Growing Your Financial Advisory Practice | Insights for Financial Advisors, Planners and Investment Managers
047: Transitioning Family Wealth: How to Increase the Odds of Success
Family businesses inevitably come with complex scenarios for a financial advisor to sort through. But the biggest complications may not be what you expect: the emotional aspect of family, business, and money is often the foremost concern when beginning conversations around business transitions. Today’s guest brings a rock-solid technical background and soft skills that helps her see the full picture and help families navigate the wealth transition landscape.
Cindy Radu is a family wealth transition advisor. She works with individuals, family enterprises, business owners and family offices to maneuver the complexities and opportunities of multi-generational wealth. Cindy has over 25 years of legal, fiduciary, trust and governance experience, giving her a bird’s eye view of the many issues families can face.
Listen to the episode to hear how Cindy frames wealth, family enterprise, and success in a way that helps her clients handle the complicated financial and emotional factors involved in transitioning family wealth.
What You’ll Learn in This Episode:
- Rethinking the key issues around transitioning wealth and family businesses in Canada (8:05)
- The difference between a family business and a family enterprise – and why it matters (11:10)
- Cindy’s first steps when advising clients (18:45)
- How Cindy bridges critical gaps by working effectively with other advisors (25:25)
- Helping families avoid assumptions and get on the same page (33:40)
- What wealth and wealth management really mean (39:30)
Links and Resources:
Quotes by Cindy Radu:
“Way too many families are willing to stake everything they work so hard for on basically a hope and a prayer that everything is going to turn out alright.”
“Referrals from clients are frankly the strongest possible referrals that you can get.”
“I’ve been successful in my practice because I’m able to bridge those emotional and technical aspects of the wealth planning and transition.”
Cindy has been a Chartered Accountant and estate planning lawyer, and she’s also worked with large financial institutions. And yet all of her work has had one common goal: helping families through transitions. Today, she shares her experience to reframe the conversation around family wealth transitions.
Below, we’re sharing three key ideas from this episode:
- Rethinking the key issues around transitioning wealth and family businesses in Canada
- The difference between a family business and a family enterprise – and why it matters
- What wealth and wealth management really mean
For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.
Rethinking the key issues around transitioning wealth and family businesses in Canada
There are nearly 900,000 family businesses in Canada. Together they contribute to over 60% of GDP, employ over 6 million people, and donate annually $1.5 billion to charity.
However, successful wealth transition from the first generation of a family business to the next only has a 30% chance of success. Worse yet, the chance of a second generation transitioning their wealth to the third generation is a measly 10%.
So where does this failure come from? If you look at what most financial professionals focus on, you’d think that tax and financial planning problems are the major issue. However, together these only contribute to about 3% of transition failures.
Here’s how the other 97% breaks down:
- The vast majority – about 60% – of wealth transition failures come from a breakdown in communication and trust between family members.
- Around one quarter of failures is due to the next generation not being adequately prepared to be good stewards of the wealth.
- In just over 10% of cases, a lack of mission or vision contributed to the failure.
These numbers are a stark wake-up call to anyone who believes that financial planning is all about the numbers. That’s why Cindy focuses most of her time on bringing multiple generations of a family to the table and helping them find common ground.
Hint: You’ve probably heard of the Pareto principle, which states that 20% of activities generate 80% of results. In this case, think of the amazing results you could have just by getting two or even three generations of a family discussing their plans together!
The difference between a family business and a family enterprise – and why it matters.
The difference between a family business and a family enterprise amounts to a critical difference in how Cindy helps families.
A family business is exactly what most people think it is: a business owned and run by a family. They vary in scope, from your local corner store to McCain, but they’re all considered family businesses.
A family enterprise, on the other hand, includes the family business as well as all the other elements that make up a family’s financial situation: real estate, art collections, investment portfolios, registered investments, insurance products and so on.
Traditionally, we break these things out, with different experts taking on different asset classes. And that makes sense because each area is itself rather complicated. But when they just work in a silo at different points in time, the family enterprise as a whole gets forgotten.
Without really knowing how all the pieces fit together, it’s impossible to get a clear picture of the family as a whole. That’s why a major aspect of Cindy’s work is liaising with different financial specialists and making sure everything fits together in a way that helps – not hurts – the family members themselves.
Hint: For more on working effectively with other professionals, listen to our interview with Jamie Robb.
What wealth and wealth management really mean
When asked about how Cindy approaches wealth management, she pointed out that everyone has a different definition of what it means. And in most cases, the definition is far too limited – usually just involving investment management.
Cindy has been trying to shift the meaning of capital beyond just the financial – though that part matters, too. “This term of wealth management for me,” she says, “really is a very, very broad term that encompasses all of the financial, social, human, and intellectual capital that a family has, all tied up in a bow around a shared dream of where that family wants to get.”
So when Cindy works with a family on wealth transition, she’s always keeping in mind all of these pieces – not just the family business, not just the family enterprise, but the family members themselves, too.
To hear more from her on how she works successfully with teams of advisors and specialists, why you need to be honest about your blindspots and what post-mortem exercises can reveal, make sure you listen to the full episode. You can find the show right here on this page or subscribe on iTunes or Stitcher so you don’t miss any episodes.
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