Carmen Bianchi

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Family Wealth & Family Offices – Boundaries, Intersections, and Families

admin : April 12, 2010 4:22 pm : Blog, Recent News

Family businesses are often great drivers of wealth creation – family member owners focus on building, growing and enhancing the business – and if successful their endeavors present new and significant challenges to their families: managing their wealth, avoiding the “shirt sleeves to shirt sleeves in three generations” syndrome, and considering family legacy and stewardship.

Families in business must deal with managing the business, strategic planning, ownership, changing markets, new technologies, customers, competition and more. But what of the family’s wealth ? What is it and how is managed? What of the family’s needs and goals ? At some point, families need to find a balance between the demands of the family and of the business. An overemphasis on one or the other means trust, commitment, business effectiveness and family harmony will be unbalanced and the family potentially conflicted (1).
John Ward and Randy Carlock developed the Parrallel Planning Process (1) suggesting family and business plans should be mutually supportive, matching the family’s interests and the business’s goals.   Key points included 1) family values and business philosophy are the core, foundation; 2) strategic thinking affects family commitment and the business; 3) establishing a shared future vision for the family and the business is a recipe for success; 4) long-term success requires formulating family and business plans.
Jay Hughes, in his book Family Wealth: A Compact Among Generations(2), suggests the guiding principle among successful families is the concept of affinity: families linked by common mission and interest  promote responsible and lasting ownership, and preserve family wealth. But what is family wealth ?

Family Wealth
Family wealth is composed of six key elements or “capitals”: spiritual, human, intellectual, structural, financial, and societal capitals (3). If families of affinity are strong families, how do we get there ? Each of these capitals represents challenges to families and their advisors. Bringing family members together to discuss and agree on their shared values, growing a family’s human and intellectual capital through inclusion, respect for individuality and loyalty to the whole are more easily said than done . Establishing a process of transparency and communications, of sharing, are important building blocks. Families of affinity, which have a shared meaning and purpose are strong families. They are constructed through collaboration, they are not some sort of “immaculate conception”.  Respecting the Next Generation’s dreams, integrating and accommodating them to the extent reasonable and possible are more important than ever as inter-generational change comes of age. Building proper ownership structures, and promoting ownership over management and educating stakeholders helps prepare the family and its members to be responsible owners. Financial capital matters, investments and the investment process are important, but they are only one of the capitals. Taken together, the focus should be about stewardship – the key to generational success.

Families are self-governing and complex systems, and promoting family commitment and growing great owners through the management of the family’s wealth can enable families to stay together. This is however process dependent – and requires patience. Evolutionary yes,  affected by family dynamics, other internal and many external factors, yes. But having an organizational structure which enables it to happen helps.

Family Offices
Family offices focus on serving the family today and into the future. Stewardship and legacy, family mission and vision, values and governance, responsibility of ownership, developing family wealth/capital, and enhancing “the pursuit of happiness” are all important objectives. The challenges to families of wealth and family offices revolve around the notion of establishing and defining family needs – both as a family and individually. Simply put, dealing with the complexities of wealth management – wealth preservation, stewardship, asset growth, risk management, financial independence, family cohesiveness, responsible ownership, and philanthropy – can be a daunting task.
A family office supports and coordinates these challenges by organizing, formalizing, orchestrating, wealth preservation and creation, and family dynamics. It allows the family to control the issues it considers important, promote continuity, access and benefit from leading service providers internally and externally, tailor services to its needs and goals, confidentially and privately. What types of services ? They may include comprehensive financial planning, tax planning, accounting, investment policy and portfolio management, consolidated reporting, succession and estate planning, risk management, trusteeship, family stewardship, governance, family meetings, education, philanthropy and much more.
The family office – in whatever shape or form – helps implement the family’s goals, serve its needs, and support the evolution of the six capitals. From a practical point of view, its services can be multi-faceted:

Family offices are not new, can be defined in many ways, through functionality and constituency. The most common are single family offices, in-house founder’s offices, and multiple family offices. They come in all shapes and sizes, one size does not fit all. Their constituents can range from a small family unit to branches of an extended family, from one to many separate and unrelated families, from a few to many family members.

Single Family Offices are dedicated to one family and its branches. It is staffed by employees of the family who work with and for the family. The selection and  role of the CEO is critical as this person will serve as an important bridge between the family and the office. The staff also play an important role – as service providers and client relationship officers. Services are tailored to the family, the functions of the office reflect the family’s culture and values. It offers privacy and direct control, it is usually very responsive to the family, and relationship-focused. It can offer best in class services internally or through outsourcing, and is an family education/cohesion platform. Cost inefficiencies, service level inadequacies, the possibility of employee/family relationship conflicts pose potential weaknesses, as can employee turnover and remuneration issues. But for families of significant wealth (over $ 100 mio) it is a wonderful platform.

So-called Founder’s in-House Offices are also dedicated to one family, yet staffed by employees who often have a dual role in the family business and the Office. The family does what it wants as it wants, few if any outsiders are part of the team, and the founder often runs an autocratic entity with limited or specific vision with respect to family wealth. The office can be dysfunctional, myopic, subject to compulsive decision-making, and risk management weak, and it can be very efficient. Much depends on the members, their experiences, expertise, attitude and more. But for families looking for limited services, or who are not particularly concerned with legacy and stewardship of the family wealth, such a structure is an option.
Multiple Family Offices  (MFO) come in two basic forms: independent and institutional. Both are growing in appeal for different reasons. Independent offices are established by one or several families looking for economies of scale. Many families are dissatisfied with current institutional providers for many different reasons, and seek greater control over their affairs, more tailored services, and quicker response times. Costs are shared, outsourcing commoditized service requirements important, knowledge sharing fundamental, pooling of services facilitated, and a dedicated staff serves all the families. Again, the CEO plays a critical role as a bridge and service provider. But values and cultural differences can create tension, relationships can be strained if boundaries are not set, and potential conflicts of interest not managed. Peer exchange amongst the members is often enhanced and learning experiences many.  Institutional offices are established as a division of a financial firm, independent of any family, offering a wide range of services. Benefits include access to best in class providers, and organization, staff, management etc is provided by the institution. Service levels can be established and costs are borne by both parties. But families are many and client relationship managers are key to the process. Personnel turnover and other institutional issues (e.g. standardized offerings and services) cannot be discounted, but many efficiencies can be obtained by engaging the “one stop shop”. For families with a minimum of $25-50 mio these are good options overall.

A word about Private Banking. Families often wonder whether a private banking relationship is a better solution to the family office options. There is no perfect answer; each family needs to reflect upon its wealth, goals, needs and its perception of legacy and stewardship, as well as the service provider’s offering, corporate culture, its people, and its dedication of service.

Family Wealth Management
The management of family wealth is indeed a journey, evolutionary yet fascinating. It challenges all involved, and now requires a new focus: the management of family wealth rather than only its financial capital.  Family strategic thinking should indeed become the new norm.
Strategic thinking at the family level is one thing, implementation is another. Families are confronted by the daunting challenge of how to manage family wealth.

Where and how to start ?
Practice has shown that family leaders often think they can solve problems themselves, want no challenges, call for help too late, think noone understands like they understand. They like to work with advisors they know. But often other family members also have vision, and they can find themselves left out, frustrated, or even indifferent. The challenge is how to bring everyone to the table – and there is no magic formula. Family dynamics, family members, family structures such as family councils, and trusted advisors can all play a role. Its important to focus on who is the client, what type of family system is involved, what are the key problems and is there any consensus, as well as undertaking a family SWOT analysis, looking for hidden or patent minefields, understanding the family’s communication process, and more. Relationships matter.
Mention is often made of the need for family governance to help guide a family, keep it on track, keep it together. Again, practice shows that families often have some sort of governance system in place – verbal and/or written. They have ownership structures in place, family dynamics, and more. The question for the family is whether or not, and how, it wishes to stay together.

If it decides it does not need to stay together but rather “co-exist”, then each member or branches go their own way on many matters.
If they decide to stay together, practice has shown that successful families are open, inclusive and communicative. They establish a governance system composed of principles, policies and practices which enables them to manage the six capitals. Before they do so, however, they live and co-exist less as “members of a family” where actions and behaviors are impulsive, focused on immediate needs and goals, and family members act independently – and in which basic financial planning is undertaken. This phase is one of wealth creation.  But as family members begin to consider the “bigger picture” of family legacy, stewardship, and their inter-relationships, and the next generation  comes into its own, the need/desire for more coordination arises. Leaders emerge, family meetings are held, and discussions focus on how to link, keep, hold everyone together. The family’s evolution has led it to consider the need for some sort of governance. Sometimes family leaders can help begin the conversation and guide it forward. In many cases they cannot – and the need for help from advisors becomes necessary.  If families are  successful, they are more cohesive, and the notion of affinity takes on a real and constructive role. Each of the six capitals become key success factors. Family members can grow as individuals yet are still part of the whole. All contribute to sustaining the family in the present and into the future.

The Challenge
The challenge for the Single or Multiple Family Office, and even the private banker, is how they support the family’s wealth management endeavors. Trusted Advisors and Consultants can help. The members of each must find a way to understand, to serve, and to help the family turn strategy into reality.

1. Strategic Planning for the Family Business, J.Ward and R.Carlock, Palgrave, 2001
2. Family Wealth: A Compact Among Generations, Jay Hughes, Bloomberg, 2008
3. Six dimensions of Wealth, D Jaffe, Journal of Financial Planning, 2003

Laurent Roux has some 28 years of experience working with families and family offices worldwide. Activities range from strategic wealth management – family legacy and stewardship, family dynamics and organization, family office construction and coordination, and consulting, to international asset management, asset allocation, portfolio management, manager selection, performance reviews, mutual fund administration and global custody.
He was a Director and Managing Director at Pictet & Cie, Private Bankers, Geneva, Switzerland and a number of its international affiliates during his 25 years at his family’s firm. In 2005 he returned to the US and founded Gallatin Wealth Management, a Wyoming LLC. The firm is an independent  wealth management advisory and consultancy whose objective is to act as the trusted advisor, personne de confiance, to a limited number of families, family offices and mfo’s.
Laurent holds a JD degree from California Western School of Law in San Diego (1980), received a BA from the Univ of Colorado with majors in History and Political Science in 1976, and  attended the Graduate Institute of International Studies Masters program in Geneva. He was a  member of the Cal Western International Law Journal, received several Dean’s Awards and Advocacy Honors Board Awards.
He joined Pictet in 1980, worked in Geneva and London, established and headed Pictet’s Asian presence in Hong Kong in 1986, worked throughout the region nine years, headed the Group’s EU operations in Luxembourg, and returned to Geneva in 1998. His responsibilities there included strategic group projects, single and multi-family office services, coordination of Pictet’s international offices, and more.
Laurent currently is a board member of the Family Firm Institute, an advisory board member of the East West Institute, a global conflict prevention think and do tank, as well as the Jackson Hole Center for Global Affairs. He has spoken at numerous forums in Asia, Europe and the US, teaches family wealth advising for the FFI Certificate Program, and was an advisor/participant in the Far Eastern Economic Review ‘Where To Put Your Money’ Quarterly’s in Asia. He has written several articles on private banking and the concept/role of personnes de confiances.

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Family businesses provide refuge in hard economic times

admin : March 1, 2010 11:48 am : Blog

For family-owned businesses, the sluggish economy has a silver lining: Sons and daughters who might be taking jobs in completely different industries in a stronger labor market are returning to work alongside their parents and grandparents.

Realtor Adam Klempner came back to work full time at The Pizza Cookery in Woodland Hills when the housing market dried up.

“Thank God for the restaurant, because right now the market is not what it was,” said Klempner, whose father, Jordan Klempner, started The Pizza Cookery with his father more than 30 years ago.

Adam, 27, worked at the pizzeria as a teenager, then left when he earned his real estate license in 2001. Now, he’s back, working as an assistant manager, learning every aspect of the business.

But he also serves customers one night a week, alongside waitresses and busboys who were working at The Pizza Cookery before he was born.

“I don’t know what’s in the future, but I would never turn my back on the restaurant,” he said. “I will always be part of it.”

Family-owned businesses have a built-in advantage during tough economic times, said Carmen Bianchi, president of the Family Firm Institute, a group that advises and educates owners of family-run business.

“In an economy that is drowning, family businesses thrive because the families understand this is their bread and butter, and they all jump on board.”

Romero & Son Painting was started more than 40 years ago by Ernest and Claudette Romero. They’re still involved in the house-painting business, although sons Ron and Ernest Jr. handle the day-to-day operations.

And grandson Parker Roth, 19, plans to study business and finance when he starts at the University of San Diego this fall. While he doesn’t see himself taking over the company in the future, he said it’s nice to know there’s a fallback position.

“If I ever needed something, they would be there for me,” he said, adding that he would also pitch in and help if the company needed him.

Historically, few family-owned businesses survive to the third generation. A little more than one-third of family ventures pass on to sons and daughters, and just 11percent are taken over by grandsons and granddaughters, according to the Family Firm Institute.

Those numbers are rising, said Bianchi, in part because of the weak economy.

Still, she said, business owners should plan well ahead of time for the business to change hands.

Currently, about 40 percent of all family businesses are led by baby boomers who will hit retirement age within the next four years, said Bianchi, and a lot of these business owners are not prepared to deal with succession.

“All of a sudden, we are getting phone calls about trust issues, dividing up the money, what to do if the family member can’t handle managing the business.”

Planning ahead can be difficult, however, when the head of the company is still going strong.

Randy Finmark, second-generation co-owner of Finmark Floors in Northridge, said he hasn’t given much thought to who will take over the business when he stops working. Business is booming lately because homeowners who have given up trying to sell are instead pouring money into home improvements.

Besides, he and his two brothers, who run the company together, aren’t ready to pass it on to their kids.

“We’re too young to be handing it over,” said Finmark. “I’m 56. My brother is 50; the other one is 59.” 818-713-3662

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SDSU Business Forum Director Named President-Elect of Family Firm Institute

admin : March 1, 2010 11:46 am : Blog

SAN DIEGO, Monday, October 30, 2006 – San Diego State University’s College of Business Administration announced today that Carmen Bianchi, director of its Entrepreneurial Management Center (EMC) Business Forum, has been chosen as president-elect of the Family Firm Institute (FFI).  The announcement was made at the FFI’s annual conference October 25-28 in San Francisco.  The FFI is the premier organization in the U.S. for professionals specializing in family business.

Bianchi has been a family business consultant since 1991.  Her expertise lies in family systems and the relationship between family, business ownership and the professional roles within a family firm.  She teaches in the graduate business program on Family Business Management and also is the principal of Carmen Bianchi & Associates, a consulting firm.

“As president, I would like to be the institute’s ‘servant leader,’ to open the doors internationally and take the organization global,” said Bianchi.  Her term will consist of one year as president-elect, two years as president, and one year as ex-officio.

Bianchi is a fellow of the FFI and has been a member for 17 years.  Throughout her time with the organization, she has held many positions: she served on the Board of Directors for three years, was chairman of the International Committee and the Awards Committee, was a member of the Networking Committee and a mentor for the Certificate Program.

Bianchi has been a presenter at most of FFI’s annual conferences and has written proceedings for the conferences.  At this year’s conference, Bianchi presented on family business education, university-based family business centers and the success of family councils.  Gail Naughton, dean of SDSU College of Business Administration, was also a guest speaker at the conference, as well as SDSU Center for International Business Education and Research Managing Director Mark Ballam.

Throughout her career as a family business consultant, Bianchi has been invited by numerous national and international organizations to speak on family business issues.  She has worked in Lebanon, Finland, Canada, Italy, Australia and South Africa; has served as a facilitator for family business retreats and conflict resolution; and has been an advisor on a variety of strategic business issues.  Earlier this month, Bianchi and SDSU College of Business Dean Gail Naughton traveled to Hong Kong to conduct a Family Business Forum in partnership between SDSU and Chinese University of Hong Kong.

Bianchi and Naughton were both recently honored as “Women Who Mean Business” by the San Diego Business Journal.

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See Carmen Quoted in the Sacramento Bee

admin : February 13, 2010 10:55 pm : Blog

Carmen is quoted discussing the decision by Raley’s grocery store to name a family member as CEO.

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Carmen’s going to India

admin : February 6, 2010 11:49 pm : Blog

From End of March to beginning of April 2010 Carmen is going to India to do a 2 day seminar on Women Entrepreneurs in a Family Business (more to follow)

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Our Intangible Assets

admin : February 6, 2010 10:52 pm : Blog, Recent News

Buy/Sell Agreements, Estate Plans, Trusts, Planned Giving. Exit Strategies, Succession Planning; all these wonderful tools we use and teach to families in business but…. what about the “intangible assets”? Known in many countries as “The Ethical Will” : our assets measured by wisdom, insight and our dearly held beliefs.

The Ethical Will embraces our values, our vision, why we are, where we are and how we got there. This Will helps to guide the family survivors of a family business as to what the intent and vision and passion of the deceased were. This is so important for our next generation and the generations that follow to know about and to understand. So often we are dealing with our tangible assets, which we need to do, but we sometimes forget about how important our intangible assets are and how to pass these on to the next generations.

I have been a family business consultant for 20 years. I come from a family business (hotels) and have taught family business management at the graduate MBA level and undergraduate level for many years. However, my passion is to take a family on retreat and communicate to them just how important their family is to them. Families are the backbone of our society. We need to revere them, cherish them and never allow business issues destroy them.

So how do we do we pass on our intangible assetst?

Family Retreats are the perfect venue. Ask one of the family member participants to volunteer to be the historian. Work with that family member to go back as far as possible in creating a genogram of the family. Then video or tape or interview the oldest member of the family who may recall the most incredible details of why and what took place when the founder founded the business. This is a perfect opportunity for grandchildren to interact with their grandparents by participating in the story telling with probing questions and attention to details. So often I hear “I love my grandparents but I don’t know how to have a real conversation with them”. Well, grandparents like nothing better than to tell you about the past because the past is so clear and vivid in their memories. By asking questions, patterns will emerge, you may find out that the deaths in your family were due to heart attacks and high blood pressure or there is a tendency for diabetes in your family or the males carry the alcoholic gene and even though they may be so entrepreneurial, these people succumb to the alcoholism and lose whatever they have started.

In the Ethical Will you describe your vision and why you started the business. Like Leonard Lavin, the oldest surviving founder of a family business who went public, his vision was women’s products and creating a business for the family that would be a legacy passed on through each generation. The war was over, he had pennies in his pocket but, he had a vision and he pursued it. His company is now quoted on the New York Stock exchange and his daughter Carol Bernick is Chairman of the Board. Lavin wanted to create a legacy, a company for his family. His daughter and grandsons now work in the company. He has fulfilled his dream, created an ethical will depicting his values and why he did what he did. Lavin just celebrated his 90th birthday his mantra is “Winners Make it Happen Losers let it Happen”.

Write down your ethical will, have your vision and values captured on a video for generations to come, create a genogram going as far back as you can depicting any trends that you can fathom up from the past. This is the legacy our children and those that come thereafter will cherish ad infinitum.

Carmen Bianchi is the immediate past president 2007-2009 of The Family Firm Institute, the premier organization in the world for family businesses and those that serve them. She is the founder and director of the EMC Family and Closely Held Business Forum at San Diego State University.

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admin : February 3, 2010 5:29 am : Blog


A traditional estate or succession plan for a family or closely held business should encompass and be part of the estate plan, the financial plan, and the strategic plan. Every closely held and family business company should have an exit strategy-What is yours?

Lately many of these closely held and family businesses at the EMC Business Forum at San Diego State University have come to us saying that they, that is , the CEO/Founder would like to work more “on” the business as opposed to “in” the business. They would like to extract themselves from the day-to-day operations and rather concentrate on growing their business and perhaps looking to diversify and perhaps even merge and/or acquire some other enterprise. However, one of the biggest dilemmas facing these CEO’s/Presidents/Founders is letting go. How do you let go? It is all very well to name your successor, hire your successor, but then once your successor has been identified then it is your duty to have the employees, clients, customers and service providers buy-in and become comfortable with this person.

A time line, or transitory period is good, with a set date, like perhaps three months so that you can ease your successor into the position, however BEWARE; remove yourself from your usual office, move on down the hall and step away from the daily operations allowing your successor to demonstrate his or her capabilities. Make sure that your successor has the same values and standard of excellence as you do and that the vision of the company remains your vision. At the outset of this transition, it is best if regular scheduled meetings occur between the successor and the person who is stepping down.

It is important to determine whether your company is your legacy and that you would like it to perpetuate through the generations. But whose dream is it, because if it is only your dream and not your next generations dream then your company may become just another company being a part of the statistics that say between 92% and 87% of all companies in the USA are family owned or closely held but by the 2nd generation this percentage drops to 36% and by the 3rd generation it drops to 16%. “Shirt sleeves to shirt sleeves in 3 generations” as the saying goes and this could be your legacy!

Do not set-up your next generation for failure. Make sure that the successor desires this position and is capable of being a leader. Establish good mentorship and development programs as well as good leadership programs. Successors need to acquire the necessary skills and experience and be comfortable in their role as the leader. Employees and customers rely on the leadership of the company to create a smooth transition that would not be disruptive to their lives.

If succession is split between two or more siblings and/or family members, what agreements should exist between these shareholders that will allow for future changes in the company. Be careful of 50/50 splits with no majority shareholder. Establish sound Buy/Sell agreements whereby decisions such as, do the shares remain in the bloodline in case of divorce, are adopted children considered bloodline etc. On the demise of one of the shareholders do the shares go back to the company or to the other family shareholders? These are very important considerations. Who will manage the company? Will there be an outside Board of Managers? Will minority ownership be allowed outside the family amongst key employees or should there be “phantom stock” given to these employees?

If you are thinking of becoming the successor of a family or closely held business here is some food for thought:

* How do you plan on acquiring the skills necessary to become the leader of the company?
* Get meaningful, fulltime outside work experience to create an aura of credibility.
* Look for mentors both inside and outside of the business
* Seek the presidency of an organization outside of your work
* Develop or belong to a peer group
* Identify leadership models to emulate
* Remember that real authority comes from earning respect, not from power
* Eventually identify your own management team
* Be a role model of listening skills, openness and change

Finally, what we like to encourage is the Ethical Will in a good succession plan. Ethical wills are multifaceted tools that can be used to transmit not just your intentions but, equally important your thoughts and feelings on innumerable subjects, some of which may be too difficult or sensitive to express directly while you are alive. Lessons learned as you experienced life, failures, and triumphs but most important of all, the Ethical Will is a tool that describes the principles and values with which you lived your life. This is a unique way of creating a lasting legacy of your wisdom and insight for having lived a rich and rewarding life; a final lesson to be learned.

Carmen Bianchi is the director of the EMC Business Forum at SDSU as well as the president of the Family firm Institute, the premier organization for service providers to family businesses. She can be reached at or 619-594-4949

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