The founding father of family business advice
Hannah Downie speaks to Peter Leach, founder and Chairman of Peter Leach & Partners and winner of STEP’s Family Business Advisor of the Year award 2013–2014.
You are known as the founder of family business consultancy services in the UK. How did you find yourself in this line of work?
I worked at BDO Stoy Hayward during the 1980s and most of our client base consisted of family businesses. I saw patterns emerging from advising clients, so I sought out academics in the US who had also started to look into this. I thought that learning from the patterns would be of great assistance in giving advice. I commissioned research with the London Business School in 1987 and 1988, and I wrote the first book on the subject – in the UK – in 1991. I was perhaps the first person in the UK to start to think about family business as a separate subject in its own right.
Family business work has emerged as a distinct multi-disciplinary field of practice. Why do you think that is?
Because it goes to the root of the family, and how it deals with money and business, at the same time as keeping the family harmonious. Such issues have to be addressed sensitively, but you must find practical and effective answers that work for everyone. Many people interact with families, be they tax advisors, lawyers, financial advisors or other professionals, and they all have had to up their game in order to better service those clients. By that, I mean that they have had to better understand the issues, challenges and concerns of their clients in order to build a close and ‘trusted advisor’ relationship.
What skills do family business advisors need in order to work effectively with multiple generations of family business stakeholders?
In terms of the family side and dealing with complex family dynamics, advisors need to have excellent interpersonal skills. That is more important than any technical skills. Technical skills are, of course, needed, but not necessarily at the initial stages of engaging with a family. It is generally easy to find excellent technical support when the family knows the direction of travel it wants to go in, and the particular technical matter it wishes to solve. It’s getting the family to agree what the direction of travel is in the first place that is more important. Otherwise, you can find family succession is dictated by tax-technical answers and you can end up in a position where you have ‘operation successful; patient dead’.
What is the most challenging aspect of family business work?
The most challenging aspect of family business work is, I think, having the patience to work with people who are not necessarily initially keen to make the changes they need to make for the family and its business to be sustainable in the long term. Family members working long term in the family business tend to get set in their ways; when the new generation appears, they will want to operate the business and behave in a different manner, thus causing potential conflict with the elder generation. It is assisting clients in balancing this and making changes to their behaviour in order to facilitate succession that I think is the hardest aspect of family business consulting. If you tell people what to do, they won’t do it – advisors need to work with the family members at such a level of detail and closeness that the family members believe making changes is their idea. Otherwise it generally doesn’t work.
The proverb ‘shirtsleeves to shirtsleeves in three generations’ has been used to describe the demise of the family business over time. Does this hold true in your experience?
They say that in the US, and it is dead right. In Mexico, they say: ‘Father – merchant, son – playboy, grandson – peasant.’ In China, they say: ‘Peasant shoes to peasant shoes in three generations.’ In Italy: ‘From the stables to the stars and back to the stables in three generations.’ And, of course, in the UK, it is: ‘Clogs to clogs in three generations.’
Is this true? Absolutely! It is the work with the family members in terms of a family governance and continuity project, for example, that raises awareness of these issues and acts as an insurance against the ‘shirtsleeves’ syndrome. Families that actively engage in family processes and building protocols and communication and so on do not generally suffer in this way.
HMRC figures indicate that, since 2006, the number of trusts being created has dropped. Do you still see trusts being created and used as wealth-planning vehicles?
It is true that trusts are becoming less popular. This is because of the significant tax that is paid by an individual who receives distribution from a discretionary trust that has received its income by a dividend from a UK limited liability company. As a result of this, advisors are cautioning clients on the creation of trusts, and other wealth-planning vehicles are used, such as family limited partnerships. But, as I alluded to above, if the ‘tax tail wags the dog’, you may get the wrong answer. Tax should not be the main driver.
What does winning STEP’s Family Business Advisor of the Year award mean to you, and your firm?
We were delighted to win the STEP Family Business Advisor of the Year award. This has meant a great deal to the firm, as the STEP awards are very prestigious and everyone in the industry knows they are hard-earned. It publicly recognises our experience and credentials in the field and we are delighted to be in this position, especially as this was a new category for the 2013–2014 awards.
The STEP Advanced Certificate in Family Business Advising
The workshop for qualification will run in Miami, London and Geneva in May 2014. This Advanced Certificate will give you practical tools that you can use immediately with clients. For more information, visit www.step.org/step-advanced-certificate-family-business-advising
STEP Private Client Awards 2014–2015 – Entries open
The STEP Private Client Awards is your opportunity to demonstrate excellence to your peer group and clients. Now in their ninth year, these prestigious awards highlight excellence among private client solicitors/attorneys, accountants, barristers, trust managers and financial advisors. The Awards are open to both STEP members and non-members, and all categories are open internationally. Entries are open until 30 May 2014, with finalists announced in July 2014.
New categories have been added for the 2014–2015 awards: Independent Trust Company of the Year; Legal Team of the Year – large; Legal Team of the Year – midsize; and Trust Company of the Year. View all the categories and enter at: www.steppca.org
The content displayed here is subject to our disclaimer. Read more