According to Smith & Williamson’s latest Family Business Survey , family-owned businesses are not leaving succession to chance but base family involvement on enthusiasm and merit. Few believe their children have an automatic right to succession, and are most concerned about ensuring they have a family member with the ability and inclination to take over.
While 80% of owners believe it is important for family members to be involved in the business, 78% said it was important that they have business or professional qualifications if they are to enter an executive role. Respondents were keen to reduce feelings of entitlement in their children, instead involving them when they had demonstrated capability and an interest in the business.
Additionally, 19% of respondents said that the business will need to be sold if the right family member cannot be found to take over management of the business.
It is important to business owners that their children show an interest in the firm before considering their involvement. While 78% felt it was important to encourage the next generation in to the business, the possibility of taking them down a career path not of their choosing and the pressures of family expectations was also of high concern.
While 52% said that engagement should begin before age 18, the majority said the next generation should only start receiving income at or after the age of 25. The most common methods of encouraging business awareness included mentoring and internships with non-family companies; this was followed closely by internships or apprenticeships within the family business.
Rupert Phelps, Partner, Family Office Services at Smith & Williamson Investment Management LLP, said: “Parents running their own business are conscious of ‘trust fund syndrome’ and are making sure their children earn their place in the business – if that’s what they choose to do. Instilling a sense of responsibility and family values in the next generation remains integral to preserving family heritage and wealth for generations to come. It is clear there’s an increasing emphasis on the next generation to have experiences outside the family business, both for their own personal development and the benefit of the business.
“Business owners clearly want their family to be involved with their business, but they are increasingly conscious that it needs to the right decision for their children, and right for the business.”
The survey was conducted in April 2019.
Click here to download the survey
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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.