Where family and business intersect: Family Office Services function as the trusted family advisEr

Families that own businesses are advised to work together to develop a framework to guide decisions under various scenarios. istock.com

In family-owned businesses, balancing the interests of the business with those of the family can become complicated, and in some cases, a source of family challenges. 

Having third-party expertise to guide families through this often-complex environment can help ensure that decision-making is effective for the family as well as the business as they move on to their next stages. 

MNP provides this type of valuable, objective advice through its Family Office Services. “In providing these services, we take on the role of trusted family adviser,” says John Hughes, senior vice president and National Leader of Private Enterprise for MNP, a national accounting, tax and business consulting firm in Canada that is dedicated to private companies and is the largest professional services firm devoted to private enterprises and their families.

“Family Office delivers our entire firm to business families,” Mr. Hughes says. “It means that we offer a broad array of insights and solutions to each client to make the family stronger and the business better.” 

The firm has 400,000 clients, and 90 per cent of them are private companies. About 80 per cent of those companies are family businesses. 

These private companies and families vary in size and financial value, and all are in various stages of their life cycle as a business and a family. MNP’s experience is that every family and business is different; in some cases, the children of the founders are ready to take on business responsibilities alongside their parents, and decisions have to be made about the children’s role, their equity positions and compensation. In addition, the parents may want to step away from the business, and the family needs to determine how they will support themselves in their retirement.   

“So families have different priorities and challenges depending on what’s happening with the business,” says Mr. Hughes. “We work with each family to identify issues and opportunities and to develop a tailored approach that also aligns with their values and goals.”

MNP offers clients expertise to meet a range of needs including tax planning, audit support, technology solutions, succession and estate planning. The services that business families often seek are in the areas of financial planning, wealth advice and family governance. 

How to manage succession of the business – the full or partial transfer of the business control from one generation to the next – is a growing share of the work done by the MNP Family Office team, Mr. Hughes explains. And one of the factors fuelling this growth has been the COVID-19 pandemic. 

“The pandemic and its aftermath have led many family firms to focus more on succession,” he says. “How companies fared during COVID-19 varied, of course. Some sectors did very well while others, for example, the hospitality and tourism industries, struggled more. Regardless of the economic impact, more business owners are reflecting on whether they want to continue in their family businesses – many are ready to have a different kind of life.” 

Those families whose companies lost value during the pandemic often had to revisit their financial plans and investment portfolios. And if they decided to exit the business, they looked for MNP’s support to determine the best solutions to benefit the family members. One of the key considerations of these business families is whether their children would be able to purchase all the shares or should they sell to a third party outside the family?  

The pandemic highlighted the fact that unexpected circumstances can derail business and family planning. The importance of “planning for the unknown” is where the concept of family governance enters the conversation, says Mr. Hughes. 

“It is important for the family to have a framework to guide decision-making under various scenarios,” he says. “And we help business families develop this framework, the key policies and procedures, well in advance, by facilitating the necessary discussions and open communication among the family members.” 

The goal is to have a clear process in place  when there is a significant change in circumstances. “We help the family work out how they will respond if a company leader passes away, for example, or becomes ill or disabled,” says Mr. Hughes. “It means planning how to deal with significant life events including marital breakdowns and disagreements within the family.

“Having these important family conversations discussed upfront before anything has happened gives the family more control. If everyone has agreed on the plan, it reduces the risk of family conflict during uncertain times when changes suddenly occur. Developing a governance system is a key peace-of-mind exercise for many families.” 

To view this report on The Globe's website, visit globeandmail.com

To view the full report as it appeared in The Globe's print edition: Family Business