Entrepreneur families face specific yet significant challenges, from the disruptive potential of digitalisation to the latest upheavals in global trade. In these troubled times, such families need a partner that can help them preserve their wealth. More than ever, this partner also needs to be able to identify new opportunities in an increasingly dynamic environment and use them for the good of the family. After all, there still exist plenty of prospects for businesses that are exceptional, agile, innovative and have a deep understanding of their clients. As a family-owned wealth management firm, these are the areas in which Kaiser Partner can help its clients.
Identity and values
The starting point for our work as a wealth management firm is not a family’s material wealth, but understanding its values. A family’s values are the key to preserving and growing their assets in line with what the founder and generations to come would wish. Even if the same values are passed on, future generations may not devote themselves to the development and success of their family business with the same rigour as their predecessor. But if a wealth manager understands the family’s shared history, values and culture – in other words, its foundations – it can identify what’s required to reconcile business aims with the changing needs of individual family members.
Wealth managers use the appropriate structures to mitigate risk, keeping family and business assets
Not all families are aware of these foundations. As a wealth manager that takes a holistic approach to its work, our job in such circumstances is to support a dialogue within the family. Only once a shared awareness of the fundamentals is established is it possible to talk about the structures and processes required for practical implementation. Family affairs can then be arranged in a way that best suits all concerned, while misunderstandings and conflicts can be avoided.
A list of shared values can be drawn up to kick-start the process. If fundamental rules for getting on with one another are required, this list can be expanded into a family constitution. Regular family conferences can then be held to check adherence to these values and assess the need to develop them further. Kaiser Partner can help the family through this process. Entrepreneur families in particular often benefit from a greater awareness of family concerns (including those unrelated to the business) and from the structures this awareness may lead to. In times of change, families can then make better decisions faster and more easily – which lies in the best interest of the business and the family.
With a family business, it’s best to keep company and family assets separate so they can’t endanger one another. Of course, this separation is impossible in many situations: some entrepreneurs may have used their private wealth to get their business off the ground in the first place. But if they keep this up, even after years of success, they are exposing themselves and their family to a potential disaster.
Wealth managers use the appropriate structures to mitigate this risk, keeping family and business assets clearly apart. This has another advantage, as it allows monitoring tools to reliably quantify the effectiveness of family investments in the business or businesses. Such insights provide a basis from which the family can make strategic decisions. This is what makes wealth management such an important link. The wealth manager can set up monitoring and control mechanisms that show the success or failure of initiatives and strategies, and that help keep track of the risks that any investment entails. Investments in the family business can thus be compared with other investments and asset classes.
Wealth managers can also ensure that the business, as well as the family, has the liquidity it needs. In its position as mediator between two poles, the wealth manager is ultimately best placed to monitor adherence to the family’s and the business’ fundamental rules, as well as to monitor the success of all investment-related initiatives.
Committing to a cause
It can be very difficult to get all members of the family around a table – and not necessarily because of family disputes. It could simply be that, as is often the case these days, family members live very different lives. However, a family business is more likely to prosper if as many members as possible are committed to the cause. This is particularly important when the company has a complex ownership
structure, with different family members having different stakes in the business.
In such cases, another way of connecting family members with the family firm can be invaluable. Where possible, this should be something that reflects family values and provides an emotional link. In our experience, this role is often played by a philanthropic foundation. Agreeing on a good cause and achieving something together can be an important experience that reinforces family ties. Every success in this area shows family members exactly what can be done when everyone works together in a practical way.
This is a worthwhile experience for the family and also helps wealth managers. While supporting the family’s ambitions with legal expertise and a network of partners, we can use such tasks as an opportunity to learn about the business and the people behind it. This helps us understand the family and its ways, assess how members work together and communicate, and identify what – beyond commercial matters – is important to everyone.
The wide-ranging reforms unleashed by digitalisation are just the latest confirmation that companies now have to make important decisions more frequently and at a faster rate. The strength of family businesses has always been that they grow slowly and steadily, but things are different now, and family firms need to adapt. If there are family members in decision-making management roles, this necessary speed should not be a problem.
Besides, speed isn’t everything; the direct involvement of family members provides the company with skills and experience. In many cases, the family passes its expertise down for many generations, so the company’s knowledge of markets and clients is refined over a long period of time. No wonder, then, that businesses are often made very successful by the participation of family members in operational management.
Speed also increases risk. Not every new product will be a success, and not every business model will bring the expected return. Fortunately, wealth managers can help develop structures that create room for innovation without jeopardising anything else. First, it is important to consider whether a particular innovation project represents an unacceptable risk for a family-owned company and whether there is an opportunity to realise the project through another vehicle, such as a spin-off or joint venture. Wealth managers can help in this regard by applying their extensive knowledge of structures, tax and corporate financing. They can also help by developing appropriate legal structures and financial strategies. But unlike other advisors, they will always keep the wider family context in mind.
Other important points can also be addressed if, for example, partnerships lead to new business models or if new technologies are deployed. What’s more, measures can be taken to mitigate exposure to political risks caused, perhaps, by trade conflicts. Ultimately the aim is to achieve the right balance between opportunities and risks.
The strength of family businesses has always been that they grow slowly and steadily, but things are different now
Ownership arrangements hover between the criteria of controlling the business, providing it with capital and covering the family’s financial needs. Each generation has to find its own way of achieving a healthy balance, and ownership arrangements often become more complex as each new generation comes through.
As co-owners, family members are beneficiaries of a business and take shares of its profits. In some cases, however, they also have a say in how the company is run, perhaps helping to set the basic direction of the business, or even – if they hold management positions – helping to run its day-to-day operations. Conferences and meetings can keep family members informed about business performance, and can help make fundamental decisions that the family’s representatives on the company’s management bodies can implement.
If family members are involved in the company’s management – perhaps via a board of directors – the challenge of constantly having to balance individual, family and commercial interests should not be underestimated. This is especially true because it is not just any company – emotions are therefore bound to come into play.
If some members do not want to be directly involved in the day-to-day running of the business, a trustee can represent family interests in the company. Holding and trust structures help families organise the ownership of one or more businesses. A differentiated structure can also be a good way of arranging different members’ interests in the family firm. This can make things easier when it comes to succession planning and can help avoid conflicts of interest down the line.
Structures are also useful when integrating investments from outside the family into the firm, or when giving managers from outside the family a stake in the company. There are many different business structures available in Liechtenstein, where Kaiser Partner is based: Liechtenstein’s wealth managers can consider trusts, foundations and institutions, giving them greater flexibility when addressing the interests of families and their businesses.
Future focus, traditional roots
Kaiser Partner’s roots are firmly embedded in Liechtenstein’s oldest trust company. For decades – and in many cases, for generations – we have used the opportunities afforded by our location to help our clients. Membership of the European Economic Area is a central factor, making Liechtenstein part of one of the strongest economic regions in the world. Meanwhile, the country’s customs and currency union with Switzerland ensures stability in financial matters. Liechtenstein is also an innovative business location and a pioneer in the development of digital assets: it is, for example, about to pass a law regulating the use of blockchain and cryptocurrencies.
Aside from the benefits of its location, Kaiser Partner has continued to develop its own exceptional capabilities. As a family-owned company, our own experience plays an important role in our effort to provide entrepreneur families with appropriate wealth management services. These services include wealth monitoring and reporting capabilities suitable for all structures, no matter how complex. Such tools give families a continuous overview of their assets, even if they own several businesses in different locations. Our portfolio also includes a multi-family office. Finally, Kaiser Partner Privatbank AG, our multi-award-winning sister company, provides private banking services under our shared motto, ‘responsibility in wealth’.