Monday, May 20, 2024

The Joys (and Issues) of Working with Family in Your Advisory Firm


Research suggests that family businesses account for more than 60 percent of U.S. GDP, making them significant contributors to the nation’s economy. Within our own ranks at Commonwealth, we estimate that more than 40 percent of our affiliates have at least one family member working in the business. The independent business model makes working with family a natural fit—as a small business owner, you get to work with people you know and love. Not to mention that when you hire family, you potentially have a built-in successor for continuing your legacy across generations.

But let’s be honest, it’s not always smooth sailing. Working with family in a business setting can get tricky, especially when you add in the complexities of running a sophisticated financial advisory firm.

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Let’s explore some dynamics, opportunities, and challenges of working with family in an advisory firm so you can ensure that your entire team—family and non-family—is working together as effectively as possible.

Family Matters: The Advantages of Working Together

From trust to personal commitment, there’s a strength in working with family that many non-family business units can’t quite grasp or replicate. This unique dynamic can (and should) be an asset to your firm. Here are some deeply rooted advantages to consider if you’re thinking about bringing a family member into your firm.

Family members often share the same values and understand each other in ways outsiders might not. The common ground of shared experiences can be a huge advantage for your business. Because you get each other, you can make decisions faster and rely on each other to move in the same direction. Family values and business values often align, and that synergy can make your firm stand out.

One of the best parts about working with family is how well you can work together. You’ve been talking to and teaming up with these people your whole life, right? When it comes to business, you may communicate and collaborate in ways that other teams might struggle with. Of course, this could also mean that you don’t communicate as effectively with non-family.

In either case, it’s important to be honest and understand each other’s strengths and weaknesses. This can lead to amazing teamwork. When a family works well together, it’s like a well-oiled machine, and that can make clients feel like part of the family, too.

The Flip Side of the Family Business

There are inherent challenges in running a family-owned advisory firm, especially when your team includes both family and non-family members or when some members of the family work in the business and others do not.

4 Strategies for Navigating Family Dynamics

Running a family-owned firm can be like navigating a ship through choppy waters. It’s rewarding, but you need the right strategies to keep things smooth. Let’s dive into some tactics to help you productively balance family and business roles.

1. Set expectations

Clearly defined roles and responsibilities are foundational elements in any business. In a family firm, it’s easy to assume everyone’s on the same page, but this isn’t always the case. You need written job descriptions for each role, so remember to talk about it openly. Who’s responsible for which part of the business? What does success look like? This clarity helps prevent misunderstandings and ensures that everyone knows the part they play in the firm’s success.

With his entire family working in the practice, advisor Randy Rawe, president of Rawe Financial, knows the importance of role definition and clarity. Rawe and his son, Eric, who’s also an advisor, are responsible for the clients, planning, investments, and business development. His wife, Linda, is office manager, while their daughter, Jessica, handles operations and marketing. Each member of the firm has clearly defined roles and responsibilities.

Setting goals—shared and individual—is critical as well. When determining goals, make sure they are SMART (specific, measurable, achievable, realistic, and timely) goals. This will help focus activities on the areas where you want to see change. And they are a key part of an overall HR strategy as they feed into performance development.

As Rawe states, “We have family members with different but complementary skills. We meet weekly to review our progress on key success initiatives, and we hold each other accountable.” He stresses that to have a successful family business, it’s critical to have a strong family unit where everyone shares the same vision. “The decisions you make as a businessperson can affect family relations, and there are times when those bonds may be tested.”

2. Adjust communication styles

In business, you must adapt your communication to suit both family and business needs. This could mean being more formal in meetings than at the dinner table or learning to give feedback in a way that’s constructive, not personal. It’s all about finding the right balance that works for everyone.

For Jodi Manthei, AIF®, principal of Riverstone Wealth Partners, having her two sons join her practice has been a blessing. Because they are on different paths—Kyle is an advisor, while Alec is currently in a client service role—she has to be careful to make sure they communicate clearly with one another.

“My sons have different and valuable strengths, which is a positive,” Manthei says. “And I’ve come to realize that my ‘go with the flow’ style does not meet my sons’—or some other employees’—needs for better definition of roles and opportunities. That’s a good learning opportunity for everyone.”

A great way to open these communication floodgates may be through regular meetings. Formal yet personalized check-ins will keep the backlog of discussions from building up. Think of it like routine maintenance. Unlike your vehicle, there’s no check engine light—it’s your responsibility to keep a pulse on the issues within your business, personal or professional. Remember, formal performance reviews benefit everyone.

3. Develop personal boundaries

You will need to know how to separate family and business roles. This means not letting family issues spill over into business decisions and vice versa. It can be tough, especially when emotions run high, but setting these boundaries is key to keeping the peace. It’s okay to say, “Let’s talk about this at home,” or “Right now, let’s focus on the business.”

Setting boundaries is critical to maintaining healthy familial relationships. Consider:

  • Setting firm rules about when—and for how long—you’ll discuss work if it’s outside of working hours

  • Establishing formal governance rules that outline ownership rights, profit distributions, and decision-making privileges

  • Seeking outside legal counsel to draft agreements that protect the business and your family relationships

4. Establish clear career paths and succession plans

For the long-term stability of your firm, you need to think about the future. Who will take over when the current leaders step down? What are the career paths for younger family members joining the firm? Career paths for family and non-family members are important, and having clear roles helps everyone understand their future in the business and reduces uncertainty and potential conflicts.

When Donna Sowa Allard, CFP®, AIF®, vice president of Sowa Financial Group, started working for her father, the whole firm assumed that she would be his successor one day. But Sowa Allard also knew that she would have to work for it, and earning the respect of the whole team was her goal.

“Bringing new members in, especially with highly tenured staff, can be challenging. You need to be intentional about not making anyone feel excluded. And building trust is essential, so you can address concerns frankly and kindly.”

Sowa Allard learned the business from the ground up, working in operations and client service while training to be an advisor. As she honed her craft, she took on more responsibility, earned industry credentials, and attended Commonwealth’s flagship Power in Practice program to learn how to run a more efficient firm.

“Looking back, I wish we’d had a more formal training program with specific measurable performance markers and goals. Ours were intentionally loose so I could serve the firm’s needs at the time and develop organically. With a more deliberate career path, I may have progressed as an advisor faster. However, having an intimate knowledge of how the business runs is beneficial in transitioning to being the business owner.”

Now, with her brother managing the firm’s operations and her sister in charge of social media, the long-awaited succession is taking place.

Find the Joy

The journey of a family business is marked by a unique set of challenges and struggles, and these same hurdles pave the way for invaluable learning lessons. By implementing the strategies outlined here, family firms can not only navigate the complexities inherent in their business model but also position themselves for lasting success.

Equally important is choosing a partner firm that appreciates the nuances of family enterprises and treats them with the same care and commitment as one would treat their own family. Such a partnership can be the cornerstone of stability and growth, ensuring that the benefits of a family business far outweigh the struggles and setting the stage for a legacy of success.

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