Advisory Teams for Business

By Wayne Rivers

Every family business has a menu of advisors to whom they turn with various questions. The advisory team normally consists of a certified public accountant, an attorney, a banker, an insurance agent, and sometimes a stock broker. Family businesses often retain consultants on an as-needed basis in addition to their core group of advisors.

The management style of most family business owners dictates that the FBO normally initiates contact with one or more of the advisors whenever the need arises. This management style may be described as a hub and spokes arrangement, where the hub is the family business owner with the spokes being lines of communication to the respective advisors. As an illustration, the FBO may have an accounting question for the CPA. The CPA mentions that there could be some legal ramifications which would mandate the involvement of the attorney. Does the family business owner put his CPA and attorney, typically his top two trusted advisors, together? No, he takes what he has learned from the CPA and calls the attorney himself. The FBO in this case is the clearinghouse for all information, and is by default the quarterback of the team.

There are several reasons this is the most common management style when interacting with advisors. Nation’s Business magazine reported on this phenomenon in December 1997, and our empirical experience tends to be very much in concert with the experience of the author.

One major reason for a lack of teamwork is the competition among non-family advisors for who is the “most trusted.” Advisors have a vested financial interest in maintaining strong relationships with the client, and this competition among advisors to be number-one can sometimes lead to professionals working against each other.

Another potential problem is that the business may have outgrown the respective advisor over time due to changes in family structure, industry trends, size, etc. Still another problem is that the advisor doesn’t share the core values of the family business itself. An advisor may harbor a strong dislike for one or more family members, a resentment of the financial success of the business or individuals, or a lack of understanding about what to do when there’s family conflict. Sometimes advisors may simply not like each other, and it’s very difficult for people who harbor dislikes on a personal level to cooperate professionally.

So what do family business owners do to eliminate the hub and spokes communication model and embrace a more collaborative and efficient model? The first thing is to delegate. The FBO doesn’t have to be the clearinghouse for every single bit of information as long as he knows the general game plan. As businesses grow, FBO’s find themselves less and less able to handle every small detail of operations. The same is true as their family and estate pictures continue to grow. If the FBO doesn’t have enough trust in his advisors to let them do their work in an environment of trust and collaboration, he may have the wrong advisors.

The next item is to have the advisors communicate with each other. That means to copy each other on correspondence, presentations, and notes of important phone calls and unscheduled discussions. Everyone needs to be dealing with good information in order to be at their most effective. You wouldn’t go in for surgery without taking thorough physicals and providing the physicians with your medical history. Why should you undertake family business succession and estate planning without giving all team members enough background information to make solid recommendations?

Next, invite all advisors to sit in on important meetings. This allows for everyone to weigh in with their respective opinions on procedures, strategy, etc.

Finally, make sure that your advisors understand they are working for you, for a common purpose, on a team. Advisors who have a history of working as sole practitioners may feel threatened or may be uncomfortable with the new teamwork approach. It’s your job to get them comfortable and to make sure they understand the ground rules for crafting the best possible plans for you.

A common objection to having advisory team meetings is the cost. If you’ve got a consultant, an accountant, and an attorney present with their clocks running, an hour of meeting time could easily cost $600 or more. Some FBO’s resist spending this kind of money for advice. Here’s the rub. How much would it cost to enter into estate planning discussions with say, an insurance agent, only to find out that there is a legal or accounting reason why the strategies you’ve spent hours and hours discussing can’t work for you? What’s the opportunity cost of using your valuable profit-producing time to engage in planning discussions which ultimately prove fruitless? It’s more than worth your while to get your advisors together on a collaborative, teamwork basis so that you’ll get the best possible professional thinking.

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.