As the complexity of family and business relationships increase, families can turn to a formal “family constitution” to create a healthy communication and decision-making environment. It is important for every family business to communicate effectively and to reach decisions that optimally balance the needs of both the family and the business. As the complexity of family and business relationships increase, families can turn to a formal “family constitution” to create a healthy communication and decision-making environment. While not legally binding, a family constitution is held together by the positive recognition and buy-in from all involved. The process and the policies created within a family constitution are always reflective of the values and beliefs of the family group. The intent is to build around a sustainable model that promotes generations of pro-growth decisions. Here are six reasons why you should write your family constitution: 1 – It Will Lay the Groundwork for Tough Decisions Family business leaders have to make the same difficult decisions that any regular business leader needs to make, except that the family business leader often has to consider complex personal and family relationships. It’s easy to make judgments based on emotion in family businesses, which is why a pre-determined, rational family constitution can help cooler heads prevail. Through developing an effective constitution, the family will have already identified the basis on which critical decisions will be made. 2 – Your Chance to Create Ethical Guidelines Family constitutions are bound by moral force. If you are serious about building a unique, marketable brand – for both employees and customers – then it’s important to have a business code of conduct. Equally, your family constitution can lay out the preferences of the family in how they as shareholders would like the company and it’s capital to be directed, provide family thinking around certain shareholder decisions and influence the culture of the business and its employees. These guidelines can also include family conduct outside of the business, conduct with any social media interaction, and communication processes between family members. 3 – Build Cohesion and Internal Harmony Your family constitution is developed by the family group. Ideas are workshopped and opinions are shared. When consensus is reached, it’s done so with unity. Members of the family learn together through a participative process. The resulting document is a codified representation of internal agreement and harmony. 4 – The Chance to Improve Your Bottom Line Though not a cure all, the process of creating a family constitution performs a lot of critical functions that can make business more effective and, by extension, profitable. The family constitution defines the leadership structure, provides a tool for succession, informs communication and conflict resolution guidelines, and – perhaps most importantly – it clearly and concisely identifies the family business’ long-term goals. With that clarity in mind, it’s easier to take effective action to build a profitable company for the long term. 5 – Establish the Rules Around Conflict Conflict is a natural part of running a business. However, when colleagues and employees are also family members, ordinary conflict can take on new dimensions. You should have a plan in place to deal with conflict if your business is going to build a strong, multi-generational legacy. No family constitution can prevent conflict entirely, but it can provide a road map to successfully manage, resolve and define conflicts in a constructive way. 6 – Plan Ahead for Those Entering and Leaving the Family Business No challenge is as serious or as easy to mishandle for family businesses as the issue of family members transitioning both in and out of the organisation. Creating a family constitution provides a robust framework for families to commence their communication and education around succession. Policies such as the employment and remuneration of family members in the family business, education expectations, stewardship and philanthropic activities can all be discussed when writing the constitution. A constitution is a dynamic document so initiating formal family meetings as part of this process can ensure the items resolved can always be open for discussion and improvement.

Succession in terms of business leadership confronts the founder of a family business with a complex set of options as Peter Leach explains below. In broad terms these are: Appoint a family member Appoint a caretaker manager Appoint a professional manager Exit via sale of the business, in part or in par Exit via liquidating the business Do nothing. Each option is distinctive and carries its own set of advantages, disadvantages, opportunities and threats. Also, the scope and impact of these will vary from one family business to another depending on, for example: The ability to attract family and non-family successors who are willing and have the skills to carry on the business The financial needs of the family (for example, whether cash needs to be extracted from the business to provide for the retirement of the senior generation The personal and corporate taxation consequences of the different options The health and size of the business The external commercial and business environment at the time of succession. If there is a commitment to retain direct control over the business, the first option of appointing a family member to succeed is seen as particularly attractive by many founders. Research by IMD has found that, if there’s a suitable candidate, owners will choose a ‘family solution’ for several reasons: It gives their personal ideas and values a greater chance of survival They can feel their life’s work is in good hands They don’t lose contact with the business, and may even retain some influence over it They feel their sacrifices building up the business will have been worthwhile. The appointment of a non-family successor, either to a permanent position or as a caretaker (options 2 and 3), may become the strategy by default if no family successors are available, motivated or have the necessary skills for the task. Genetics do not guarantee that families can produce entrepreneurial business leaders generation after generation. In terms of exit routes, some form of sale as a going concern (option 4) is likely to recover most value from the business. Alternatives within this option include a trade sale (ie an outright sale of the business for cash),which may be particularly appealing where no suitable successors can be found, or a stock market flotation can be the best answer if external capital to finance growth is a priority. Similarly, a management buy-out financed by private equity funding (a sale by the founder to the existing management team, which may include family members), can offer a compromise between transferring the shares to the family and an outright trade sale. Liquidation (option 5) entails selling of all the company’s assets, paying its outstanding debts and dismissing the workforce. It also involves substantial expenses and is unlikely to result in the best price being obtained. Finally, the founder may simply avoid planning for succession by adopting the ‘do nothing’ approach (option 6), and here lies the central paradox. Despite founders professing that a ‘family solution’ is their preferred course, in practice the dynastic dream is rarely achieved. Doing nothing is the least logical, the most costly, the most destructive off all the options, yet is by far the most popular.

Expectations were set but transitions from Baby Boomers to the next gen have not materialised. Dozens of articles came out during the 1990’s about the coming tidal wave of business transitions from Baby Boomers to their Gen X and Gen Y children. The articles theorised that as Baby Boomers got to be 55 and older, they’d be looking to either sell their businesses or pass them on to their children. The writers looked at the demographics and numbers of closely held businesses, and they theorised that somewhere between $10 trillion and $140 trillion of assets were going to be transferred from one generation to the next. Financial services firms, charities, law firms, and consulting firms all licked their chops at the prospect that all these business transitions would somehow need to be managed and facilitated in an orderly way. The question is: What has happened to the family business transition tidal wave? Wayne Rivers explores further. Surely since all those articles were penned, some family businesses have indeed transitioned. However, the breathless predictions of a tsunami of family businesses moving from senior to junior generations simply hasn’t materialised. The demographers could not have been wrong; simple maths indicates they were not off that much in terms of the ages of the baby boomers. If there wasn’t a chronological mistake, then, why hasn’t the tidal wave come to pass? We believe there are six reasons why family businesses are staying in the hands of senior generation family business owners longer. 1 - Age 65 Is The New 50 A 65 year old family business owner today isn’t nearly as old at the same age as his father was. People today are in better health for longer than ever before. We eat better, exercise more, smoke less, and take care of ourselves better than previous generations. Therefore, when a family business owner reaches 'normal retirement age,' he is often far from ready to retire. He is still filled with energy, ideas, ambition, and there are so many exciting things left to do! 2 - The Great Recession The Great Recession shocked many family businesses, some of whom believed the hype that the Federal Reserve had made recessions obsolete. Now, their businesses from somewhat to a great deal smaller than they were before, senior generation leaders see much which needs to be done to restore the business to its former glory. Leaving the business at the tail end of a historic recession simply doesn’t seem like a good idea to many. 3 - Lack Of Ownership Succession Plans The state of family business estate and ownership succession planning is far better than it was when we started The Family Business Institute 23 years ago. However, many families still wrestle with the issues of ownership succession. How do I treat my children fairly and equitably when I have some in the business and some who don’t work here? How will my children get along when I’m no longer around? Is it fair to treat my daughter who is the CEO the same as her brother who works on the loading dock with respect to ownership succession? If I leave the company in the hands of my children, will my spouse have enough money to be comfortable after I’m gone? Many family business owners have undertaken to wrestle with these questions. Many others have not, and the questions aren’t any easier to answer now than they were 23 years ago. 4 - Lack Of Management Succession Plans It’s hard to beat experience. Even though a 65 year old family business leader might have incredibly competent forty-something children, they are at a severe chronological disadvantage in the sense that the senior generation had a 20+ year business head start, and that gap can never be closed! While the younger generation might have all the tools necessary for future success, they simply can’t replace the hard earned experience Dad carries between his ears. Most closely held companies also have two other management succession limitations: a lack of clear, written, transferable policies and procedures for the various jobs in the company and a lack of Knowledge Transfer (KT) which is the process for formerly transferring soft information (i.e. someone’s experience about business practices and processes) to younger members of the firm. 5 - Lack Of Specific Retirement Plans For The Senior Generation This item is related to item #1 above in that 65 year olds today have plenty of energy and ambition, and most family business seniors have no specific retirement plans remotely capable of consuming their energy and time. The idea of moving to a retirement community, puttering around in the yard, and maybe the occasional round of golf isn’t nearly as compelling and exciting as continuing to fight the daily battles necessary to put the family business back in its rightful place. Since murky retirement plans make for a nebulous future, and the concrete reality of rebuilding the family business is both present and exciting, staying trumps leaving hands down. 6 - Lack Of Buyers For Family And Closely Held Businesses A few years ago I delivered a speech in Canada before which we had surveyed the attendees to learn more about them. Somewhere between a third and one half of the franchisees (who were involved tangentially in the new home construction business) said that when they reached retirement age they were going to sell their businesses. Digging deeper into the demographics, we found that the average franchisee had one location with less than $2 million in gross sales. My message to them – which definitely put them on their heels – was that they couldn’t sell their businesses BECAUSE THEY HAD NOTHING TO SELL! When someone looks to buy a business they want to see a proven methodology for creating top line sales, a management team capable of executing the strategies of ownership, loyal employees who won’t leave the business if the family sold out, strong financials, and a business which isn’t dependent on one or a tiny handful of people to make all the decisions. Unfortunately, that is exactly what most family businesses continue to have to this very day! Even large family businesses, and we are talking in some cases well over $500 million in sales, depend on one or a tiny handful of family members to make virtually every decision in the business large or small. If one were to choose to buy a business like that, what in fact would he be buying? In essence, he’d be buying a job – a job that takes 60 to 80 hours a week sometimes, creates a great deal of mental and physical stress, and offers no escape hatch when things get hairy. Most family businesses don’t have anything to sell because they don’t have genuine businesses; they have jobs, and the jobs are pretty thankless ones at that. Will the family business succession tidal wave one day materialise? Given our steadily advancing ages, it must. Are most family and closely held businesses prepared for the ownership and management succession which must one day challenge them? The answer to that question is still “no” and that in and of itself constrains the possibility of successful family business transition whether it comes in a slow, steady trickle or a tsunami.

Latest research from Charities Aid Foundation suggest 25% of wealth should be donated to charity by wealthiest. For the study 2,085 online interviews were conducted with UK consumers by Populus between 20-22 March 2015. Britons think that the wealthiest in society should donate an average of 25% of their money to charity in the course of their lives, according to research released by the Charities Aid Foundation. More than half (53%) of people think wealthy people should give away more than they do. Those identifying as non-Christian wanted to see the affluent donate an even larger proportion of their wealth, this group believing richer people should give nearly a third (32%) of their money away. Over three-fifths (62%) agree that giving to charity by the more affluent sets a good example to others, and over two-fifths (46%) say the wealthy could help to increase giving by talking more about it. The research is released just days before the Sunday Times Giving List reveals the UK’s top donors of the year. People also welcome the idea of a UK version of the Giving Pledge, a US-born project spearheaded by Bill Gates and Warren Buffett asking wealthy individuals to commit to give away at least 50% of their wealth to good causes. Five British philanthropists have already committed to the pledge, including Richard Branson. Just under half (43%) would like to see something similar in the UK, a number growing to 55% among 18-24 year-olds. John Low, Chief Executive of the Charities Aid Foundation, said: “There is growing awareness of inequality around the world, and it’s clear people believe the richest in society could help to address this problem by giving significant proportions of their wealth away to help those less fortunate.” “We see so many incredible examples of generosity by the world’s wealthiest, and movements such as the Giving Pledge are leading the way in opening up the conversation and bringing giving and charitable organisations into the public eye.” “Driving a project like this forward in the UK could help more philanthropists feel comfortable speaking out about their work with charities, and help further grow giving and support among the wealthy and the public.”

Research carried out by Safestore has revealed that 31% of people aged 55 and over do not have a will and as a result, may be risking inheritance for future generations. Inspired by Free Will Writing month which takes place throughout March, the self storage company discovered that an alarming number of Baby Boomers may be putting their family’s inheritance at risk for all the wrong reasons. Out of 31% of adults aged 55 and over who do not have a will: 12% have children in their household 16% are separated or divorced 48% admit they ‘haven’t got round’ to writing one 18% feel that they don’t have anything of value to leave behind 12% believe that all assets would go to a partner regardless “Wills are essential life documents which really ought to be in place well before you reach 55. It is concerning that so many 55+ year olds have not taken the time to complete one, especially where there are children or marital issues involved.” says Simon Crooks, a solicitor and specialist in tax and estate planning with Argo Life & Legacy Ltd. “Without a Will you lose the opportunity to express your wishes as to what happens with your assets and who sorts it all out when you die. But a Will encompasses much more than the destination of your assets. You get to choose the people who will manage your affairs on death and they have power to act straight away. If you have younger children you can appoint people as Guardians to be responsible for their upbringing and welfare. One of the key benefits is spending time on yourself and considering surrounding issues – retirement plans, tax planning, care fee planning, policies and pensions. Not having a Will often means none of these issues have been considered which can cause problems in the future.” “By the time you get to 55 there really is no excuse for not having a Will.” The results also indicate that a vast majority of people do not understand intestacy rules as without a will, if you are separated but not divorced from your spouse they are legally entitled to most, if not all of your estate. Similarly, those who are married and assume that their estate will go to their spouse are technically correct, however without a legal document in place there are numerous complications. “When a marriage breaks down it is important to review your Will. Separation does not end a marriage and any Will written previously still has effect as do the Intestacy Rules where there is no Will. Under the Intestacy Rules if you are married (or in a civil partnership) and you have no children then your spouse gets your estate – whether you are separated or not. Where children are involved it is more complex as the estate is split between them depending on the value of the assets.” “People often think they will review their Will after a divorce is finalised – when they know what their financial position will actually be. But what happens if you die before this is sorted? You’re stuck with the Will already in place or the Intestacy Rules and your soon to be former spouse inherits some or all of your estate. It is best practice to write a new Will as soon as you can and review it when the divorce is complete.” Dying without a Will in place can cause a devastating impact on family and can add new challenges to an already distressing situation. Throughout March, members of the public age 55 and over are able to have simple wills written or updated free of charge by using participating solicitors.

The 2014 Survey of Corporate Governance Practices in European Family Businesses provides a snapshot view of some of the largest family businesses in France, Germany, Italy and Spain, along with some surprising facts. How are Europe’s largest family businesses run? What do their boards of directors look like? How do they function? And how do they decide who takes the title of CEO? For example, although 50 percent of board seats are occupied by family members, women make up only 16 percent of the average board. And while the professionalisation of Europe’s family businesses is evident, only about a third of their boards have any experience with CEO succession planning. Also, only a third of the boards have emergency CEO succession plans in place. The survey covers four topics: (1) board composition, (2) board efficiency, (3) CEO succession planning and (4) the CEO/chairman backgrounds. It was conducted by Russell Reynolds Associates, an executive leadership and search firm, and it was overseen by IESE’s Josep Tàpies, holder of IESE’s Family-Owned Business Chair. The 400 largest family-controlled businesses in France, Germany, Italy and Spain were targeted, with 106 of them responding. Who Sits on the Boards? In Europe, on average, 50 percent of board seats are occupied by family members representing ownership interests. With the average board surveyed consisting of 7.4 members, only two seats (27 percent) go to independent directors, while company executives and other shareholder representatives occupy a seat a piece. At the same time, there are relatively few female directors: women make up 16 percent of the board, on average. Yet gender diversity varies widely on European family-controlled boards, ranging from just 10 percent in Germany to 25 percent in France. Foreign diversity is relatively scarce, with only eight percent of the board hailing from another country. Family members’ presence on boards varies considerably country by country. In Spain, family members make up 62 percent of the average family-business board. Meanwhile, in Germany, family members make up only 25 percent of the average board. France and Italy are close to the survey average, with 51 percent and 56 percent, respectively. In Spain, independent directors make up only 17 percent of the board, while Germany pushes up the average with 51 percent. Understanding Board Efficiency Formalised corporate governance practices are important in family businesses. In this survey, almost all boards review their companies’ economic and financial situations, as well as their capital expenditures and sales performances. Meanwhile, competitive, industry and client trends are on only 80 percent of the boards’ agendas. When asked if they would describe their boards’ role as “informative,” “consultative” or “decision making,” more than half replied that their boards play a decision-making role. In developing the company’s strategic plan, 57 percent report that their boards’ role is “approval only.” Meanwhile, 40 percent feel that their boards both prepare and approve the strategic plan. Yet only half of European boards surveyed have more than a week to prepare for board meetings. Moreover, 22 percent have fewer than three days to prepare. The German and French boards tend to get more advanced warnings of their meetings than Spanish and Italian boards do. Interestingly, only 39 percent of boards surveyed have an “Audit and Risk” committee while 43 percent have a “Nominating/Remuneration” committee. CEO Succession Planning In family-controlled businesses, CEO succession can be a touchy subject. Just half of the boards surveyed (49 percent) have identified possible internal CEO candidates. Furthermore, only a third of boards surveyed have a plan to replace the CEO in the event of an emergency. French boards tend to be better prepared, with 62 percent having a plan, compared with only 18 percent of Italian boards. Boards also vary widely in their level of experience with CEO succession planning. On 95 percent of the German boards surveyed, at least one director has succession planning experience. In contrast, on the Italian boards surveyed, only 28 percent report having a member with experience. How many internal or external candidates to evaluate for the CEO role? More than half of the family businesses say they consider it ideal to evaluate two or fewer candidates. At the same time, 60 percent of boards say that their internal candidates are benchmarked against external candidates in the market. CEO and Chairman Background In the end, more than two-thirds of the CEO’s of family businesses in Europe are promoted internally. In Spain this number is higher: 85 percent of CEO’s hail from the same company. When CEO’s come from external companies, they are most likely to bring experience within the same industry. That said, it is surprising that only 20 percent of external CEO hires come from other family-owned companies. In contrast, when the chairman of the board comes from a different company, they are most likely to bring experience from another family-owned enterprise. While European companies tend to separate the chairman and the CEO roles, 27 percent of family businesses surveyed combine them.

Family companies may have a conservative heritage, but new research suggests they can teach us a lot about innovation. Family firms are generally characterised by their lack of social capital and trust in an economy. It’s said they rely too much on familial ties; are often conservative in outlook; and are reluctant to take on additional debt or other external financing measures fearing the dilution of control. All attributes which are thought to hinder innovation. Another train of thought however suggests businesses under family ownership are less motivated by short-term profits and show greater alignment between ownership and management; characteristics which are known to stimulate innovative behaviour. All of which paints a particularly paradoxical picture, and raises the question does the family-owned business model stifle or enhance a company’s capacity to innovate? Latest research supports the latter suggesting family-ownership boosts both the quantity and quality of innovation as evidenced by the number and substance of its firm level patents. To test the strengths of opposing theories associating family ownership and innovation, my study, The New Lyrics of the Old Folks: The Role of Family Ownership in Corporate Innovation, co-authored with Po-Hsuan Hsu Associate Professor of Finance at the University of Hong Kong, Sterling Huang, Assistant Professor of Accounting at Singapore Management University and Hong Zhang, Assistant Professor of Finance at INSEAD, researched a comprehensive sample of U.S. public companies between 2000 and 2010. The results were illuminating. We found family firms were associated with 11 percent more patents filed and 12 percent more citations of filed patents received. They scored 14 percent higher in originality (innovation output which considers the creativity of the firm’s patents) and 30 percent higher in generality (which considers the patents’ versatility), indicating that not only is there more innovation happening in these organisations, but it is of a higher quality than non-family companies. Surprisingly, family firms spent less on research and development (we observed a negative relationship between family ownership and R&D input) but were significantly more efficient with what they did invest in this area, when measuring R&D spending against patent output. That is, they produced more and better patents. So what are family firms doing right? A closer look at the data identified three channels which promoted innovation. Focus on long-term value. By sheltering managers from the short-term pressures of irrational and myopic investors, the family ownership model encouraged them to pursue technological advantages with long-term value. Reduced financial constraints One train of thought suggests that in their efforts to retain control, families may be less willing to resort to capital markets, investment partners or other external financing methods. However we found that lenders had a tendency to trust family firms more, thus reducing financial constraints that hinder innovation. Improved governance Based on the widely-accepted assumption that the presence of institutional investors indicates better governance and encourages innovation, we found family ownership serves as a substitute for these investors and replaces other governance mechanisms in spurring innovation by lowering agency costs and strengthening monitoring. The role of family ownership in corporate innovation changes over time. Innovation efficiencies in the firms studied were found to improve with the reduction of the estate tax, suggesting family-owned firms adapt to their institutional environment. Family firms account for a significant portion of business activities and constitute the backbone of economic development worldwide. But their link to innovation is less obvious. While family ownership can hamper a firm’s innovation – conservatism and nepotism can result in family businesses adopting sub-optimal investment policies and there may be higher capital costs due to under-diversification or exacerbating agency issues – family firms can also stimulate innovation. By taking advantage of economic channels that focus on long-term value, alleviating financial constraints and improving governance, family firms can make up for these negative characteristics – and through a balance of tradition and modernity- adapt to survive change. About the Author - Massimo Massa, is The Rothschild Chaired Professor of Banking and Professor of Finance at INSEAD. This article is republished with permission of INSEAD Knowledge.

China’s rich visa-seekers are discovering alternatives to foreign investment visa schemes in the US, Canada and Australia, and are increasingly applying to Europe and the Commonwealth Caribbean. Whether it is to send their children to elite universities or simply escape the polluted air, American and Canadian citizenship-for-investment programs have in recent years attracted wealthy Chinese in their droves. Chinese are the largest group of investor immigrants for the US, Canada, Portugal and Australia, and some visas have as much as 80 percent take-up by People’s Republic of China nationals, according to law firm Withers. But now with Canada’s programme closed down, the UK and Australia’s schemes growing more expensive, and strict taxation on US green card holders and US citizens, Chinese nationals are looking beyond the ‘usual’ options. “There are several ways to establish a foothold in the US. Not everyone realises that a green card is one of many,” said Mark Lanning, director of immigration at Withers. Excellent educational institutions, strong capital markets and quality of life have historically provided the pull factor to these countries. But now many are limiting their programs while they deal with the backlog of applications from China. There is a four-year waiting list for Chinese nationals applying for the US EB-5 ‘green card’ visa, according to Reaz Jafri, attorney at law at New York-based Withers Bergman. “If your 18-year-old daughter is about to start at Harvard and you apply for an EB-5 visa now, you’re not going to make it in time (to live there). In fact, you’re not even going to make it for her graduation,” said Jafri. The US’ EB-5 visa requires investment of between US$500,000 and US$1 million in return for a conditional green card. There are just 10,000 of these visas issued annually and a cap on each nationality, and many Chinese applicants are being forced to wait until 2018, reckons Jafri. This April Canada stopped accepting applications for its immigrant investor program and the federal entrepreneur program, of which around 90 percent of applications were from China. The initiatives, which allowed investors with a minimum net worth of C$1.6 million (US$1.42 million) to invest C$800,000 (US$708,000) in return for residence, had hit a logjam. The government’s Citizenship and Immigration Canada (CIC) has said it is ‘reviewing the programme’ which it may reopen. As for Australia, the good news is that from 2015 a foreigner can get permanent residency in just one year. The bad news? It will cost an eye-watering A$15 million (US$13 million) investment. Applicants for the new Premium Investor Visa will also be strictly vetted to ensure they meet eligibility criteria. And this month the UK Government doubled the minimum investment required for the Tier 1 Investor visa scheme to £2 million (US$3.13 million). The visa allows non-European citizens and their families to live in the UK in return for a £2 million (US$3.13 million) investment in UK companies or UK government bonds. Chinese are also the number one source of applicants for this visa, followed by Russians. What does this mean for footloose wealthy Chinese? If they want to go to the US there are lesser-known alternatives, according to Withers, like the L-1A visa, an inter-company transfer for executive or management level individuals. There is the O-1 for individuals of ‘extraordinary ability’ and the E-2, the treaty investor visa. Obama last week also extended a new visa law to make it easier for Chinese students and tourists to come to the US, as well as homebuyers, a sign that the US wants to encourage the flow of capital into its property markets. Armand Arton, chief executive and president and Dubai-based citizenship advisor Arton Capital, said the reasons for wanting a second citizenship are fundamental in deciding the destination and type of visa. “There are two kinds of investment programs, one that leads to immediate citizenship and one for longer term residence,” he said. St. Kitts, Antigua, Dominica, Grenada and Cyprus offer immediate citizenship and Bulgaria and Malta offer accelerated citizenship. Traditionally families in the Middle East or Pakistan have used these programs as the urgency for a free passport may be their main priority, he explained. Investor programs for residence, like in Portugal, Spain, Greece, Hungary, UK, Canada, US, Australia, where the investor receives only Permanent Resident (PR) Status, are more popular in China, he said. Under these programs it is legal for them to invest abroad and obtain PR, while applying for immediate citizenship is against the law in China. “Chinese have traditionally dominated residency programs and they will now start to dominate the programs for citizenship over the next five years, because some countries are limiting Chinese applications,” predicts Arton. He added that ‎Chinese investors are looking at more European options, especially since the UK visa price hike. “The recent increase of the Tier 1 Investor visa will have an important impact on demand, because Chinese investors can obtain citizenship in Cyprus, Malta or Bulgaria and still settle in UK.” The lower investment bar in Greece, Hungary and Bulgaria has attracted already over 2,000 Chinese investors in the three countries combined in the last twelve months, and Portugal and Spain are following the competition with around 750 Chinese families in the same time period, said Arton. While the US, Canada and UK have the appeal of being home to some of the world’s top universities, investment visas are not purely education-driven. Many affluent Chinese are simply looking for a bucolic bolthole which doubles as an investment, said Kingston Lai, chief executive of Asia Bankers Club. “By their nature, visas for investment are usually a temporary way for a distressed government to raise funds quickly, which is why so many schemes launched in the wake of the financial crisis,” he explained. “But as economies grow stronger some programs are drying up. So when the opportunity comes, you need to act quickly.” Lai said his members have recently been asking about Greece, after it announced a new three-generation citizenship visa for a US$250,000 property investment, the cheapest of all the offerings. Malta, Portugal, Cyprus and Spain are all promoting similar initiatives to wealthy Asians looking to diversify into a European pied à terre. The beleaguered Greek government is plugging the scheme in Asia, hoping to attract affluent Chinese on the hunt for a real estate bargain. With Greek real estate values as much as 40 percent below peak, it is could be great investment as much as a way to secure a European passport. But there are some investment visa schemes which look set to stay for the long run. The industry has seen a considerable move towards the citizenship by investment programs of St Kitts and Nevis and the Commonwealth of Dominica, according to Micha Emmett, the managing director of legal adviser CS Global Partners. “We’ve seen so many programs come and go but these two are the longest running citizenship by investment programs in the world, 30 and 20 years respectively,” she said. “These two have held their ground in being a sustainable and attractive option. Chinese investors are aware of this and have developed a strong affinity for these countries.” She added that even though Europe remains a popular destination due to the Freedom of Movement act, which gives the right to live anywhere in the EU as an EU citizen, ‎the investment thresholds are high for an immediate citizenship. On the other hand, the risk of only receiving the residence has prompted more investors to seek beyond the European residence options. And despite the EU stamp, some countries within the EU still do not hold the status that the Western European counterparts or Commonwealth Caribbean options offer. Clearly in future if governments want to attract the swelling wallets of the Chinese, they will have stiff competition. This article has been reproduced with permission from Wealth-X. For more information please visit their website at www.wealthx.com

When it comes to wealth preservation, why have some families businesses been so successful while others have failed miserably? In my opinion, the secret boils down to a family ethos that values one thing over all others: capital preservation. The bear traps of inheriting money without purpose have been well documented in literature, Hollywood and the media. Thomas Mellon, founder of one of the wealthiest and longest enduring families in America, set up a tacit understanding that while spending was acceptable, it came with the expectation that each generation would become the caretakers of this capital and push it forward to a larger amount than he or she was given. This sense of ownership and responsibility was central to the family’s vision. But conserving family business wealth isn’t always so straightforward. Family businesses make up the foundation of the Canadian economy, but not all owners feel adequately prepared for succession, says Saul Plener of PwC. In the annual PwC Family Business Survey, family business respondents tended to fall into the second generation, or ‘Baby Boomer’ category, and are ‘looking for the best opportunity to exit.’ Unfortunately, he points out, a significant number of those surveyed “haven’t put the necessary effort into succession planning and professionalising the business to ensure long term survival.” One of the reasons why the professionalisation of the family business has become as challenge is because these types of discussions can be difficult. But succession conversations should take place several years before the business changes hands and wealth is passed down to the next generation. Discussions should centre around the financial plan, tax and legal implications, as well as family expectations. If you run a family business, it’s never too late to start. I also recommend hiring a family business expert to assist these often tricky questions. To get the conversation started, family members should rate their knowledge on the following question out of ten: 1. I understand the expectations about the transition of the business by the current owners (parents) and also the next generation. Mr. Plener says that parents often think they know what their children want to do, but they’re not always right. The next generation has seen the stress that their parents handle and don’t necessarily want to take on that level of emotional strain. Founders needs to find out the interests of the next generation as a beginning to the succession process. One owner was pleasantly surprised to discover his daughter was interested in being on the board of the family business. He had assumed his daughters weren’t interested, but he had not started that conversation. 2. We have discussed the distribution of capital. Has there been a systematic building of capital in a diversified investment portfolio over the years? Having capital invested outside of the concentrated investment into the business is wise as the optimism of many entrepreneurs has resulted in spectacular belly flops. By systematically taking money out of the business and putting it into a portfolio, the family will be looked in the worst-case scenario. With the security of a portfolio in place, the family and retirement costs are covered, and then entrepreneur is in a far better position to take the risks required to grow the business. Families can relax and relationships enhanced if everyone knows the strategy around capital. 3. We are on the same page about our long term-family goal(s). The longer the family has been in the business, the more the business means to its members. In material terms, it usually represents their largest asset and primary source of income. Beyond this, it is also a source of personal wealth and family tradition. Family members are usually proud of being associated with the business, especially if it carries the family name. After a sale, these families have to look for new means to keep the family together, to continue its legacy and preserve its wealth over generations. This is often the reason to set up a family office to create a platform to manage joint family activities, such as philanthropy, family investments or special projects such as private equity. Capital preservation is recommended as the central family goal which the next generations will need to understand and embrace. The next generation and family can then have the security to reactivate the family’s entrepreneurial spirit and create the next family business endeavour. About the Author - Jacoline Loewen is director of business development of UBS Bank in Canada. She is also author of Money Magnet: How to Attract Investors to Your Business. Article first appeared in The Globe and Mail and has been reproduced with permission.

The Company was formed in 1889 and the Wright family have been involved in the making of quality ladies hats for over 300 years, making Philip Wright one of the oldest “blood line” hat manufacturers in the world. What does your family business do? The Company was formed in 1889 by Walter and Minnie-Susan Wright in Albion Road, Luton and our family have been involved in the making of quality ladies hats for over 300 years, making us one of the oldest “blood line” hat manufacturers in the world. In 1982, I joined the family business. As a result of the combination of the long experience of previous generations and his training under Madame Marie O’ Regan, at the London College of fashion, I have been able to bring the family’ firm into the 21st Century. How did you get involved? I was invited to learn about the value of pocket money by my Father, bless him, by working in the factory during the school holidays from the age of about 7 but my love and appreciation for the theatre of hats really started in a cafe in Greenwich when I was about 19. How I actually ended up in the business is quite an interesting story too – I was working in London and was pretty bored with my job and I used to play ‘chicken’ with lorries on my motorbike and one day I lost and was involved in an accident. After discharging myself from Hackney Hospital I had to return to my family to mend as I was unable to walk much, and whilst mending I pottered around the factory designing and making a hat for a National Young Designers Competition. My entry did rather well and I really enjoyed the creativity so I left my job in London and started as a junior blocker at the factory in 1982. I learnt Model Millinery at the London College of Fashion and eventually bought out my father in 1999. What did you want to be when you grew up? You could say that I am still growing up today!! When I was at school I did not know what I wanted to do. I liked acting and entertaining so I guess I’ve landed the perfect job! What pressure does a 120+ year old family business place on you? Now, none! It did take me ages to break the pattern of my predecessor, my Father, the way things were done and the attitude which hindered my ability to fully embrace my talents and evolve into a very different market. I also associated the factory as a place of work and not of fun and creativity so again that hindered my real enjoyment and development. In hindsight, what I did was right at the time and I am still here… How do you embrace the heritage of the business and move into the modern era? BIG TIME!! I am proud of what we do and embrace the importance of that by not trying to change but to evolve. The past of selling vast quantities of quality hats to the High Street for me is over – if the department stores want to turn themselves into warehouses without any sales advisers then we do not want to be part of it – hats are not the same as socks and sell far more effectively with a knowledgeable member of staff to advise them on what hat to choose and how to wear it. As the big stores cut staff, and cut the hat departments too, there is an opportunity for us and I am ‘taking the hat direct to the people!’ What marketing activities do you do and how do you engage with new markets? These are important activities so I meet lots of people, I give lectures to various organisations such as the Womens Institute and we hold Open Studio sessions for past clients and their friends to help them ‘discover our world.’ We have also created numerous YouTube videos to demonstrate the diversity and range of what we do an I have even given a five minute cabaret act too!! Our business is all about profile, word of mouth and recommendations rather than expensive advertising campaigns that are forgotten the moment they stop running. Is there a next generation waiting in the wings? Maybe! When I arrived on the scene I made my contribution as the next generation so who knows… My daughter is learning the skills and maybe if and when she is ready she will join me, if the time is right and that is really what she wants to do too. Do you enjoy what you do? Yes, I love it! Words of wisdom – If you could change one thing what would it be? Not a great deal because everything that has happened in the past has brought me to this point today, which I am truly happy about. Nothing radical to change but maybe I should have hung around more fashionable bars and clubs in my earlier days, the extravagance and creativity would have been great inspiration and I may have influenced a celebrity or two to wear one of my hats and helped with my public awareness too. I do not beat myself up with hindsight although I’d love to meet Mary Portas! Today my heart is full and my suitcase is light!!

A moving insight into what happens when your Uncle closes the doors and there is nothing you can do. Heather Leavens was a third generation director of the family business for 18 years until her Uncle decided to close the business. Powerless to do anything about it, Heather had to direct the winding down of the business. Paul Andrews spoke to Heather to understand some of the emotions involved in such a process. Heather Leavens joined the family business when her father asked her too, giving up her role in marketing and business development which at the time she loved to enter the fray. The business was formed in 1927 in Mississauga in Canada by her Grandfather and his two brothers, Art and Walt, in Belleville in Ontario, Canada. The original business began doing barnstorming, training pilots for war and mail runs to Pelee Island, Ontario. Great Uncle Art died in a plane crash and Great Uncle Walt left to pursue his interests in farming which is when her Grandfather took over running the business with his four sons and from a building in Mississauga, began to service and overhaul small aircraft like Pipers and Cessnas, maintaining a stock of spare parts and servicing specific plane parts too. Heather recalls her time as a child, way before actually joining the business when she used to work filing and cutting the grass. “My father got involved in the business as the second generation and growth came through diversification – first there was Leavens Boats and then a car dealership and even a business selling private jets,” she explains. “At the peak in activity there were operations in Mississauga, Montreal, Calgary and Edmonton with around 70 employees. We were not a large business but gave a lot of people work and the business afforded us a good lifestyle too. During this time, we also moved to a new building and the name of the company was changed to Leavens Aviation Inc.” Leavens Aviation was a good place to work and the employees enjoyed their time with the business. Many stayed for years and when the business eventually closed, a number of the staff leaving had worked for the company for over 40 years, something that Heather felt a certain responsibility for. “Our staff were part of the family really, an extension of who we are. They spent a long time with the company and it was sad that as well as the family closing the business, for many of the staff it was also the end of an era for them too,” continues Heather. For many, working towards a known outcome, the closure of the family business, is something that is planned a long time in advance. Not so for Leavens Aviation which at the time of the decision being taken was still predominantly owned by Heather’s Uncle, who at this time was approaching eighty years of age. “His daughter worked for the family business and it was obvious that the two of them had discussed the future of the business and come to a decision prior to us knowing anything about it” continues Heather. “In fact, my Uncle came into the office in the Christmas of 2010 and just told us that he was closing the business. It really did come as a shock to all of us, especially the three other family members working in the business that had no idea it was coming. We were all aware that there was no apparent fourth generation coming through to take the business on and that it was likely that it would have to be sold in the future, but we were all approaching our fifties and expecting to work towards building a nest-egg for our retirement through the business. Instead, we were suddenly confronted with a life-changing situation that we had simply not envisaged.” The next six months were not an easy time for the family as the assets were sold off and disposed of and eventually Heather found herself sitting in the car park on the last remaining chair waiting for the final customer to come to collect their goods. “At this time, I was not really sure what was going to happen” continues Heather, “I had no idea what I was going to do but I guess in the six months preparing for the closure I had time to think about the past and collect some of my thoughts, sorting out the papers and getting the practical things in order. What nobody can prepare you for is the last time that you close the door on a business that has been in the hands of your Father and your Grandfather, and for which you cannot help but having a feeling of responsibility for.” “Sadly, my Uncle had made his decision and we had to abide by it, he was the majority shareholder and we did not have the funds, nor the desire to take on any personal debt, to buy the business from him.” Hindsight is a powerful tool and Heather is now coming to terms with the reality of the situation. “I do get sad sometimes when I think of my Father and then the link to the business that is no longer ours, but am not naiive to think that running the business did not come at a cost. My father dedicated a lot of time to the business and as such had less time to spend with us as a family. However, the money has come in handy for the family and ultimately are well positioned and in a way, fortunate, to be able to take stock of our lives.” “Having said that, our building is now used as a furniture store and since opening, I have not driven past it once nor had any desire to go into the building to look around, it is all still a little raw and something that I just cannot bring myself to do,” continues Heather. Like other family business owners that have been involved with the closure of a multi-generational business, Heather is not alone in her feelings. However, she is aware more than many that life is short and that we have to make the most of things. “The day I left the building for the last time I went straight to the hospital to spend time at the bedside of a close school friend who was ill with terminal cancer and passed away nine days later. This was a tough time but helped to put things in perspective for me” she explains. Since the business closing, Heather sees herself as having been fortunate enough to take stock of her life, spend a year travelling and catching up with friends and is now about to embark on the next chapter of her life, life without the “burden of the family business.” Heather has always liked marketing, people and customer service and is keen to find a role that offers these opportunities to her. “In hindsight, we spent the last few years in the business trying to diversify and increase revenue, reduce costs and fight the recession, like many other businesses, but we were facing an uphill battle and maybe closing the business was actually the right thing to do. We had all become embedded in what we were doing, week in week out, and now we can stand back and consider the options before it is too late.” For Heather, it has been a difficult emotional road to go down but at least now she is able to look back and focus on the positives. “The burden of responsibility towards the family and the wider family, the employees and the community, has been removed and if I had to give any words of advice to others in a similar position, I would strongly suggest they consider their options, but closure or selling the family business is an option that may be necessary.” For Leavens Bros the outcome would probably have been the same in fifteen to twenty years time, an outcome that the third generation were quietly working towards without any thought of anything different, and then the ‘rug was pulled out’ and the family business came to an abrupt end. At the request of her Father, Heather gave up her own career to start in the family business and sacrificed a lot personally to manage the business for many years with her cousins. It has taken a toll, but Heather does have fond memories of the business, recognises the sacrifices that were made along the way, and although closing the business was probably the biggest sacrifice of all, is embracing all of the opportunities that it has also created for her now so that she can move forward and embrace life to the full.

When you meet someone new, how do you describe your business? If you’re like most people, you might talk about what you do or how you do it. Maybe you’ll mention how you do it better than your competitors. However, do you talk about the “why” of your business? Can you answer the question: What is the purpose behind my business? While the concept of a purpose-driven business is certainly not new, I recently came across a TEDx Talk from U.S.-based author and speaker Simon Sinek that put an interesting twist on the idea. The video is called “How Great Leaders Inspire Action” and it’s well worth the eighteen minutes out of your day to watch. Sinek’s basic premise is that leaders who “Start With Why” (incidentally, the title of his book,) have better personal, professional, and business outcomes. Why? Understanding why your organisation exists and being able to communicate that purpose to others creates a much more compelling story. Most firms simply focus on the “what” and the “how” of what they do, missing the opportunity to show off the purpose behind the business. There’s a solid business case for starting from why: it differentiates your business from your competitors by showcasing what makes you unique. It helps employees, partners, and customers understand why you do what you do. It focuses your attention on the activities that truly create value and move your business forward. By integrating your purpose into your mission statement and marketing materials, you are able to make a better case for why customers should do business with you. In his talk, Sinek points to Apple as a company that has seen enormous success by putting “why” at the core of its message. Apple isn’t just another company that produces technology products. Their purpose is to change the world through simple, functional, beautiful design. You have only to look at Apple’s share price over time to see the effect this powerful message and brilliant execution have on the company’s bottom line. I think that this is a phenomenally important idea for family businesses because we serve multiple purposes: our organisations exist to help our customers and to create a better future for our families. In order to successfully integrate these dual mandates, family business leaders have to understand the core purpose behind everything they do. Take a moment to think about why you get up every day and go to work. Look past the need to earn a living or turn a profit and go back to the beginning. What’s the ground truth behind your business? Who do you serve and why do you do it better than anyone else? If you’re having trouble visualising your core purpose, think about the problems your company solves for your customers and why they choose to do business with you. It’s also helpful to consider the story behind the founding of your company. Why was your company founded? Your unique history is one of the biggest differentiators between you and corporate competitors and it’s important to integrate that into the way you describe your business to employees, clients, and other key stakeholders. I think that it’s also essential to apply this concept to your personal life. Ask yourself: What drives you as a person? How do you want to be remembered when you’re gone? These are not always easy questions to answer, particularly when you’re caught up in the daily grind of running a company. However, knowing these answers can help you avoid burnout by keeping your focus on the things that matter most in your life. As family business advisers, one of the things we stress to our clients is the importance of a developing a long-term vision for your family. That vision should be centred on a purpose for the human, intellectual, and financial capital of your family. Our experience shows, and research supports, that multi-generational families that develop shared values and a purpose for their capital are more likely to thrive during key family business transitions. It’s a sad reality that many generational transitions fail. Whether it’s lack of planning, unprepared heirs, or disputes between members of the next generation, many families fail to successfully pass their wealth on to their children. I strongly believe that sitting down together and exploring the “why” behind your family is one of the best ways to ensure a successful long-term legacy.