How Financial Professionals Can Find New Wealth in Family Owned Businesses
Episode 8812th January 2023 • Human-centric Investing Podcast • Hartford Funds
00:00:00 00:24:27

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When it comes to client acquisition, family-owned businesses offer opportunities for new wealth. Dave Specht shares his expertise on navigating these complex relationships and tips for financial professionals to tap into this market.

David Specht is not affiliated with Hartford Funds

Transcripts

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on, they'll be able to serve them. When you think about the family business as an opportunity set,

clearly there's there's these families have for one case, they have life insurance needs, especially those that are perpetuating from one generation to the next. They have liquidity issues. They have a rising generation that they're trying to to teach and raise. So there's just so many different ways that a financial advisor can serve these families. There's so many financial possibilities with these business owning families that I think it just makes a lot of sense for an advisor to get started, though, it's really important for them to look at this family business as a system. So there's really kind of three, three main systems that come together when it comes to a family business. The first is the family system. So anyone that's a family member would fit kind of squarely in that family system. The second is the business system. Well, let me go back in the family system. That's basically a system of unconditional love. Julia have six kids. None of my kids actually had to do anything to become valuable to me. So that's the family system. It's that system of unconditional love. The second system is a business system. And this this is different because it's competitive, it's market driven, and it's kind of what have you done for me lately? Can you be valuable to the company? And then the third system for advisors to be aware of as they're serving these business owning families is the ownership system. So if you think about it as a Venn diagram, Julie, these three systems are coming together. Some individuals are family members that have ownership, that do not work in the business. Non-operating shareholders, advisors need to know what are the dynamics that they face with those particular individuals. And then they can also see what are the opportunities, what are the products that that group will likely be interested in and need. Other groups are family members that work in the business but don't yet have ownership. They have different, very different questions. That's typically the rising generation, you know, how will I get ownership? So an advisor has an opportunity to play a pivotal role in the decision making of that business owning family. And then if they ask great questions along the way with that business owning family, there's just tons of opportunities. Again, it depends on kind of the the set of products that the advisor and their team offers. But the family business is a fantastic target market for financial advisors.

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But tell me the back story. Like tell me about when it was first started. If it's second or third generation, like tell me about your parents and what what kind of things they went through to to build the business. Tell me about how you survived the transition from second generation to third generation. And what are some of those what are some of those learnings along the way? So again, if you can get them to tell you a story about. About their struggle, about conquering something that's tough. You you have a real opportunity to serve them because most advisors never get there. So if you can begin early with a curiosity about their journey in the story, the the needs that they have and some of the liabilities that that they have, they're going to become evident to the advisor, because that's that's typically as an advisor, how we're trained is to spot issues. And so we need to just pump the brakes on solving for them and really accelerate into curiosity mode about who they are, about their business, about what they worry about and things like that.

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many ways. And how can a financial professional really be a resource to that individual who's trying to juggle all of these things and hopefully do all of them well, but probably is exhausted to some degree.

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There'll be products and there'll be other services that you can that you can offer.

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And he felt like if he didn't have that company that had 400 employees in that small little town, that he would someday, that he would basically become irrelevant. So as you serve these business owning families, we need to be thinking about. The emotional part of what it means to be an owner and the relationships that they have with their employees and the relationships that they have with the community are so valuable and they're oftentimes overlooked by advisors. So I would just say, again, we need to look at the whole that whole system, those those three systems, how they come into play. And as you're thinking about, you know, a business owner selling again, we need to just layer on the empathy of what are your greatest fears? Because a lot of times, again, they are worried about how it's going to be received. Am I going to be seen as, you know, greedy for selling this, especially if my if my employees aren't treated well or some are are let go? So as an advisor, you have an opportunity to be be the empathetic one that has some inside information about what they're dealing with that they cannot share with someone else. And if you can help them navigate that kind of emotionality of a transaction or a transition, they'll forever be loyal to you.

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