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INTERVIEW: US Trust On The "Emotional" Journey Of Passing Over A Business

Tom Burroughes, Group Editor , August 9, 2017


A few weeks before the organization issues its major annual report on business owners and their concerns, US Trust talked to FWR about succession planning and current challenges.

Transferring a business to the next generation or selling up completely and figuring out the next step is daunting when founders and children read about how corporate dynasties collapse. Taking some of the pain out of the process is, therefore, a core task of wealth management.

And a few weeks before US Trust – part of Bank of America – issues its annual business owners report, executives at that firm spoke about how many owners fall outside the radar of some financial institutions when it came to seeking help in making a transition.

“There are a number of options for owners: selling up, finding a strategic buyer or bringing the kids into the business,” Bob Dunkin, private client advisor for US Trust, who is based in Palm Beach, FL, told Family Wealth Report. If the option is transferring ownership and control to children, the obvious question will be their competence, let alone desire, for the task, he said.

In the US Southeast, for example, business sectors where a lot of transitions are due but not necessarily grabbing headlines can be auto dealerships and beverage/food distributors, sometimes with high barriers to entry and other factors complicating exits of firms, Dunkin continued. Dunkin’s colleague, Andrew Huber, a wealth strategist – also based in Palm Beach – chimed in that one big succession planning issue is that with many business owners, they have been so busy running a firm they haven’t had time to consider the “what’s next?” issue.

“Part of our role here is creating meaningful separation between a business and personal wealth,” Huber said. An issue is that with many business owners, their success hinged around their being “in control”, and yet succession planning requires them to give some or all of that control up.

With multi-generational family firms, the succession issues can be a bit easier because there may already be some sort of infrastructure and governance in place; for a business founder, however, succession is a leap in to the unknown for some of them, Huber continued.

Businesses are becoming more complex, so the succession issues are similarly intricate as a result, putting a premium on advice, Dunkin said.

There is no doubt that demand for succession planning and guidance around issues such as governance is still growing at a time when the Baby Boom generation is retiring. And such work is keeping US Trust and its peers in profit. As recently as May this year, US Trust hired 14 people across the United States. Such work is helping US Trust’s financial results. As shown in recent second-quarter figures, the operation logged revenue of $819 million, the highest revenue quarter since 2009 and a gain of 7.5 per cent on a year earlier. Client balances are at a record of $421 billion; and there are 8 per cent more client advisors (361) than a year ago.

The business has also been active in terms of thought leadership: In June this year a study, called US Trust Insights On Wealth And Worth Survey, based on a poll of 808 high net worth households, showed that generational diversity causes both innovation and some tension among families and businesses. Millennials are challenging traditional ways of thinking about managing money, philanthropy and career goals. Preparing Millennials for business succession issues is a hot-button topic not just for US Trust, but the North America wealth sector more broadly.

And the firm has produced White Papers elucidating the lessons for family businesses, such as a paper produced in conjunction with the Eugene Lang Entrepreneurship Center at Columbia Business School, entitled The Owner’s Journey; another document charts the “emotional journey” involved in preparing to sell or transfer a business and the stages involved.

US Trust’s sister organization, Merrill Lynch Private Banking and Investment Group, this week set out a white paper on succession and wealth transfer issues that in some ways works in conjunction with the kind of topics addressed by US Trust. (The latter organization focuses more on those in the ultra-high net worth end of the wealth spectrum.)

Business interest
“We are building business and relationships around not just those who have had a liquidity event but an ongoing business interest,” Dunkin said.

An institution such as US Trust can be important in trying to keep some of the emotion out of transitions for families; there can be a lot of emotion around when, for example, a founder wonders if a child is able or willing to take up control, he continued.

“We usually see the conversation about succession focus on possible outside management or outside board of directors to keep the business within the family for multiple generations including the grandchildren,” Dunkin added.


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