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VOL. 77 PART 6 NOVEMBER 2019
and often a “rubber stamp” board for the owner-operator. It often transitions
over time into an advisory board composed of trusted employees, professional
advisors and friends.
The function of an advisory board is to provide a sounding board for the
founder’s ideas and concerns over the direction of the business. Usually an
advisory board is an interim solution between a fully family-run board and
a board with one or more formally appointed non-executive outside directors.
An advisory board allows for a transition in the formality of the way a
family business operates and the degree of accountability and challenge an
owner-founder faces as leader.
Board of Directors
As the business grows and ownership and management roles are separated,
the board often becomes more formal and professional in its role, providing
feedback, confirming the management’s actions, planning continuity and
An effective board facilitates continuity planning in two fundamental
ways: the board holds management accountable to early planning and
demonstrates to the next generation that the family is committed to increasing
professionalism in ownership and management.
Ongoing continuity planning
As the business matures or passes from family hands to subsequent owners,
wealth management becomes a more pressing issue than during the wealth-
creation phase of the business. Whether or not the family has sold or otherwise
exited from the operating business, as the relative value of wealth
increases, the family must decide whether they wish to remain connected
through coordinated management of their wealth or to pursue separate destinies.
The route a family chooses will likely be influenced by the events
that led to the sale of the business (if applicable), the scale of the assets they
have realized, and the degree of commitment and loyalty they have to the
family as a unit.
Families who successfully manage a collaborative approach to wealth
management over time often have the following approaches:
• a united sense of mission of what they are trying to achieve long
• governance that recognizes that as a family grows in complexity, it
will need increasingly sophisticated decision-making structures;
• an awareness that power and control will need to be managed and
delegated consciously and carefully;
• an appreciation that while great efforts were expended to build the
wealth, effort will need to be sustained, refreshed and renewed if
the family is going to continue to be successful in the future.21