Navigating New Family Business Horizons: The Evolving Advisor’s Role

Written by Joe Ambrose, Vice Chairman/Managing Director, First Bank Wealth Management

In recent years, there has been a notable shift in where advice for family-owned businesses comes from and how that advice is perceived. Business owners have traditionally turned to accountants, insurance agents, bankers, and lawyers for professional guidance due to the technical complexities involved with these areas. However, there is a noticeable shift toward seeking advice on non-business, yet equally important, aspects of family business.

Historically, professional advisors primarily focused on business-related matters, often overlooking the unique challenges and intricacies associated with managing a family-owned business. Compounding the uncertainty of the advice’s value, it simply may not have been aligned and conflicted. For instance, advice regarding handling conflict with a family member in the business from a legal or accounting point of view may not be suitable for what is necessary for his or her unique situation.

The Evolving Role of the Advisor and Their Perspectives
The most notable shift in advisory services has centered on adopting a more comprehensive perspective that considers the family as a whole, rather than just the business itself. When you consider the significant differences from operating as “a family in business” versus “a family business”, advisors and service providers, who focused primarily on just the business side, may have offered advice that certainly benefited the company but to the detriment of the current and future owners as individuals. For example, advising that a family-owned business organize as a C corporation (C corp.) rather than an S corporation (S corp.) or using only one class of stock rather than issuing voting and non-voting shares, may not always be in the best personal interest of the family.

Another example is preparing for a transition of the family business to the next generation. The first generation may be working with the next generation to train them in all aspects of running the daily operations of the business but they may not be preparing them to be successful next generation owners of the business. This often leads to a host of other considerations, especially if there are siblings not involved in the day-to-day operations of the business.

Undoubtedly, every generation of the family business needs to have an advisory team in their corner to take a holistic approach regarding these issues and more, especially when family harmony comes into play.

The Evolution of Becoming a Family in Business
The evolution of becoming a cohesive family in business requires coordinated thinking on matters involving accounting, legal, and general business issues as well as family wealth and dynamics. While there typically isn’t one person endowed with detailed knowledge in all facets of a family enterprise, there is a need for a manager of these subject matter experts. This could either be the owner of the business, a family board or council, or a lead advisor that meets regularly with the advisory team as a group.

To understand how family businesses are viewed today, read, “The Perception of Family Businesses: Strengths, Challenges, and Competitive Positioning.

The value of the team is lost if all parties aren’t at the same table to address the issues that arise in a coordinated manner. The cadence of these collaborative meetings is dependent on the volume of issues to address so plan on more frequent meetings as the strategy evolves. Once a solid plan is in place, the meetings will simply become a touchpoint to stay on track.

It’s important to note, one subject matter expert simply cannot replace the knowledge and proficiency of a complete advisory team. Rather, they should complement one another with varying levels of expertise while implementing a holistic family business plan.

Aligning your organization with First Bank’s knowledgeable team of experts will help position your business for long-term success. We’re here to partner with and work alongside your group of advisors to help take your family-owned and privately held business to the next level.

Joseph “Joe” T. Ambrose is the Vice Chairman and Managing Director of First Bank Wealth Management which provides investment management, financial planning, trust, and employment benefit services to individuals and organizations across First Bank’s markets. Joe has been with First Bank for over 32 years, primarily focused on the acquisition and retention of family business clients in all revenue areas of the bank, including Wealth Management, Retail, Commercial Banking, and Treasury Management. Possessing over 47 years of combined banking experience, Joe serves as a member of the First Bank Executive Management Committee. You may reach Joe Ambrose by phone at (314) 995-8722 or via email [email protected].