Join us for a compelling episode of ABFI Table Talk as Matt Knight hosts a deep-dive discussion with three experts in family business succession and wealth transition: Tom Deans, best-selling author of “Every Family’s Business,” “Willing Wisdom,” and “The Happy Inheritor”; Jane Halford, president of Halford Consulting specializing in governance and leadership transitions; and Bob Hahn, partner at HLH Chartered Professional Accountants with extensive experience in accounting, tax planning, and wealth management for family enterprises.
In Episode 7, our guests explore the critical conversations families need to ensure successful wealth and business ownership transitions across generations. Discover why Tom Deans advocates for selling family businesses to third parties and the transformative power of facilitated family meetings. Jane Halford and Bob Hahn delve into the challenges of engaging family members in succession planning, emphasizing the crucial role of trusted advisors in guiding sensitive discussions. They highlight the importance of initiating conversations, involving all generations and addressing financial and emotional dimensions to prevent conflicts and sustain the family business legacy.
Whether you’re a family business owner, a successor in waiting, or an advisor in the field, this episode offers invaluable insights into the dynamics of family enterprises. Learn about effective succession planning strategies, the significance of open communication, and how to balance personal relationships with business objectives. Our guests share real-world experiences and practical advice on overcoming common obstacles in wealth transfer and leadership transition.
Tune in to ABFI Table Talk for an enlightening and actionable conversation that blends professional expertise with heartfelt stories. Gain the knowledge and tools to navigate the complexities of managing and transitioning a family business, ensuring its prosperity for generations to come.
Matt Knight 00:00
Matt, welcome to Table Talk. I’m Matt Knight. I’m with you today for a special episode. We’re going to be joined by three guests, one in studio here, and two online. So we’re getting into that hybrid environment, and we’re going to dive into the world of family business, as we do every episode today. We’re joined by Tom deans, who’s the author of three best selling books, including every family’s business willing wisdom and the happy inheritor. We’re also joined by Jane Halford, president of Helford consulting, and Bob partner at HLH, Chartered Professional accountants, and today we’re going to host this conversation about a workshop we’re doing in November with the three of us and Tom. And we really just wanted to start this conversation today by introducing Tom and explaining some of the key themes from from his books. Like I mentioned, Tom does have three books, but we’re going to focus both today and in the November workshop, on just every family’s business and the newest book, The Happy inheritor. So to kick things off, Tom, for anyone who’s not familiar with you, can you maybe introduce yourself, share kind of a high level of what inspired you to write every family’s business and the happy inheritor and why you’re so passionate about the space?
Tom Deans 01:21
Yeah, it is a great place to jump in. And let me just begin by saying that anyone who writes I think a decent book is really trying to convince himself of an idea. And so when I think back to that first book, every family’s business, which, by the way, is 15 years old and still sells over 50,000 copies a year, this book won’t die. I thought when I wrote my second book, little wisdom, your first book kind of falls off, but not so much. And in fact, I think that this issue of transitioning family businesses has become even more prescient, more important, more urgent, because the baby boomers are turning 76 born in 1948 fast forward, 40 you know, 7475 76 they are. They had created businesses in record numbers, and they really did what a lot of entrepreneurs is, which is store their wealth in their business. And that was me. I joined a family business at age 37 which is quite late in the world of family business. Ran that business for eight years as CEO, and sold that business along with my father, something we had actually done in our family three previous times. So I wrote that book. I wrote a book that simply says, here’s the big idea, don’t give your business to your children if they want it, they need to buy it at full market value, no discounts, no haircuts for children. They need to buy the full market value well, so
Bob Hahn 02:44
maybe Tom, Tom, you actually need to just repeat that. They just don’t get it for free. That’s that’s a different concept.
Tom Deans 02:51
Yeah, it really is. I, I thought, you know, this is not crazy. This is something I’ve watched in my own family. But I really keen to understand that it really is very, very, a very different idea. In fact, when the book was first released, it was such a controversial book, which is why I think it still does well today, because business owners intuitively view their business as their legacy, the family farm, the manufacturing business, the corner store, whatever it is, Ford, Motor Company, they’re everywhere. They view that thing as their legacy and legacies, I think intuitively, we didn’t think we pass on for free. Well, the reality is, the success rate of family businesses that are gifted is appalling. The amount of wealth destruction in the modern economy, which is the destruction of family businesses, because 90% of businesses are family owned and controlled. It’s alarming, and the number is really not improving. So I think I wrote that book 15 years ago to convince myself that our family’s decision to sell the business to a third party, to a strategic buyer. In our case, was the right thing to do. And with 15 years now passed, I can look back and say, in fact, it was the greatest day of my life.
Matt Knight 04:11
We’ll get into some of those things right away, but before we dive into some of those questions, Jane, welcome. You’ve helped a lot of family businesses, mostly in kind of the governance and transition and succession and leadership area. Can you tell us a little bit about about yourself and Helford consulting?
Jane Halford 04:28
Thanks so much. And it’s great to be here. And you know, just as a bit of background, it’s probably been more than 25 years since I started my career as a chartered accountant, and I started in owner managed businesses, helping family businesses. And just like Tom said, a lot of them were first generation people who started the business and were working, working, working so hard. And at that time, you know, their children were starting to get involved and to varying degrees of interest. And I know we’ll talk about that today, and now, when I look 25 years later, very few. Those family businesses have now gone on to the second generation, and as Tom said, for very good reason. So I love that space. I love that sort of trusted advisor space. But for myself, it was 2013 when I decided to completely change my career path and focus on helping organizations transition leadership and in the space of family business that’s looking to those next generation and helping them choose to stay in the family business or not, helping navigate those who do and those who don’t. And now I think what’s most prevalent in my world is saying you’ve got a 25, 3040, year age difference between the senior leaders in those family businesses and the next gen, and you can’t have those senior leaders walk out the door and expect this next generation to just pick up where mom, dad and uncles left off. So I think that’s my curiosity and family business today, but I look forward to the conversation nice, and
Matt Knight 05:58
you’ve done a very good job in that transition yourself, so much so that I didn’t even know you were anaccountant.
Jane Halford 06:03
There you go. Bob and I are not typical accountants.
Matt Knight 06:07
Let’s put it so Bob over to you. You work with a lot of business families, more on the accounting and tax planning and kind of wealth side. Can you share a little bit more about your background? Tell us about HLH charter professional accountants, and your work with family business clients.
Bob Hahn 06:22
Thank you very much. Yes. HLH just turned 20 September one, so we are very proud to have our accounting firm transition. Yes, we do a lot of accounting and tax work. However, we are sensing that we need to move to becoming more advisors, we need to have conversations that matter. And moving conversations away from just the financial statements, but talking about things like share ownership. When do I retire? What’s the value of my business? Can I afford to retire? When am I going to retire? And you know, perhaps I have one child involved in the business, three not. How do I deal with that these conversations are the ones that really matter, and those are the conversations, as long as we’re not afraid to go there. That’s what our clients want to talk about, and whether it’s actually family members or key employees that I treat those just like family, those are the things that I find very challenging, and that’s why I’m all in as far as the future of HLH and where we want to go as advisors. Yes, accounting and tax is very important. That’s our base. Everybody expects us to know that. But this future side, and having Tom come back to Edmonton again is so exciting for me. When we had him here last year, people are asking, When is he coming back? We want to hear more, and he is this podcast is just over the top for me.
Matt Knight 07:45
Maybe tell us a little bit about kind of the last time you hosted Tom, both virtually and in Edmonton?
Bob Hahn 07:51
Well, Tom came in and he talked about his last two books. He did give a hint that he’s writing a new book at that point, and he’s willing to talk about these taboo topics, wills, estates, money like as though, you know that’s sort of deemed obvious if you’re talking about your will and how many dollars are we talking and what’s happening. But this is difficult stuff. Tom is not afraid to address the top taboo topics, and that’s what’s really intriguing,
Matt Knight 08:23
sex, politics, wealth, all of those things. So Tom I recently read your book, or reread your book on a flight. Sadly, I wasn’t going to the Barbados. I was actually coming from Toronto back to Edmonton. The opening chapter really kind of sets that scene really well about a memorable conversation on a plane. A lot of my thoughts are, you know, in addition to the content was, how true is that story? What, you know, what? Where was that key message coming from? What were you looking to get get across? What kind of liberties did you take as a writer?
Tom Deans 08:56
Yeah, I think first of all, the there was never a plane ride, but I liked the plane ride as a backdrop. I find myself, to this day, sharing information with complete strangers. I don’t know what it is about being 30 throughout 33,000 feet in the air and revealing details with with strangers. I think there’s, there’s something about the anonymity of a flight, and you’ll never see these people again. And I thought, What a great backdrop for two characters, an older gentleman who has sold his business, family business, who has really kind of mucked things up. He’s got lots of regrets, and he sits down beside William, okay, that’s my middle name. I did a terrible job out of hiding myself in the narrative. But William shares 12 questions that his father asked him to help frame a conversation, an annual conversation, to probe whether or not William, the rising generation, wants to risk his capital and buy that business at full market value based on a third party valuation. And so that is what that flight is. It’s it is an exploration of those 12 questions that really help William. Him and his father find the end of their business, and here’s the best part, to celebrate the end. Culturally, we view the sale of the family business as some kind of public acknowledgement of failure. What I’ve been trying to do for 15 years is shift the narrative and say that is actually the goal. Sell it inside to a family member. Sell it to a key employee, or group employee, as Bob said, sell it to a strategic buyer. That’s a competitor. Sell it to a financial buyer, private equity. I don’t care what you do, but this idea of a business owner, semi retiring, drawing a salary while their children run their business, where that business owner is going to die in his 80s or 90s, is getting old. It’s destroying families strong, destroying wealth and family relationships. And I’m really trying to put an end to it. I’m really trying to to force that liquidity event. Because when death happens, and I don’t know if you know this, but actually, everyone dies this.
Jane Halford 10:55
This is a news flash, like, really, we need that. That is a title for the talk today.
Tom Deans 11:02
It’s my next book. Everyone dies. It’s such a crazy idea. So I’m really trying to accelerate these family conversations and get at this really tricky issue, which is, who are you going to sell to?
Bob Hahn 11:16
Tom? I find your conversa, your comments, very interesting. I also find that even though you bring up that topic about who’s waiting to buy and it takes sometimes years for that message to actually be heard or to be believed by the next generation, or whatever it takes a while, there’s some of these conversations that are now happening within my client groups that we’ve been talking About this for two or three, four years already, and finally, the conversations are beginning.
Tom Deans 11:46
Yeah, I, you know, I have spent 15 years just trying to start conversations. I’m not the last word. I’m not a practitioner, I’m not a consultant. I literally have devoted my time to be the blunt instrument of this conversation, to get it going. Because when I’m doing lectures, when I’m doing public events like the one I did for you and your clients, in that room, there are business owners who think their children are going to buy the business, and there are children who think their parents are going to gift it, and no one there’s a huge gap in expectations, and no one knows how to start the conversations. If the children start it, they feel like they’re going to be perceived to be greedy. If the parents started, they’re worried about it spinning out of control. And so there’s this crisis of expectation. And I know that the role that you’re fulfilling, it’s so rare among public accountants, we want to reduce this subject to a tax question. Well, you know, and I know that’s the easy part. It’s starting these really human, relational conversations, and managing those conversations to probe what is right for that family. And every family is different.
Jane Halford 12:51
And Tom I was going to say that I was so happy to see William back in the new book, and I totally confessed the happy inheritor. I read that one Sunday afternoon and read it straight front to back. And I was super intrigued and and, you know, we’ll leave it to the to the viewers to pick up the book and dive in. But what I loved was it talks about the psychology of what’s going on, and it gives you some really substantial ideas around what’s actually happening in the humans here. And you know, I love the resources at the end of the book, so congratulations. I think that’s another game changer book that’s on your radar.
Tom Deans 13:28
Well, well, I really appreciate that. I really thought that I was done. I mean, Willie Winston, my second book, was written 10 years, 10 years ago. It took me 10 years to write this book, and I think it was a book really born out of frustration. I when I started, 12 and a half million Canadians did not have a will, including half of all business owners in Edmonton. Like, it’s shocking, half of all lawyers don’t have a will. So you know what I’m thinking, What is going on? Like, seriously, what is really going on? I’ve given over 2000 speeches in 28 countries. I’m not even moving the needle. The number now is 15 million Canadians without a will. Bob has suggested that I stop writing and speaking, and the numbers getting worse worse. I really wanted to get, you know, get do a little bit of a deeper dive, and I think, a more honest appraisal of what is really going on in a certain subsection of society. There are, there’s about 20% of people who will never write a will. And as as as you know, if you’ve read the book, you’ll know that I’m really getting into the world of personality disorders. These are people, particularly covert narcissists, who are in control of family wealth, in control of businesses, and they simply will not plan. They spend their energy and resources dividing family, using their wealth to divide relationships. It’s really devastating for people to, particularly in life, to find out you’re expecting an inheritance and you’re going to find out they’re going to be, usually very disappointed,
Matt Knight 14:53
nice. So whether it’s kind of on wills or inheritances or selling the family business, what are some of the ways that. That you’ve helped advisors, or what are some practical steps that you could recommend for advisors like Jane or Bob, or maybe the ones who aren’t already integrating this into their practice? How would you suggest they start? What are some some steps and tools that they could could use?
Tom Deans 15:13
Well, I can say with great certainty that at the center this very centerpiece, and Bob is very good at this, the centerpiece of all of this wealth transition, whether it’s a business, a farm, cottage, difficult divide assets at the very centerpiece is a facilitated family meeting, bringing transparency, good governance, structure, honesty, decency to the conversation, we know that inherited wealth will do one of two things. Heirs will be prepared because there’s been ample conversation and predictability and transparency, and it will release potential. The wealth will transition, and people will start new businesses, fund, education, health care, important things, or it will accelerate demise, and when we leave our wealth carelessly, when we’re capricious with our wealth, and it causes damage, someone’s got an addiction. I talk in the happy inheritor about someone inheriting $10,000 and being dead in 30 days because of their addiction. Was that the intention? No, of course not, but that is the result of someone who is indifferent to conversations around how wealth will impact people.
Matt Knight 16:30
And that’s maybe a really good connection, and maybe something Bob should add to his business card. You know that Tom Dean’s kind of sings your praises that that way. But what’s kind of some of the ways that you’ve started integrating these into your conversation? Conversations with your clients. And how would you advise other advisors or your competition or your collaborators to do similar things?
Bob Hahn 16:51
Matt, I go back to one of my first comments is that we have the ultimate introduction to conversations that matter. People trust us. We know a lot about we basically know everything, and even more than our clients, sometimes about their corporations. Sometimes we don’t know very much about their personal situations because we don’t have balance sheets for personal we need to get there. But these conversations come up, and they’ll come up right quite routinely, especially if you’re that trusted advisor. You have that trusted piece, and they know that you have your their best intentions in mind and but as an advisor, you have to be deliberate. You can’t skirt around this topic. You have to be willing to say, Do you have a will? Have you thought about the value of your business? Can you afford to retire all of these kinds of things and just start the conversation, going, let them talk, let them talk. And sooner or later, all of these advisory services that we love to sell, it’s, it’s like taking candy to kindergarten. It’s, it’s really cool. And at the end of those meetings, Matt, I feel like I’ve actually accomplished something, and they’ve given some true value to that, to that client.
Matt Knight 18:09
And do you see kind of similar numbers as what Tom talks about in your clients with the number that have wills or have already figured that out?
Bob Hahn 18:17
Well, I think just watching the body language of your client, just they either look to the left or right, whichever direction that is about the you already know that the will hasn’t been looked at or they don’t have one. They look down and and very often, clients that are on this road now are very proud of what they’ve accomplished, and they’ll, they’ll take the time they want to tell you this what I’ve accomplished so far now I’ve decided that next steps are this, and there are some conversations I need to have, and this is a sort of a never ending process. It’s not just one conversation. And Tom’s approach of having this annual meeting, having this annual conversation, that is a very deliberate conversation. Is just masterful.
Matt Knight 19:04
And Jane in your practice, more on the transition side of things. How do you kind of recognize or help families recognize when they need that external support, and how do they engage that and how do you help them with those steps? You
Jane Halford 19:18
know, I when reflecting on this, I realize that it comes out of their source of pain. And let me give you three quick scenes that I find quite often. Number one is the most senior generation is feeling burdened by the business. You know, they’re 70 years old, they have all the wealth that they need, but they don’t have the lifestyle anymore. And they’re looking at the wealth and the limited health and saying, oh my gosh, like, I need to get moving on this. And, you know, you don’t want to wait till you’re in your 70s, but most of them do. Some of them are in their 80s. As Tom mentioned, I think the other pain point comes with the spouse of that CEO that’s running that business, saying that, you know, I’ve only got so much time left with my spouse. And I want to enjoy things, and there’s trouble between the spouse and the children, so that pain point. And then I think the one that I think is a bit more refreshing and upbeat is that next generation saying, Hey, mom, dad, aunt, uncle, Grandpa, Grandma, I’m ready, or I’m never going to be ready. And how do I as the next generation push us to have this conversation. I know Tom’s didn’t had lots of those conversations with families and and I love that, that he’s a catalyst for that. But Matt, before we turn it over to others, you haven’t shared too much about the Alberta Family Business Institute and and the difference you make. So share with us a little bit about how you get your folks talking about these difficult topics.
Matt Knight 20:42
Yeah. Well, thank you. So for us, it’s much more. We see our role very much as telling the story of business families. So we do that through this podcast. We do that through other mediums, like our signature event, which is coming up. And it’s really about bringing the community together, bringing the business families, bringing the advisors, and bringing the educators and the researchers, and then also the students, which are often forgotten. So to bring all of those parties together to have these conversations and start to have that dialog around well, what are we seeing in different practices? What are some of the issues, what are some of the hard questions that we should be thinking about now, and how do we really bring those all together? So yeah, it’s it’s more on, on building that community and building that ecosystem and helping everyone to connect and have those conversations. This has been a great conversation so far. Please stick with us as we’ll be right back. Just wanted to take a quick moment and thank some of our sponsors who helped put on the show today. Thank you very much to Bennet Jones, QV, investors and results. Without the support from the three of you, we wouldn’t be able to do table talk today. So thank you again. So maybe going back to the wealth side of thing, Tom and your new book with the happy inheritor, you talk a lot about, you know, the distinction between kind of those who want to preserve the wealth and those who want to maybe start new ventures and have that startup and entrepreneurial energy. How do you help families, kind of balance the stewardship versus entrepreneurial mindset and track?
Tom Deans 22:09
Yeah, I think you know the solution. I’ll come right back to it again. The centerpiece is that facilitated family meeting with that trusted advisor, or advisors, this, this notion of transitioning a business all on your own is near impossible. These conversations feel so dangerous and awkward and and I just don’t think they’re going to be had, or if they do, often, people revert to their 12 year old self, and they go sideways. And then people get the family they fear, not the one that they want to design with the help of a knowledgeable, trusted, talented facilitator. And what I get into in the book is is, you know, a little bit of a process on how to design these family meetings, right down to how round tables are very democratic, as opposed to a boardroom, you know, where someone is sitting at the end, and they’ve got the power, they’ve got the money, and they’re going to have a family meeting, and they’re going to tell people, you know how it’s going to be. That’s the furthest thing from the picture I’m trying to paint in the book where someone rather is, you know, gathering their family to say, I need to develop an estate plan, and I don’t have all the answers, and I want to start a conversation so that we can make better decisions as a family and transfer wealth efficiently and smoothly. And of course, every great story needs needs a villain. So, you know, in the book, that would be the litigation lawyer, right? I mean, they’re okay with that. They actually laugh their ass off. They think that. They think it’s hilarious because they know the families the courts are full of families in dispute fighting over farms. And, you know, I actually did a lot of research, it is going to cost about a half million dollars to get your family to a one day trial. I say all the time. If you think divorce is expensive, that’s like a dress rehearsal for the really big show, which is family estate litigation. Because there’s not two lawyers. If there’s five kids, there’s six lawyers, one for the estate. And guess who pays all the legal bills in many jurisdictions, it’s the estate. So I, I’m always kind of referring to that as the worst case, and then pivot back to but there’s another way, and that. That other way is gathering your family to say, look, first of all, from a place of gratitude. We we are. We’re a family with surplus capital that’s going to transition. Hey, nice problem to have, perspective is the first casualty of estate planning, right? These are great problems to have, but nevertheless a challenge. How do we transition the business? How do we transition wealth? It’s such a tricky subject to tackle on your own, which is why I’m really saying that trusted advisor is crucial. They will help build the agenda. They will help build a process so that the first meeting, you know the you know what the goal of the first family meeting is, get to a second family meeting the first one you just so you want to build it, so that you get a success right out of the gate. What would be a good family meeting agenda? Item selection of a family executor. How is that going to go wrong? When someone says, Your mother and I are traveling to Europe, we’re going to be traveling together, we need to update our will. Instead of proclaiming who our executor is, we thought we would gather our family, have a conversation together and make a decision as a family, because you children will be impacted by that decision. That is going to end fantastic, with people saying that wasn’t so painful. What’s next, what’s next, what’s next, what’s next. And this is so I think it’s building culture, building success, building confidence around this, this whole subject, which is counterculture. We wrap wealth in, in secrecy. Culturally, it’s rude to talk about money, and most Canadians, if they do have a will, will wrap their wealth in silence and and then, of course, they die. And then there’s a big reveal party. It’s kind of like a gender reveal party, except it’s everything is revealed. Who gets what. And of course, as Bob alluded to, if you go, if you got one son in the business and one daughter outside the business, or vice versa, where’s the family money? It’s in the business. Business owners make profits. They plow it back in year after year after year. How are you going to equalize the estate? You know, when someone dies? You know what the child outside the business wants? Really quick. It rhymes with funny. It’s not very funny, and they want it quick. And if there’s no conversation, no family meeting, no trusted advisor involved in the in the preparation of that estate plan, it’s got the lawyers are going to get involved. And that’s really what I’m trying to avoid, getting families to get out in front of this, and I know that’s the work that Bob and Jane are doing.
Bob Hahn 26:43
Tom I do have a practical question. Let’s say that yes, we’ve now got everybody to the round table. But even to get people to that round table is sometimes difficult. Some family members don’t want to attend. They will say they attend, then don’t attend. Can you give some practical solutions, or just some ideas of that part of the difficulty of getting that first meeting going? And sometimes, I think in your book, you refer to this as relationship issues, not necessarily personality disorder issues, but just relationship things. So any comments? Tom,
Tom Deans 27:19
yeah, absolutely. Don’t let perfection be the enemy of the good. Have that family meeting. Invite them if they don’t attend, send them the minutes, let them know that the meeting and the process will continue in their absence. Bow on. You. Don’t know what’s going on in that person’s world, but many times, children will say, Oh my gosh, I’m not the disruptive force that I thought I was now the family pick up on that a
Jane Halford 27:43
little bit, because I think one of the things that I’m seeing is it takes courage of one family member to say, let’s do it. And if everybody doesn’t come, they don’t come. But you’ve seen this time and time again. Can you give us some ideas of who has that courage? Is it always the most senior generation?
Tom Deans 28:02
It’s not always the most senior generation. We often think that, you know, the person who is old and has the money, has the wisdom and the insight. Well, the reality is, there’s there’s a rising generation. And this is heartbreaking. There is a rising generation who want nothing more than to have conversations are out about the transition of wealth, so that there aren’t disputes, and, more importantly, so that they are in possession of the documents. Are you ready for this? So that they can serve their parents or grandparents? Financial power of attorneys, health care. Power of attorneys. These are people who want to be able to be in a position to actually help their parents, and if there’s no conversation, if they’re not empowered and they’re not in possession of these documents, good luck. So part of my message is for the senior generation. It’s like, I know you think estate planning is answering the question, who gets my stuff when I’m dead? Listen, there’s a lot of self interest, right? If you have these family meetings, you can there should be reciprocity. You can answer the question, Who will take care of me when I lose mental capacity? You could be on there are many, many Canadians whose estate plans will be triggered not by their death, but by their cognitive decline.
Jane Halford 29:21
Well, that’s my biggest fear. Like death is one thing, but like not being able to take care of myself is is extremely fearful, and people don’t even admit it’s on their minds.
Tom Deans 29:31
So it’s on their mind and and for business owners who don’t answer the question, how is my business going to transition? They move into their 60s and 70s and 80s and 90s, carrying this tremendous burden of, how will this thing work when I’m not here?
Bob Hahn 29:46
So on that, yeah, topic Tom many businesses, they have a life cycle, and many of them are very complex. If I look at my personal situation, man, man, I’ve got I’ve got a farm, I’ve got accounting. Practice. I’ve got all these different pieces. Boy, I tell you, I really don’t want to be the executor of my own will. And many, many, there’s a lot of complexities. And many off many times, I’ve seen some family meetings where the business owners, the parents, have been able to reassure everybody else to say, I’ve already thought of a lot of these complexities. I’ve found a transition person. These are the people that you need to use. And here’s some cheat notes. And of course, I could change that five years from now. Once things are different, maybe they get more complex. On purpose, because I like being an entrepreneur. I’m not about to stop any comments.
Tom Deans 30:43
Yeah, I think, I think, first of all, in the family business world, there’s a lot of business owners who conflate employment with ownership. So they think if I sell, that is who I am. I’ve spent a lifetime acquiring control and making decisions and designing my day because I had control. And so if I sell my business, who will I be? Where will I go? What will I do? That will be more fun, more compelling, more interesting. And there’s this huge identity crisis. There’s a real, what I describe in the newest book, a real cognitive dissonance. I want to be free. I don’t want to be free. I want to be free of the business. I need my business. And there’s their core values, two competing core beliefs that are in opposition, and they’re stuck. And so that is why that third party like yourself, and it’s so crucial to help them resolve that dissonance. And there is a there is a better answer for everyone. But the reality is, and this is really the wisdom that I’m asking people to to kind of tap into, not dealing with this issue and dying and leaving it to other family members who you care about to clean up your mess. It’s heartbreaking to watch a business that has taken decades to develop and grow to destroy its value is heartbreaking. And I know, I know business owners who are picking off family businesses for pennies on the dollar, because these business owner business owners are not getting out in front of this issue in building durable plans, flexible plans, they think they have more time
Matt Knight 32:26
Interesting. So when I dive into that a little bit more. So you talked a little bit about how if that founder or owner passes away suddenly, and a lot of those things aren’t taken care of, asides from kind of those family conversations, anything. And maybe I’ll point this question at both you Tom, but also Jane, anything on kind of the governance side that we could look at as polling too, is some other tools to help, kind of bring in some frameworks or some structures to help, you know, really support that process.
Tom Deans 32:56
Well, I’ll tell you, I’m going to keep coming back to that family meeting with the trusted advisor. But what I’m seeing in these facilitated family meetings is other allied professionals rotating through so a lawyer would so, you know, maybe Bob, as the accountant is, is the trusted advisor. Very often is. In Canada, accountants are the most trusted advisor. It’s interesting in the US Attorneys are. It’s kind of flipped, but the so as the trusted advisor you would, you would build an agenda for that business owner and the business owner family, but they would cycle through, for example, a lawyer to maybe give a 10% a 10 minute presentation on the duties of an executor to frame a family conversation around updating mom and dad’s will. Maybe the next meeting, they’re talking about how dangerous it is to concentrate their wealth in one illiquid stock called the family business. And so they might bring in a wealth advisor to give a presentation on how to get, you know, retained earnings out of a business and spreading risk across many different sectors and currencies. Really important as you move into your 60s and 70s, not to have 80% of percent of your wealth in one stock called the family business. So allied professionals coming through, including including marriage culture counselors and addiction. There’s lots of stuff going on inside family meetings and the most successful families, they don’t bury their head in the sand. They address it. They move towards the chaos, and they resource it in a really transparent way, including the creation of trust, where there are really deep concerns around maybe the spending habits of a child’s spouse. By not having a meeting doesn’t make the problem go away, dealing with it in a family meeting and saying, listen, we’d like to bring the resources to this issue. Here’s our expectations, how our wealth will be treated. We would like to introduce you to our advisors. There’s another tool, another resource, to help you take living gifts and invest. Learn how to become an investor like we have lost this idea. That we need to teach and reinforce and coach wealth. It’s not a one and done. Die and have a reveal party and expect, you know, the rising generation to somehow quickly trip over these powerful financial planning ideas like the power of spending less than you make really again, we’re just not talking about stuff like that. That’s that is what’s taking place in facilitated family meetings with children as young as five.
Jane Halford 35:32
And to pick up on, Tom’s point about the education, I think people can get super overwhelmed. There’s so much to pass on, but you just have to start from where you are and take one step forward. You know, one interesting thing I see time and time again is that, you know, when you set up a business, everybody needs to have directors, right? So everybody has a directory name, lots of family businesses haven’t looked at those core documents since they were incorporated and or since the last time some senior generation person passed away. So sometimes it’s starting as basic as, what are those core documents do the current owners understand them? And chances are, there’s lots of individuals involved in that ownership structure that don’t go into the family business every day. They don’t know how it’s structured. They don’t know why it’s structured. And even if they are fiduciary duty as directors, they’re not even doing that. So they’ve got exposure they don’t even know today. So sometimes it takes, like a trusted space of the current owners and saying, Hey folks, do you even know how you’re structured, why you’re structured that way? And if we have to go on the learning journey first just to get this current generation knowledgeable, then bring in the next generation. Because I think it’s quite fearful for this most senior generation to think, Boy, if our kids and grandkids only knew that we didn’t even know how we were structured, why we were structured, that’ll be embarrassing. So even if it’s starting privately, just do it
Bob Hahn 36:59
the one point that you’ve made before, Tom as want to bring it up here is that, yes, Generation One as as life expectancy goes up. You know, we could have the parents be 80, and so their children are in their 60s, let’s say, well, they’re already thinking of retiring. Maybe it’s gen two behind them, and to Jane’s point, all of a sudden, now you’ve got even more complexities. And so talk a little bit about at these family meetings. Do you include just the immediate family? Do you go beyond? I know that you talked about grandchildren. Just some comments about the ideal. Yeah.
Tom Deans 37:39
So the ideal is to start small and to build that family meeting with like, to have a nuclear family meeting before the family goes nuclear, you want to have a nuclear family meeting. So that’s mom and dad and and their children, not spouses. Like, keep it small. The smaller the number of people, the more probable you’re gonna have. You’re going to have, you’re going to have, you’re going to have a success. You’re going to have people go, well, that that wasn’t painful, that was that was actually pretty good, but notionally or aspirationally, that is what you want to aim for as time moves on. Second meeting, third meeting, fourth meeting, you want to start to include the spouses of g2 and the the total aspirational goal is a multi generational, typically three generation family meeting with grandchildren present. And that is really where you can start to see families getting in and contemplating living gifts, from g1 to g3, generation. I call it generation skipping, with conversation and transparency, as opposed to generation skipping, where grandparents look at their adult children in their 50s and 60s and say they’re not going to get my money. They don’t need my money. They go to they go to Palm Springs, way more than we ever did. So we’re, you know what? They equate estate planning with economic need. So they quietly no family meeting, skip over their adult children and leave their money to their grandchildren,
Matt Knight 39:01
maybe on that generation side of things, what age would you see being the youngest you could bring people into this family meeting, and what ways can you engage people that are maybe younger than that?
Tom Deans 39:13
So I’m seeing children as young as five. I’ve seen children younger than that walking around the room. They have no intro. They have no idea why they’re there or what the meaning is is taking place, but eventually those young children sit down and they’re curious, and they’re they they’re curious about what is taking place in that room. And so the families that are involving young children are, they’re they’re developed. They’ve been at this for a while. I’m a speaking resource inside many of these family meetings, and they’ve been at it for years. And they have family mission statements. They absolutely and I include this in my new book The Happy inheritor, that they have confidentiality statements that they read out at the beginning of the very, very beginning of every meeting, so that. Everyone is hyper attuned to this idea that what is taking place in that room is very special. There may not be a family business, but they are about to engage in the business of family. So there’s governance and structure and rules and process and family culture around the transition of wealth. They know that they’re participating in something unique and special. It’s really reinforced, and so that is what’s clearing the way for money to transition from g1 to g3 we have a generation of millennials and Gen X ers who, through no fault of their own, are as educated and hardworking and focused on being productive members of society. They’re shut out of the housing market through no fault of their own. They’re not even close their recent globe article on two young lawyers in Toronto, each making close to $200,000 each. They’re they are so far out of the game for house ownership, $400,000 not in the game, short of some kind of generational support. They are going nowhere in this city. So these are the type there’s a whole new urgency to these family meetings. You have a highly successful generation of savers, investors, the boomers turning 76 and a rising generation that is through no fault of their own, in deep, deep need of generational wealth, not to go to the couch and play Xbox and retire at age 28 but simply to get a crummy little townhouse in Brampton.
Bob Hahn 41:35
Another topic. Tom, when we do retirement planning, life planning clients, mine don’t like the word estate. But anyway, that to the side, we’re all talking about the same thing. Anyways, very often it’s surprising to everybody how much it takes to fund your own retirement. We usually plan to age 100 let’s say some of these things. You know, you have to be very realistic about the dollar amounts needed to find your own piece and look after yourself first of all, and then you can worry about Gen three. Right now, I’m not even too worried about Gen three. Let’s just worry about ourselves and encourage them to think about that. Then be realistic about what your goal was to say for gen two, and then if we need to, or if we can, maybe Gen three. It’s some of these conversations get very personal, and people have to realize their realistic expectations at the end of the day.
Tom Deans 42:38
And it’s a really excellent point. And again, that is why the facilitated family is so good, because that math can be done in the family meeting with with an advisor like yourself or a wealth advisor in collaboration, where they answer the question, How much am I going to need to fund my long term care? I can tell you that my last surviving grandmother died in 2011 and we were spending $150,000 of after tax money every year to provide 24 hour 365 care. That number is closer to $250,000 now a year, a year, we are living a long time. Do the math. So what I say is work with your advisor to find out how much money you need for your long term care, and then double it so that you can really sleep at night, right?
Bob Hahn 43:22
I guess I’m I’m not retiring. I’m not retiring anytime soon. Tom
Tom Deans 43:29
so you can see how important that conversation is for the rising generation, who may look at their parents and grandparents and say, Oh man, they’re awash in cash, but they have no idea of the cost it is that’s going to be required just to fund just a decent retirement with good care. So you can see how these family meetings really close the gaps in in people’s expectations and bring transparency, brings transparency to the relationships that are really struggling and buckling under this silence that is that is pervasive in families around the subject of money.
Matt Knight 44:10
So you mentioned earlier about some of the research you did for this new book around kind of that emotional side of things and that psychological side of things, that that last comment made me think of what were maybe some of the things that surprised you out of the out of that, and what were maybe some of the big things that you learned that weren’t in your book or that were in your book around kind of that emotional side of family legacy and family business.
Tom Deans 44:33
Yeah, that’s, it’s a really, really great question. I would say the thing that surprised me the most was particularly families that I was presenting to who had been at this for many, many years that really the centerpiece of their set, their family meetings, is philanthropy, over and over and over I saw it, the highest level of engagement, the lowest probability of litigation was coming from families who were plowing. Through the governance piece. So updating wills, power of attorney, healthcare directives, getting through and bringing transparency to succession plans for businesses and cottages, you know, those emotional assets that cause a lot of problems. They plow through that, and they really get to the fun stuff, which is collaborative family philanthropy, where they’re working as a font, as a family to collectively make decisions on how they want to make gifts. And this is a this surprised me, the logic behind this, but I decoded it, and I shared in the book, what is really going on is they’re teaching the rising generation that they are not going to be flippant with their charitable contributions. They are going to make the decision to give that charity, but not that charity, a check, because they have a process of discovery. They’re looking for impact, and what they’re teaching the next generation is that $1 that they would take out of their holding company for investments, $1 that they would take out of their holding company for consumption, or $1 that they take out of their holding company for philanthropy, is given the same kind of intellectual rigor. That’s what they’re teaching. And so they’re teaching their children and their grandchildren that $1 is $1 is $1 there’s no shortcut to creating wealth. It’s hard. It’s meant to be hard. And so when they’re in this position of having surplus capital, they really connect the rising generation to the stories and how the wealth was created and why inherited wealth comes with great responsibility and accountability.
Jane Halford 46:39
And Tom one of the things that that really inspires me about that conversation about the impact your money is meant to be as a family, is that you think about those families that hit that crossroads, where are we really willing to sell? And in their hearts, they know the answer is yes, the next generation doesn’t want it. They were just doing out of obligation to their parents, but talking about, if our family has a certain amount of wealth, that wealth doesn’t have to slow down, but we do have to put it forward into the world and make a difference. And I can see those next generations getting very excited about making different impact with the family money, but also having that open conversation. And so I think it can unlock that grief part about giving up the business and turn it into the next phase, which could be multi generational in impact.
Tom Deans 47:30
That is a really, really interesting insight. I i think it is the number one reason business owners struggle with this subject, the the notion of selling a business or answering the question, who will own it, if not me, who feels like a public acknowledgement of failure, that continuity of ownership inside the family is the only path. And I’m really, really quick to remind business, that’s why I think this book has sold a million and a half copies because there was a lot of business owners who did not have children, who were interested or capable and found themselves having to sell and then grieving over the loss of their life’s work. And so what I wanted to do is come along and say, no, no, that’s the goal. Sell it to your family. Sell it to some, sell it to employees, sell it, sell it, sell it. It’s not even radical, because CRA is gonna there’s gonna be a deemed disposition. Every business is sold anyway. I’m just making it official and and I, and I want people to not feel bad, but to understand that businesses come and go. There is a life cycle of the 100 largest firms in America. In the year 1900 only 16 were still in business in the year 2000 there’s a tremendous amount of wealth destruction in the modern economy. We don’t talk about it, we don’t look at it. We don’t want to measure it. We kind of glance away and we want to focus on that entrepreneur who started with $20 and built a billion dollar company, we love to hyper focus on success. Well, I think all the really great lessons in certainly in the family business space, are in the failures and what did the family do wrong? So in my personal situation, my grandfather had a chemical manufacturing business. My father had a plastic manufacturing business. I have a publishing business. My two kids, I’ve asked if they want to risk their capital and buy my business. Guess what? They’ve got their own ideas. So this one will be sold as well. And I don’t know, are we a failed family? Listen, this is, this is what I believe. I believe I’m a fourth generation family business. It’s not a building with our name on it. It’s a family business. Is a set of values, a love of risk, a love of entrepreneurship, a love of creating something that didn’t exist. That’s what we do, and I will transition my wealth to our children and. And they will go off and start businesses that they’re really good at and passionate about. It’s just a different way of looking at what a family business is.
Bob Hahn 50:10
One of your comments in the past, Tom, you’ve you’ve said, I gotta paraphrase. I think I got it right. You don’t have to stay in love with this particular business. That doesn’t mean that you have to not be in business. You can still love being an entrepreneur. You can love being in business. It’s just going to be a different form. My two daughters have no interest in being in charter account at all, zero and the farm maybe, but that entrepreneurial spirit and working hard that is coming through loud and clear. I want to raise one other comment that Jane made a post a while ago, and that is that successors aren’t born. They’re made Tom. When you think about a family business and meetings and things like that. Maybe Jane also, what was your main intention of that post and that education piece for that successor, key driver for that business to move on? Pretty key for for that business to continue being successful, successful. So I’m
Matt Knight 51:18
actually going to transition and make that our wrap up question. So you did such a good job with that, with that transition Bob. So maybe we’ll start with Tom, move to Jane, and then go to Bob, and then I’ll close things off with my comments as well.
Tom Deans 51:31
Yeah, I’ll make it super short. I think in the world of family businesses, we don’t spend enough time developing the the not only the management leadership, but also the ownership leadership. We conflate the two in family businesses, children join the family business, and they think there’s no conversation. So I think one day all this will be mine. I just got to wait for someone to die. That’s that’s the logic that takes place in the world of family businesses in the absence of conversation, and they conflate ownership with management, and it’s really devastating. They’re two completely different things. I think when business owners can help the rising generation by providing them performance feedback, do you know how many next gens never get any performance feedback? The you know, the owners are providing performance reviews for everyone but family, they just feel too dangerous to have with family, so they’re left in a performance vacuum, and they feel like, I don’t know, maybe I’m not doing a good job. No one’s giving me feedback. And then they don’t want to buy the business, because they don’t even know if they’re a success in that business, there’s a lot of moving pieces that need to be decoded, and that’s why, again, trying to do this on your own is nearly impossible. It’s way too emotional. It’s way too complex, both technically and emotionally.
Matt Knight 52:50
Awesome. Thank you, Jane,
Jane Halford 52:52
you know Bob, thanks for raising that one. I think my my excitement about that comment was just be intentional. You know your family, your business and your family business, all mixing up is just made up of a whole bunch of individuals. They have different talents, they have different interests. They’re in different ages and stages in life. And so to actually have that conversation and to say each individual needs to say, Hey, this is where I want to go in life. It is with the family business or not, or here’s the difference I want to make, or whatever, and actually then start to create the intentional picture of, how do we help that come to life? Because I think it’s very sad when you see families who fall into this assumption that somebody’s going to be in or, as Tom said, the assumption by the ultimate inheritor that they’re just going to get a bunch of money and live large and and you know, at 3040, 50 years old, it’s your job to direct your future and say, How are we going to do this? And that’s what I leave the onus on the individual first, but then also the family and the business around them to say, So, how are we going to make that happen? And I think that’s the conversation people aren’t at
Bob Hahn 54:03
awesome. My only addition to the conversation so far, I like all the comments, is just to remember the life cycle of the particular business that you’re in. You know, maybe, maybe markets have changed. Maybe this business won’t survive another 510, years. I’m trying desperately to make accounting business much more of an advisory side so that it survives 10 years. The business is going to change, and that applies to all of us, no matter where that is. But also remember the life cycle and the stages of life that this successor is at, at 2530 years old, there’s no way that I was capable of doing anything that I can now do. So that’s all part of making a successor and just being realistic about the stage that you’re at, and like Tom says he’s now running the fourth generation family business. Well, that’s a different I never thought. Of it that way before, but you are in business, you are an entrepreneur. And many people that are raised and parents are entrepreneurs, they can’t help but also be entrepreneurs. A lot of them, even if they don’t admit it, they are. And it’s fun. It’s exciting, dangerous, but fun.
Matt Knight 55:20
Yeah, that culture of wanting to kind of build things and create is really generated at a really, really early age. Was talking earlier this morning about how, you know, I think by the age of four, we’ve all developed kind of whether we’re a spender or a saver or a giver and when it comes to wealth. So you know when I was reflecting on that final question, because it wasn’t scripted this time around. For me, it’s I see a lot of students when they come into the MBA classroom or the BCom classroom, and they’re really trying to figure out what they want to do when they grow up and what they want their career to look like. In my family business class, a lot of them is around. You know, should I join the family business? How am I going to get into this? How do I fit? And I don’t think we can wait until you’re in post secondary to figure that out. We need to start these conversations really early, as Tom was suggesting, maybe as early as five, if not earlier. But these conversations need a lot of thought and need a lot of strategic insight, and you need some trusted advisors to help you with those decisions and those conversations. So it’s just one of those. I encourage all the families that might listen to this, all the advisors that might listen to this, to really think about how you can encourage those family conversations early, and even if it is like Tom was referencing, where let’s just do really small, tactical things and celebrate that success, and then I’ll go out and have dinner and call it a family meeting. That is a huge win. And being able to do that with you know, your your kind of, your small nuclear, non nuclear family, and then moving on to slowly growing as you have those small successes and small wins, I think there’s just so much power in that approach. So I’m really looking forward to our conversation in a couple weeks, when we get to meet with Tom and hear a lot more from both hit the happy inheritor and every family’s business. And maybe what we’ll do very, very quickly, maybe give everyone kind of 30 seconds to kind of summarize last, last thoughts, anything you wanted to share, but before we get there, just really wanted to thank all three of you for your time, for sharing all the knowledge that you’ve had, from your building your fourth generation family business to the advice and support that you provide to your family business clients. So thank you very much. I truly appreciate that. Tom, we’ll start with you. Any last words, closing statements,
Tom Deans 57:41
yeah, yeah. 3030, seconds, let me, let me just say that the vast majority of business owners are decent, kind, empathetic people who want the very best for their children. I think in many cases, they just lack a process that relies on trusted advisors like yourself. They really do want the best and when they can give their children the freedom and the space to be the people they were meant to be, to exercise their own sovereignty over their own future, that is a lovely, decent gesture, and when that’s expressed in a family meeting, it’s magical to watch a family take that brave step and start these interesting conversations. Awesome. Jane,
Jane Halford 58:23
well, let me leave it with the listeners for challenge. So what’s one thing you’re going to do because you joined this podcast today, are you going to pick up one of Tom’s books? And book is fantastic because it’s a third party, we can share it amongst family. Are you going to join us at the event in November, or are you just going to phone a trusted advisor and say, Hey, we just have to start so do something because you’re here today. That’s my closing thought,
Bob Hahn 58:47
Bob, I look forward to seeing everybody on November 19. Tom is an excellent speaker. He’s well, world renowned. It’s going to be exciting. At the last event, he stayed after the event, had some conversations with with people these the level of questions and and the openness that Tom created at the event was amazing. We had questions that I thought there’s, there’s no way people would ask those kinds of questions, very personal questions, and Tom weighed into all of them. Tom is not afraid of asking the tough questions. So thank you. Tom I look forward to our conversation. It’s going to be fun, and make sure that you attend our event. Once again, it’s in the afternoon and the evening event, and who knows, there may even be some Han brisket. So yeah,
Matt Knight 59:36
excellent. Final thing for me, I would kind of reflect back to, oddly, one of the first podcasts we did in this series. It was with Sarah Baptiste, where she talked about her role in the family business, and with her family was just to grow good humans, and whether she’s doing that with the people that work in her business or with with with her son, that was really what, what she was there for. And I think a lot of the conversation we had today. It really goes back to how do we build great humans, both in our family businesses and beyond? So I want to thank all of you again, one last time, just for engaging in this conversation and looking forward to hearing more when we meet again soon.
Jane Halford 1:00:11
Thanks Matt.
Bob Hahn 1:00:15
Thank you.
