For first-generation wealthy entrepreneurs with businesses they plan to pass on to their descendants, there can be some enormous challenges to be overcome. Succession planning and preparation is critical for a proper handover, as is keeping the enterprise growing at a sufficient rate to support a growing family, and wise long term wealth management.
Increasingly, smart families around the globe are realising more formalised frameworks, policies and processes are the key to successful inter-generational business and wealth planning. After all, only 30% of family-owned businesses survive to the second generation, less than 12% to the third, and only 3% to the fourth, according to the UK#39;s Institute for Family Business.
Dr Steen Ehlern, managing partner of the private family office Ferguson Partners in London and Zurich, says that despite the numbers, still fewer than one in three family businesses worldwide has any formalised family governance in place: It is really very important to have a formal family (business) governance structure, which is as strong on the corporate level as it is on the family level, he says.Vision and objectives
Such a structure clarifies the roles, responsibilities and interests of the three interdependent groups in a family-owned business, namely the family, the ownership, and the business. Family governance, like corporate governance, typically starts off with a family constitution or charter, which documents a whole raft of protocols around the family#39;s vision and objectives for the business.
You have to have a family vision, says Dr Ehlern, to basically set out what the business is there for. It is not simply a money machine, but a means to support the family and future generations financially, as well as a shared endeavour to keep the family together. This charter will also include key policies relating to family members#39; employment, management succession, and the ownership and transfer of shares.
The constitution, not normally legally binding but is instead a flexible, living framework outlining the rules of the game, which might also include a code of conduct on how different family members should treat each other, and it may empower family governance bodies and committees to make decisions.
These bodies should in turn include a family assembly, open to all family members, and a family council, formed of elected representatives of the family and tasked with making decisions on its behalf. The family council is effectively the board of directors of the family, reporting to the whole family and potentially creating committees to deal with things like education or philanthropy.
Dr Ehlern suggests all these governance structures should be put in place as early as possible in the life cycle of a family business, before any disputes have had an opportunity to arise (although conflict resolution guidelines are also a vital component of all the frameworks). He also recommends family meetings take place periodically - at least annually and preferably more frequently to keep all interested parties fully up to speed on the finances, business and family matters.Enduring family wealth
Li Lee Tan is counsel and the head of the private client and trusts practice at Appleby in Hong Kong. She says Chinese and Asian families have often focused far more on the growth of their businesses rather than the growth of their wealth, but are waking up to the idea of enduring family wealth and the business of managing a family.
She says: In the first place, families, and especially the founders, need to recognise that while they are very good at setting up corporate structures for their business, with various companies and fund structures, running the business of the family itself also needs proper structuring in a way that allows the family to remain successful for future generations. That starts by setting out the vision, mission and values of the family, which perhaps stretches beyond the family to society and the wider community. Many Asian families have a tradition of supporting philanthropy education or alleviating poverty in their poorer home towns, for example.
In Asia, family businesses are still very often in the hands of the first generation, in contrast to the often more sophisticated multi-generational family businesses in Europe and North America. A particular challenge arises when families look to involve the second generation in the business individuals who may have studied and worked abroad, and have frequently returned with a mix of Asian and Western values.Succession planning
Dr Ehlern does a lot of work with clients in the Middle East, where modern families can sometimes use offshore vehicles to hold or segregate assets in order to be more flexible with regard to forced heirship under Shari#39;ah law. But still he says many families in the region are conservative and pass the business on to the eldest son, which may or may not prove successful, or there is a delay in succession as a result of family feuds resulting in a possible disruption to the business. Many family businesses in the Middle East face pressure to transition to the next generation within the next few years, he says. So succession planning is a highly sensitive and very emotional issue in the region. More family businesses now seek advice and support from outside experts and consultants.
When family businesses fail, it is often because there is no qualified successor, or because transition is handled badly. Preventing that happening requires careful career planning for the next generation, as well as education, training and mentoring to raise their understanding and increase their interest. Often the answer to keeping the family and business together lies in creating shared visions and values, communicated openly, discussed frequently, and making use of clear dispute resolution procedures, Dr Ehlern says.
Li Lee Tan says: The running of a family business often involves different branches of a family, with some active and some not, and there may be cultural differences between generations because of the opportunities the younger generations had over their parents. Each generation can have really quite different focuses, and the question is whether they are able to come up with common family visions and values that can be translated into effective succession plans. Typically that works best with the use of more formalised frameworks.
Originally published in Wealth Structuring 20:20, 2015.
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[at Investors Business Daily] Chinese stocks received a downgrade for the first time in over seven years from Morgan Stanley (MS), which cut its MSCI China Index rating to equal weight from overweight, noting a worsening technically
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Morgan Stanley (MS), valued at $74.02B, began trading this morning at $36.98.
Looking at todays market, MS one day range is $36.85 to $37.62 with the price of the stock fluctuating between $29.26 to $39.19 over the last 52 weeks.
Priced at 12.56x this years forecasted earnings, MS shares are relatively inexpensive compared to the industrys 19.76x forward p/e ratio.
The company pays shareholders $0.40 per share annually in dividends, yielding 1.10%.
In a review of the consensus earnings estimate this quarter, 23 sell-side analysts are looking at $0.73 per share, which would be $0.13 better than the year-ago quarter and a $0.00 sequential decrease. In looking at the bigger picture, the full-year EPS estimate of $2.95 would be a $0.63 better when compared to the previous years annual results.
The quarterly earnings estimate is based on a consensus revenue forecast of the current quarter of $9.08 Billion. If realized, that would be a 6.57% increase over the year-ago quarter.
Recently, Atlantic Equities Initiated MS at Neutral (May 7, 2015). Previously, MKM Partners Initiated MS at to Buy.
With the above information in mind, readers should note that the average price target is $39.72, which is 7.41% above where the stock opened this morning.
Summary (NYSE:MS): Morgan Stanley, a financial holding company, provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. The companys Institutional Securities segment offers financial advisory services on mergers and acquisitions, divestitures, joint ventures, corporate restructurings, recapitalizations, spin-offs, exchange offers, leveraged buyouts, takeover defenses, and shareholder relations, as well as provides capital raising and corporate lending services. This segment also engages in sales, trading, financing, and market-making activities, including institutional equity, fixed income and commodities, research, and investment activities, as well as offers financing services, such as prime brokerage, consolidated clearance, settlement, custody, financing, and portfolio reporting services. Its Wealth Management segment provides brokerage and investment advisory services covering various types of investments comprising equities, options, futures, foreign currencies, precious metals, fixed income securities, mutual funds, structured products, alternative investments, unit investment trusts, managed futures, separately managed accounts, and mutual fund asset allocation programs. This segment also offers education savings programs, financial and wealth planning services, annuity and other insurance products, cash management services, trust and fiduciary services, individual and corporate retirement solutions, and credit and other lending products, as well as fixed income principal trading services. The companys Investment Management segment provides alternative investment products, such as hedge funds, private equity and real estate funds, and portable alpha strategies to institutional and intermediary channels, and high net worth clients, as well as engages in real estate investing and merchant banking businesses. Morgan Stanley was founded in 1924 and is headquartered in New York, New York.
SAN FRANCISCO, May 6, 2015 /PRNewswire/ --Bank of the West Wealth Management Group has appointed two new regional managers to support the ongoing expansion of its business. As part of these appointments, the Wealth Management Group divided its West Coast regional structure into two separate regions Southern California amp; Southwest and Northern California amp; Northwest to provide further leadership resources and structure for the growth and client demand in these areas.
Edward Mora was promoted to regional manager for Southern California amp; Southwest, and Cheryl Farley was promoted to regional manager for Northern California amp; Northwest.
It is rewarding that increasing numbers of clients are looking to Bank of the West for their wealth management needs. Through the hard work and dedication of our team, we serve them while continuing to build even more leadership resources, expanding our team of advisors, and developing the solutions we have available to them. It is an exciting time to be at Bank of the West, said John Bahnken, group head and senior executive vice president of the Wealth Management Group at Bank of the West. I am very pleased that we are able to promote both Ed and Cheryl into this next level of leadership. We have a strong commitment to identifying and developing leaders from within our business, and Im glad we could give them this opportunity. I know our clients will ultimately benefit from having their insights and experience available across a broader set of markets.
About Edward Mora
Previously the market leader for Orange County, Mora was recognized for his client service and team leadership through his appointment to the regional manager role. He led the development and growth of the Orange County wealth management team to ensure clients have access to all of the banks resources, including wealth management professionals focused on deposit services, private mortgage banking, trust services, and investment management.
Mora has more than 20 years of experience advising affluent and high-net-worth business owners regarding wealth planning, investment solutions and private banking. He is a Certified Financial Planner professional and is active in the community, serving on the boards of Project Access, United Cerebral Palsy of Orange County and the UCI Merage Center for Investment and Wealth Management.
About Cheryl Farley
Prior to her appointment as regional manager, Farley served as market leader and drove the development of the banks Silicon Valley and Palo Alto wealth management team, where she significantly grew her teams presence and the banks relationships with affluent and high-net-worth individuals, business owners and foundations.
Farley brings more than 25 years of experience in the financial industry to her new role. She has extensive knowledge in the areas of investment analysis, trust and estate services, insurance, and retirement plans. Farley holds the Certified Wealth Strategist and Certified Retirement Counselor designations.
Bank of the West Wealth Management provides wealth planning consulting, investment management*, personal banking, and trust services. The group is part of BNP Paribas global wealth management business of more than 6,300 professionals in 30 countries worldwide with over $10 billion** in assets under management in the United States $345 billion (305 billion) in assets under management globally as of December, 2014.
About Bank of the West:
Bank of the West is a regional financial services company chartered in California and headquartered in San Francisco with $71.7 billion in assets. Founded in 1874, Bank of the West provides a wide range of personal, commercial, wealth management and international banking services through more than 600 offices in 22 states and digital channels. Bank of the West is a subsidiary of BNP Paribas, which has a presence in more than 75 countries with 185,000 employees.
Deposit and loan products offered by Bank of the West, Member FDIC. Member FDIC andEqual Housing Lender
Bank of the West Wealth Management offers products and services through Bank of the West and its various affiliates and subsidiaries.
Securities and variable annuities are offered through BancWest Investment Services, a registered broker/dealer, Member FINRA/SIPC. Financial Advisors are Registered Representatives of BancWest Investment Services. Fixed annuities/insurance products are offered through BancWest Insurance Agency in California, (License #0C52321), through BancWest Insurance Agency in Utah and through BancWest Investment Services, Inc. in AZ, CO, IA, ID, KS, MN, MO, ND, NE, NM, NV, OK, OR, SD, WA, WI, WY, HI, GUAM and CNMI. Bank of the West and its various affiliates and subsidiaries are not tax or legal advisors.
BancWest Investment Services is a wholly owned subsidiary of Bank of the West and a part of the Wealth Management Group. BancWest Corporation is the holding company for Bank of the West. BancWest Corporation is a wholly owned subsidiary of BNP Paribas.
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