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.

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.

Latest family business poll from the Institute for Family Business shows family firms more than twice as likely to be trusted than those on the stock market. Key Findings More than half (55%) say being a family firm is important to business trustworthiness Only 26 per cent say being listed on the stock market is important to business trustworthiness Strong values (88%), heritage (73%) and commitment to local community (71%) key to business trustworthiness Quality of products (94%) and staff (93%) ranked highest Fifty three per cent believe family firms have stronger values than non-family businesses People are more than twice as likely to trust family businesses as they are a company listed on the stock market, according to a new YouGov poll for the Institute for Family Business (IFB), published today. Fifty five per cent (55%) of people say being a family firm is important in trustworthiness. Only 26 per cent (26%) say being listed on the stock market is important. Values are key. Eighty eight per cent (88%) say an important factor for a company to be trusted by them is that it has strong values. Fifty three per cent (53%) say family businesses have stronger values than other companies – only nine per cent (9%) disagreed. Family businesses employ more than nine million people, contribute over a quarter of UK GDP and pay more than £84 billion in tax. They number some of the largest and most successful companies in the UK, including Clarks, Dyson, Warburtons, Primark, JCB, Speedo, Glenfiddich, Yorkshire Tea, Aunt Bessie’s, Ginsters, Selfridges, Wates and Walkers Shortbread. The most important factors in business trust are: Quality of products and services (94%) Staff (93%) Value for money (90%) Strong values (88%) Company heritage (73%) Commitment to the local community (71%) Being UK-based (65%) Having won awards for its products/ services (65%) Being a family business (55%) Being owned by the same family for generations (54%) The survey also found that people recognise that family businesses make an important contribution to the UK economy (71%) and play an important role in creating employment (53%). Their commitment to looking after their customers also gives family firms an advantage over non-family businesses, with more than half (52%) of consumers recognising that they offer higher standards of customer care – only eight per cent (8%) disagreed. Responding to the survey’s findings, IFB Director General Mark Hastings said: “Trust is a critical issue for businesses. Family businesses not only score well for trust, but have an advantage over other companies.” “Strong values are the key to what makes family firms different. Living those values is giving family firms an edge over listed companies. Family businesses pride themselves on carrying strong family values throughout their business practices – maintaining trust is essential when your name is above the door.” “Britain’s family business sector provides more than nine million jobs and produces a quarter of GDP. They are the backbone of the economy and number many of the UK’s largest and most successful companies. More than seven in ten people agree that family business makes an important contribution to the UK economy.” “Now is the time for Government and other businesses to work more closely with the sector and help put trust back into business.”

Family Business United completed the first ever research into the oldest family firms across the South West of the UK. Check out the oldest family firms in the report below that was published in 2014.

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.

Advisers can help clients better secure their family business by asking them to address four key areas: legal structure, governance structure, policies and processes. Many traditional professional advisers and trustees are familiar with legal structure, but it is critical to address all four areas to help clients build a solid business foundation for the future. In this article, Christian Stewart explores the topic in more detail. Legal Structure The first question to ask is: what is the right kind of legal structure to secure the long-term protection of the family business? Should it be owned by a trust, a charity, a foundation or a holding company? Should there be a mechanism, such as voting and non-voting shares or a partnership structure, to separate control from the economic interest in the business? If it is going to be a trust structure, what kind of trust and what kind of trustee? In Asia, for example, trust ownership is not uncommon, but where the asset is the shares in a family business, an institutional trustee will want a trust structure that completely carves out and allocates responsibility for control of the shares in the family business to the settlor of the trust and their family. Alternatively, an institutional trustee may recommend a private trust company structure to be run by the settlor and their family, with the institutional trustee providing only administrative support. One reason for needing a legal structure to own the business is to consolidate ownership and prevent fragmentation of the shares. A legal structure is about allocating the benefits of ownership, and control. It should provide an ownership transition plan for the business, and the right one can also help to protect shares from creditor, divorce and illegitimate heir claims. A legal structure such as a trust can potentially allow the shares in the business to be owned by the family for multiple generations. Family meetings to explain the terms of the family trust or other legal structures will ensure there are no surprises in store. Governance Structure The legal structure is not sufficient by itself, so the next point to address is what governance structure would best suit the goals and objectives of the founder and their family. As a minimum, periodic family meetings between the business owners enable them to talk about the relationship between the family and the business. Family meetings should follow an agenda and rules, with someone chairing and another facilitating. These key roles can be rotated among family members, but a family new to formal meetings is likely to use a non-family facilitator. These meetings are not necessarily about decision-making but about ensuring that the family has a voice and creates a fair process. More formal governance structures are a family assembly comprising all family members; a family council, a smaller group that represents the family assembly; and possibly one or more committees of the family council, for example education and development, or career planning. If there’s a family office that manages the liquidity the business generates, it should be a structure separate from the family business, with its own organisation, officers and staff. The family office can help organise the governance structure, and support the activities and initiatives of the family council, which is responsible for ensuring control and overseeing the office. Part of planning the governance structure is reviewing the manner in which the family business has been governed: looking at the composition and the role of the board of directors of the business. There is often a link between the governance structure for the family and the board of directors. In practice, this may be achieved by having overlapping memberships or through arranging occasional meetings between the board and family council. Governance structures provide leadership and direction for the family and its business. They help ensure continued support and commitment to the business, and enable harmony because family members have worked out their differences behind closed doors. And if the founder or family’s goal is to continue the business for generations, there needs to be an organised structure and processes for the owners to make decisions together. Choosing Policies Policies regulate the relationship between the family and the business, but what kind do you need? A family employment policy, a dividend policy or a policy for compensating family members who work in the business? And do you need policies relating to the qualifications for acting as a director? Is there an exit policy governing how shares can be sold? Having the right policies helps avoid predictable conflicts and establishes boundaries between family issues and business matters. Policies make things clear, so everyone is on the same page. "Governance structures provide leadership and direction for the family and its business. They help ensure continued support and commitment to the business" It’s common for the family council to develop the terms of the policies, but it cannot make policies or decisions about the management or operation of the business. In these cases, it can develop and propose the policy to the board of directors, which approves it as necessary. Process Options Finally, there are processes, and which ones are needed to bring the family and business governance system to life. Consider the following example: a business founder sets up a family trust to own the shares in the family business. The trust is structured so the founder controls all the voting rights on the shares. It provides that if the founder dies or becomes incapacitated, control of the voting rights on the shares will pass to their surviving spouse. But what if the spouse does not know anything about being a controlling shareholder in the business? What if the spouse does not understand the trust structure and their potential role in it? What if there is a board but the spouse does not understand its role – that the members of the board could be their representatives in the future and that they have the power to change them? What if the spouse does not understand the strategy of the business or the risk profile of the business? In practice, this is a common scenario. The trust structure in this example may be a good legal structure and it may help the founder keep control and pass legal control to their spouse. It provides an ownership succession plan, but you can see this trust structure is not by itself going to teach the spouse how to be a good owner and business steward. You cannot rely on structure alone to guarantee future success. The types of ongoing processes that business-owning families implement can include education and development of shareholders and owners (whether that ownership is direct, or indirect through a trust), career planning and developing the next generation of family managers and leaders. As the future business will be a more complex environment than the business of today, the next generation need skills in important areas such as communication and conflict resolution, strategic planning and leadership. Different Approaches The traditional approach to selecting and setting up a legal structure for the family business has been to work only with the business founder. In Asia, for example, it is not uncommon to find cases where the legal structure is not fully revealed to the rest of the family members until the founder has died or become incapacitated. In practice, a different kind of approach is taken to design the right governance structures, policies and processes. The most common is either to form a family task force, which may consider options and give proposals to the founder, or to install a series of family meetings, which include the founder, their spouse and adult children, to discuss and design their own governance structure, etc. The founder can control these meetings, but by involving their spouse and children, the rest of the family can get a clear understanding of their goals, wishes and thoughts and they can all work together to develop an approach that has family buy-in and support. The most common approach is to combine the agreed governance structure, policies and processes into a written document known as a family constitution or a family charter. These agreements can be made legally binding but often they are not. The family constitution’s value and effectiveness come from the process of the family members working on it together, considering alternatives, and coming up with their shared understandings of how things should be done. If the legal structure is handled in the same way as the family constitution, the same benefits will be achieved: increased family buy-in, understanding and the ability to get feedback on the basic question of whether or not the proposed legal structure will be workable when the founder is no longer around.

Buying well is key to successful art investment and is a delicate balance between aesthetic appreciation and financial savvy. Viola Raikhel-Bolot explains more. Investing in the art market can provide impressive returns, yet an even greater reward can be derived from an individual’s passion to acquire objects of great beauty. The benefits of investing in art include a low correlation with other asset classes. Economists have predicted that over the coming years a concern about future inflation or the return to financial instability may drive individuals towards increasing their portfolio allocation to art as an inflation hedge. In addition, the competition for artworks adds to the inherent scarcity to make art a desirable asset for investment purposes. Whilst anomalies can exist in the art market (as they can in any market), record prices, strong returns and increased institutional buying have sparked significant interest in art as an asset class. If one goes about investing in art with the right balance of aesthetic appreciation and financial awareness then you can ensure that what you have bought will appreciate over time. So, how does one know what the perfect balance is? To ensure you buy wisely, protect your asset and enhance its value we have compiled a short list of some tips for buying well: 1 – Identify the Seller It is important when considering an art purchase to identify who you are buying from. Auction houses, art dealers and art advisers are all incentivised differently. Understanding the seller’s motivation will assist you in making informed purchases. The objectives of dealers and auction houses is to sell consigned and existing stock, therefore advice from these parties can in fact be skewed with a focus on business profits and reaping in-house commissions. In contrast, the sole purpose of an independent art adviser is to identify the best source of works which suit their client’s collecting objectives without any bias. While auction houses charge both the buyer and seller a percentage on the same transaction and dealers sell at retail prices, an independent art adviser is able to leverage discounts for you in the market place and provide a completely transparent transaction. 2 – Do Your Research Discovering an artwork that appeals to you aesthetically is only one of the first steps in the collecting process. Ask yourself – does this piece represent the best possible work by this artist, within my budget? Researching the artist’s body of work will ascertain whether or not your selected Picasso, for example, is the best possible representation of his Blue Period. 3 – Provenance Another factor to consider is an artwork’s provenance. This can make a considerable difference to the selling price. In the current market, works from private collections with an excellent public exhibition history are in high demand and occupy some of the top lots by value at auction. While the prestige of being featured in an exhibition at a world-class institution adds to an artwork’s desirability and value, this is not to say that artworks kept out of the public eye are worth any less. A Monet painting, “Nympheas” (Water Lilies),1907, owned for many years by the reclusive heiress Huguette Clark and not publicly exhibited since 1926, sold at Christie’s in May 2014 for $27 million. 4 – Condition Condition is another very important element which can greatly impact the value of an artwork. It is essential to request independent condition reports before making a purchase. Similarly when identifying works privately or at auction, an independent examination of the artwork’s by your adviser with a UV light will immediately ascertain whether or not the existing condition report reflects the actual state of the work. 5 – Protection To protect your investment and ensure it appreciates in value it is important that your artwork is properly insured. If you have owned an artwork for several years, the initial valuation could now be out of date and not relevant for insurance purposes. Therefore it is recommended that an annual valuation is obtained to reflects changes in the marketplace. Where possible it is also recommended to identify if your artwork can be featured in public exhibitions as this will enhance the works future sale value and desirability. Buyers and sellers should always seek an independent and impartial adviser to undertake thorough due diligence at all stages of the collecting process. With an unregulated market, inflated prices and counterfeit works, a good adviser will ensure clients avoid the many pitfalls and potentially unpleasant surprises that can occur in the market place. This article was prepared by Viola Raikhel-Bolot, Director of International Advisory at 1858 Ltd Art Advisory, who is frequently called upon to assist clients when buying and investing in art. For more information please visit www.1858ltd.com