Dennis T. Jaffe, Ph.D., a Cornell Family Business Scholar, shares his insights on some of the necessary tools a family business advisor must possess. Dennis will be leading a Master Class on Advising the Family Enterprise on March 6 in New York City.
Family wealth advisors exist in several professions—law, accounting, banking and financial planning. Their professional skills are focused on what they do for families, not the family itself. However, in recent years the field of behavioral finance has shown that individuals are deeply biased by emotional and cognitive factors that skew their financial choices. Advisors have begun to learn that the family is not a passive or rational entity, but a human system composed of members who are deeply connected emotionally, and whose personal relationships often make it difficult to focus on their financial or business choices.
The personal nature of the family makes it difficult for a family advisor of any profession to do their job. In dealing with the highly personal dimension of family business and finance, the advisor comes into contact with family conflict, mixed or confused intentions, past hurts, feelings of unfairness, and differing values and life goals. As a result, the advisor needs to learn how to work with family relationships and dynamics in order to do the job they were trained to do.
There are several generic skills that an advisor must develop to work with families. The advisor must learn to gather information from family members, information that sometimes family members find it difficult to share. They also come upon differences in values and agendas that are exacerbated by differences in power between generations. Family elders usually control the money and make choices about how to share it with their children, who have little or no say.
Another dimension of family dynamics has to do with the huge differences among older and younger generations. The older generation often came from modest wealth and been able to amass their own wealth. Their children grow up in affluent environments and may not have the drive and motivation to create their own wealth. The advisor has to mediate between these two realities and help the younger generation develop and the older one prepare them adequately.
Added to that are value and cultural differences between generations. Younger generations are global digital citizens, and their parents much less so. They live in different realities, and their values about transparency, teamwork, business values, and gender roles, to name a few, diverge. To help the family prepare for the future, these differences must be addressed openly.
The advisor will observe all manner of family issues. Some cannot be resolved but must be worked around. Other issues will require the services of different types of advisor or consultant. When the family seeks an advisor for help with one issue, the resolution will often require a deeper assessment of the family itself, and address areas the family might not have considered. To serve the family, the advisor will also have to be able to challenge the view of the family leaders about what they want and what is needed. They must help the family to address differences among themselves, which may be emotionally difficult and unprecedented for them. The advisor will need to develop skills in assessing family dynamics and then helping them take a path forward that may not be what they expected.
Therefore, the advisor, not trained as a family mediator or counselor, must develop skills to bring the family together, address important issues and differences, resolve conflict, and then develop agreements, structures, policies and practices across generations. The advisor must develop skills in assessing families and bringing them together.
Business schools have focused on the needs of the next generation of family business by offering training and development to younger family members. Now, Cornell, in a pioneering venture, will offer a program for advisors to learn how to guide families through the challenges of family dynamics. These skills will be deeply useful in their work with families and allow them to better serve their families.
Dennis T. Jaffe, Ph.D. is a Cornell Family Business Scholarand a member of Wise Counsel Research Associates. Dennis is now in the third phase of his 100-Year Family Enterprise research project, resulting so far in five working papers (all available on Amazon). Dennis is a weekly contributor to Forbes Leadership channel, reporting on family cross-generational family business and wealth. His global insights have led to teaching or consulting engagements at Hult University in Dubai, the Pacific Asia chapter of Family Business Network, and the Advisory Board of Chinese University of Hong Kong. He is part of the Polaris team working with the Family Business Network to create a roadmap for family and business sustainability.