey and Daniel, into his business affairs.

During my first hour-long meeting with Sam, he defined his main objective: He wanted to educate and include his sons in his business affairs. He wanted them to have a different experience than he'd had. Sam had been a practicing lawyer when his father died, leaving him $20 million and catapulting him into asset management. It'd been a major challenge. Sam had to give up his law practice and spend full time on his investments. The change had resulted in tense and difficult times. He was proud that he'd increased the family's asset base dramatically — five fold — and was looking forward to transferring these assets to the next generations, consisting of two growing families. But he wanted the succession transition to be less traumatic for his sons, a doctor and a professor.

Ten years earlier, he'd tried to include Jeffrey and Daniel in the family's financial affairs, but that effort had gone awry, because he'd not brought them into his decision-making process. While wounds had healed over, bad feelings associated with business matters lingered. Neither Sam nor his sons ever referred to that difficult time, but neither did they ever talk of Sam's business affairs in any way whatsoever. Sam's attorney, aware of this history, suggested he meet with a family business consultant specializing in family matters — before meeting with his boys.

As Sam shared these facts with me, a number of questions emerged: How much information was he really willing to share? How willing was he to have his sons participate in the business? What time frame did he have in mind for handing control to them? How would they respond to his plan? What would their concerns be?

To all these questions, Sam responded with a blank stare. He realized that his invitation to a family meeting had been spontaneous. Now, his anxiety spiraled. He'd never talked to his sons about money matters, his or theirs. Actually, he had never talked to anyone about his finances other than his advisors.

As wealth and family advisors of all stripes know, people have a hard time talking about money, and the result is often bad dynamics in family business planning. Yet the benefits of exploring the issues can be great, both on business and family levels. The question is, then, how do we facilitate the conversation?

First, we need to acknowledge with our clients a central paradox of American culture: While we live in a capitalist context that operates with economics at the center, many of our key financial decisions are made without reflective articulation of what money means in our personal lives. We all struggle to make more money. People spend without great forethought, often impulsively. As a society, our personal and societal level of debt is greater than it has ever been. If and when people do talk about money, they usually talk about how they earn and spend it.

Meanwhile, critical money conversations often are avoided or spark tensions. People tend not to talk about what it means to them to have money, earn it, spend it and give it away. Some couples spend money together without ever talking about how they arrive at budgeting decisions. Adults make financial decisions that impact their children without always examining the potential consequences. Older parents often have a difficult time revealing their finances to grown children. All too often these adult children discover that their elderly parents have left their financial affairs in disarray.

Clearly, the stumbling block is that these conversations are fraught with complex emotional issues. Scratch the surface and shame, fear and guilt often appear. For many, money has multiple meanings, explicit and implicit, conscious and unconscious.

It may seem that these emotional issues are beyond the purview of wealth advisors. But, of course, without a handle on these issues, sound planning and implementation of intrafamily transactions can be derailed.

Many wealth advisors have taken these days to talking not about “money” per se, but about “values,” as a way of both elevating the talk of finances and making the conversation more accessible. The connection between money and values is useful in organizing the “money conversation.” It helps professionals and families break the silence, facilitating discussions that lead to better decisions. It helps families feel generous and proud toward one another. It is a natural linkage, but one that requires skill in its application when sitting with families. It opens the door to exploring the tensions within the family in a productive way. It offers a context for creating a “safe space” in which families can have a conversation about money with a greater depth of understanding.

HOW TO

So how do we go about this? It is often helpful to have an exploratory talk with the wealth owner before a full-fledged family meeting takes place. The goals in this “pre-talk” are to help the client identify the values that are informing his motivation. Think about how to integrate those values into the process, and then help the client prepare to communicate these values openly to other members of the family.

What surfaced early on in my conversations with Sam was the pride he had in his ability to grow the family assets for future generations. At the core of Sam's belief was a notion of the collective family ownership of these assets. The disconnect for Sam was between that idealized value and the reality of the day-to-day dealings. The alignment would come when his sons were involved and informed in that activity with him.

How did I arrive at this understanding with Sam? My first conversation with Sam was a joint effort to clarify his values and uncover what he wanted most from his meeting with his sons. As we talked, it became clear that even though the financial responsibility and stewardship of the family assets had motivated his decision to meet. The most important thing to Sam was his relationship with his sons. Therefore, all three of these values — financial responsibility, stewardship of family assets and personal relationships — would form the agenda of his family meeting. Sam decided that (1) as an introduction, he would present his motivation and objective; (2) next, he would reveal his assets; (3) and then he would start to discuss the thorny question of how to implement his vision.

The tensions Sam knew existed between him and his sons would assuredly surface around the “how.” And thinking about the “how” was new for Sam.

THE DISCONNECT

In our second exploratory conversation about his values, I began to introduce the process values to the business at hand. This time, we talked about the different ways to implement a family business transition. It was important for Sam to recognize that some of his conscious values and process-related goals were not going to be behaviors that came naturally to him.

To help Sam, I gave him a list of phrases we've developed at the Ackerman Family Institute's Money, Values, Family Life Project to help people describe their processes and values:

  • collaboration;
  • transparency;
  • inclusivity;
  • hierarchy;
  • joint decision making;
  • empowerment;
  • equality;
  • exclusivity; and
  • reflective thought.

As I presented this list, Sam became pensive. I asked him to pick the phrases he'd like to apply to his succession. I noted that the transition would take time and that each step might inform the next. What was important here was for him to take responsibility for how he wanted to bring his sons into the management of his business affairs. How much did he want to share and at what pace?

Sam defined three of the process values that he thought should guide his thinking: transparency, collaboration and empowerment. Making this choice enhanced his understanding of the journey he was to take with his sons. Sam was hoping they'd want to do this with him. As our conversation progressed, he was growing more comfortable with the clarity he was getting.

For family business advisors who are used to working with clients in tactfully impersonal ways, focusing like this on process values may feel like a disruptive or unimportant detour. The concept of attending to process is new for many people. It's the final business plan, the trust documents and the will that counts, right? But our focus on process is based on the belief that there are almost always inherent contradictions between what anyone says he wants to do and how he implements those intentions. Although Sam had said that he wanted to bring his sons into his financial matters, he hadn't started the process until he was 70 years old and still had never thought about how he wanted to accomplish that goal nor what steps would be required.

Sam quickly identified which process value would likely be most problematic: collaboration. Although he very much wanted to include his sons, his natural mode of operation ran in the opposite direction. He had been an only child and throughout life had made decisions accessing resources and advisors but never conferring with others about his actual decisions. Once Sam and I began talking about these values, he was able to see for himself the potential discrepancy. He wondered aloud what he could do about this at the meeting. He understood that his old behavior again could sabotage his objective to collaborate with his sons.

Sam's pre-meeting preparation helped alleviate the anticipatory anxiety that usually accompanies these events. He felt quite comfortable with his vision of succession, his underlying priorities — and therefore, his comfort and clarity in transmitting his goals to his sons. At the meeting, held in the Ackerman offices with me present (but mostly just listening), Sam was able to present his ideas and intentions, along with a complete list of the assets he managed. His sons listened intently as Sam walked them through the information.

THE FAMILY MEETING

As expected, the sons' questions focused on the “how” of the plan; they were mostly concerned with decision making. Although Sam and I had explored this area in advance, he was still surprised at the accuracy of his predictions in what would prove the greatest problem. Sam responded by suggesting a transition they might all plan together. He had wanted to get a sense of their commitment level. He suggested that they begin by joining him at significant meetings with his trust company, using conference calls when real estate decisions were being addressed, and having business meetings in person on a quarterly basis.

While this seemed like a good plan, it did not address fully the sons' concerns. They were still worried about decision making.

Realizing that some exploratory talk was needed, I stepped into the conversation for the first time and suggested we take a detour to look at the nine different ways families can, and do make financial decisions. I asked the sons to list these ways: collaboration, joint decision making, reflective thought, inclusivity, exclusivity, hierarchy, transparency, empowerment and equality.) I then asked them to choose the way they had experienced decision making in the past with Sam and how they would like it to happen in the future. I asked each one to give us his perspective and we listened to each response before getting into any dialogue. Sam participated as well.

Both sons were able to articulate how disappointed they'd been 10 years earlier when Sam had invited them into the family's financial matters but left no room for their participation in decision making. They did not want to repeat the experience. Sam acknowledged the validity of their concern, expressed his preference for collaboration, and recognized his difficulties working with others. His sons appreciated his openness and candor. All three men understood that the old pattern might, and likely would, recur; Sam probably would make a decision without involving them. The difference this time, though, was that they were given the green light to talk about this problem with Sam when it occurred and that he was committed to being open to the discussion. The talk they were having then, therefore, was the blueprint for future openness. Sam and his sons were all pleased. They had overcome one major hurdle for the family succession planning. The positive experience of this conversation began to shift in the way Sam and his sons worked together. Everyone left feeling cautiously optimistic.

There were three more family meetings, one including Sam's lawyer. Before each meeting, Sam and I would meet to prepare the agenda. I also checked with Daniel and Jeffrey, sometimes requesting their participation in reporting on some financial matters. In the interim, Daniel and Jeffrey began to participate in business meetings and conference calls.

In my latest contact with Sam, he was pleased to report that his vision was quickly becoming a reality.

Endnotes

  1. This is an actual case but all names and circumstances have been changed to protect clients' privacy.

SPOTLIGHT

A Slice of Americana: “Mildred Carter,” John Singer Sargent's 1908 oil on canvas, was the top seller at Christie's “Important American Paintings” auction on Nov. 30, 2006 in New York City. It exceeded its pre-auction estimate of $1.5 million to $2.5 million, fetching a final price of $3.936 million.