The importance of structures in a family advice business

I became aware quite recently of a family business, thankfully not in the financial advice space, that had failed. Their products were excellent, their target market was big and while there were some competitors, they weren’t a huge threat in reality. This business should have succeeded but didn’t.

I was very fortunate to be given a candid review of why the business failed by one of the leaders of the business. As we peeled away where things went wrong, it became clear that a lack of structure in some key areas sat at the heart of this failure.

Here’s what I learned about what went wrong in this family retail business and how these mistakes can be avoided in family financial advice businesses.


Family businesses can be too informal

I see this quite frequently. Usually it’s a father who has been a financial adviser for many years. He is delighted then when his son(s) and/or daughter(s) come into the business. This happens quite informally – it might start with some summer work, in some cases it’s a case of “come in and give it a try and see if you like it” – always very well-intentioned on all sides. This then turns into something permanent and the business motors on, now with a parent and children involved. It all sounds good so far!

However this is where the family retail business started to slip off the rails. In hindsight, the dynamic remained very informal. There were no structures put in place that you would expect to see in a normal shareholder business. The following structures might have helped them succeed, and I think every family financial advice business should consider implementing them in their business.


Goal setting is key

This starts with a clear vision for the business. What is it that you want to achieve through your financial advice business? What is your guiding “North Star”, that when some members of the family become uncertain about changes in direction about to be taken, you can all agree that it is (or isn’t) bringing you closer to that ultimate vision?

Once the vision is set, it is important that the values of the business are identified and articulated. These might evolve and change over time – this in itself emphasises the importance of returning and reviewing them periodically. These should be standards for the business on which you’re not willing to compromise – for example, these might be around fairness and delivery standards to customers or how non-family staff are treated. All family members need to to agree them and abide by them.

And then you agree the shorter-term objectives and goals of the business, just as is done in any other shareholder business.


Governance keeps you accountable

How this is structured depends on the preferences of each family business. The key is that governance is carefully considered, and a conscious choice made, as opposed to just drifting into some informal governance structure.

For some family businesses, a “family leadership council” might be the best way to proceed. This is a group of some / all of the family who meet regularly, follow a defined agenda and document outputs and actions as to the future strategies of the business.

For other businesses, the family members might acknowledge that external oversight is needed, to properly challenge their own thinking, prevent “group think” and to sometimes act as a referee! There is no weakness in bringing in external people to help reach the right decision – I know that my sisters and I sometimes struggle to agree on something as simple as a restaurant for family dinners… External people can also bring a very useful and different perspective, where family members can sometimes get trapped down in the weeds of the day-to-day running of the business.


Clear communication keeps everyone on the same page

The final piece is to ensure everyone is aware of the challenges and issues facing the business and stays on the same page. Structured communication is key. This is particularly important in a family business, where some siblings might be closer than others, and of course some of the family members might be living under the same roof. You must be careful that the important conversations don’t take place at the dinner table, to the exclusion of other family members.

A family business can be the most rewarding experience, one of shared vision, collaboration and growth and shared satisfaction as you achieve your goals. Put the necessary structures in place to ensure these positive outcomes become the reality.