Family Governance: Keep it in the Family
Most, if not all, successful entrepreneurs have earned their wealth by overcoming challenges and obstacles in their business, including those arising from managing relationships, making critical decisions in an evolving environment, and seeking innovative solutions to ensure progress
The management, preservation and transmission of wealth for the benefit of their families is yet another challenge requiring the same sort of behavior. The latest BNP Paribas Wealth Management Global Entrepreneur report highlighted that 51% of entrepreneurs for example have a strategy to transmit their business to their family. Highly emotive in nature, the notion of a family business and the wealth built from it– and wealth transmission in particular – can be the basis of tensions that could potentially be avoided.
To address such potential issues, most successful families set-up clear governance structures aiming at establishing transparent rules and guidelines – as well as legal structures. Such governance framework allows the principal of a family to ensure that the family wealth remains protected across generations, to set-up the rules for decisions in order to ensure for a smooth operation of the family business and to protect the interests of the family members.
While a family office, a family investment company or a trust structure have become relatively standard especially in Europe, it is vital that the governance put in place and the structure chosen are customized for the specific needs and circumstances of each family rather than relying on an off-the-shelf solution. The needs of a family intending to operate a multi-national business over several generations are clearly very different from the needs of an entrepreneur wanting to use his or her wealth to fund a foundation for a specific philanthropic objective.
These critical decisions require careful planning and thinking with experts to understand the specific context of each family and adapt to the long-term goal of the principals.
An adequate governance structure should enshrine a range of protection for the family and its members, including succession planning, a decision-making process and overall investments goal, but it should also anticipate potential disagreements that could arise between family members and prepare the next generations to take over the management of the family wealth. Continuity, preservation and performance are some of the key concepts in that regard. One of the key issues identified in the BNP Paribas Wealth Management Global Entrepreneur Report 2020 pertains to the perception by entrepreneurs by 53% of entrepreneurs that the next generation will need more preparation and advice to take over.
In a context as sensitive and complex as family succession, our seasoned experts have the experience to identify the issues that need to be addressed and design solutions taking into consideration the needs of a family.
Exchanging with our clients in a trusted relationship to understand their needs and bring together all the required expertise is at the core of our DNA. From helping design the right governance structure for the family with our experts to providing preparation for the next generation through our NextGen programme, based on constant exchanges with families and principals about their challenges, BNP Paribas Wealth Management is constantly evolving our suite of services for our clients to match their own evolving needs and expectations. Ensuring the cohesion of a family and the perpetuation of the family culture from a generation to another is critical for our clients and we take pride in making sure our clients benefit from a holistic and customized approach to achieve their family goals.