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Family Wealth Management: Seven Imperatives for Successful Investing in the New World Order by Tom McCullough, Mark Haynes Daniell

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Chapter 8

Integrating the Family Business into Wealth Management Strategy

Many family leaders and family office chief investment officers (CIOs) make the mistake of leaving the family business out of their thinking about family wealth management.

This may be due to a separation of responsibilities within the family, or because the focus of the family office is solely on the investment of liquid wealth, or the family keeps the main business aside as a single entity subject to a different ownership structure, governance participation, and management approach.

In most cases this is a mistake, despite the good intentions of the leaders and advisors involved. To optimize family wealth over time, it is crucial that the family business be included in financial and wealth planning strategies. Of course, it is also vital that the family business is well run, that the leadership is smoothly transitioned from one leader to another, that its value is enhanced, and, if appropriate, that its value is realized through a sale, partial sale, or listing of the company.

At the same time, a family business can play an integrated role in the family wealth portfolio, bringing with it such issues as capital and income contributions, cash and debt drawdowns, risk, cash flow, leverage, currency, sale timing, family role definition, and other considerations common to all assets in the portfolio.

For many families, the vast bulk of their wealth may be tied up in a family business. The sheer magnitude of ...

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