Recently, I was lucky enough to hear David Smorgon, Executive Chairman, Family Advisory of PwC present to a few of our East Coast clients. Here I share a few of his key messages
Source: The Australian Business Review, Stuart McEvoy
David Smorgon is an interesting and well known Australian businessman. Born into the Smorgon manufacturing family, he went on to establish an advisory firm which was bought out by PwC and he is currently Executive Chairman, PWC – Family Advisory. David is an avid AFL fan, being Chairman of the Western Bulldogs AFL club for 16 years and recently awarded AFL life membership.
I was very much looking forward to hearing him tell a few tales and gaining some insight into preparing for and transitioning wealth within families.
Here is an opening caveat – the presentation wasn’t what I expected. I’d thought it would feature asset allocation, structure and a few case studies showing some successful transitions. The only thing I got right was the case study!
The presentation was all about communication. Most descendants aren’t interested in the money, they want family time. Thus one of David’s best suggestions for a successful transition was to schedule in family time in your diary on a regular basis – family issues need to be discussed just like work issues.
Often, successful, wealthy families have a very strong patriarch that has spent most of his time working to build up the business but not scheduled in enough time for his family. Nor are all family members always good enough or interested to work in the family business and be trusted with important decisions. Preference is given to outsiders, which breeds lack of trust in the patriarch.
It is easy to see a break down in communication which follows and can mean descendants are ill-prepared and don’t know enough to be able to manage the business when the patriarch finally lets go due to ill health or worse, death.
Generally, families don’t:
- Spend enough time on family issues as compared to business issues.
- Discuss wealth with their children on a regular basis.
- Train or educate their children about wealth or the business.
- Think enough about what makes them and their children happy….often until it’s too late.
- Understand that succession is a process and not an event.
- Deal with conflict. They keep it in the cupboard.
- Understand the importance of good governance.
The above list might help you think about your own circumstances and provide the impetus to have these sometimes difficult conversations with your own family.
Personally, I’ve seen too many families fall apart due to arguments over finances or business. Preparing your family wealth transfer plan and making sure you have up to date wills and power of attorney, as well as making your wishes known, should help you engage and educate your children and transition your wealth.