The Business of Family

Mr. Hughes, a resident of Aspen, Colorado, is the author of Family Wealth: Keeping It in the Family, and of Family – The Compact Among Generations, both published by Bloomberg Press, and is the co–author with Susan Massenzio and Keith Whitaker of The Cycle of the Gift: Family Wealth and Wisdom, The Voice of the Rising Generation, and Complete Faith Wealth, all published by John Wiley & Sons and is a co-author with Hartley Goldstone and Keith Whitaker of Family Trusts: A Guide to Trustees, Beneficiaries, Advisors and Protectors".

In addition, he has written numerous articles on family governance and wealth preservation and a series of Reflections which can be found on his website jamesehughes.com.

He was the founder of a law partnership in New York City specializing in the representation of private clients throughout the world and is now retired from the active practice of law. Mr. Hughes was a partner of the law firms of Coudert Brothers and Jones Day.

Standout Quotes:

• "The first asset a family owns is its spiritual capital; if it doesn't have it, it better develop it" - [Jay Hughes]
• "If we're learning together and we're sharing what we learn, guess what? we're likely to make better joint decisions" - [Jay Hughes]
• "A family that's nothing but quantitative capital is toast" - [Jay Hughes]
• "You don't have entitled children and you will know how much is enough if you're concentrating on growing your qualitative capitals" - [Jay Hughes]
• "The two great obstacles to adjustment for a human being are sex and money; money is the worst of all because no nice person will speak of it" - [Jay Hughes]
• "Every family has ghosts" - [Jay Hughes]
• "Almost always, the plan that they have for transition...is a liability" - [Jay Hughes]
• "Way too much time I think is spent on saying we need to be resilient, that's good but the real question is we need to be enduring" - [Jay Hughes]
• "There's no such thing as financial resources, there are only things that are the representation of someone else's dream; anybody who doesn't get that right just misses the problem of the recipient" - [Jay Hughes]
• "It astonishes me, Mike, that many families with huge resources have never studied the fact that human beings don't learn the same way" - [Jay Hughes]
• "You don't just start; you start by building up those cells are going to make up the team on the journey" - [Jay Hughes]
• "Storytelling is incredibly important to discover our history" - [Jay Hughes]

Key Takeaways:

• Jay's book "Family Wealth" was a huge inspiration over a decade ago for Mike's interest in the concept of Family Business.
• After a major midlife crisis, Jay realized that his work in the law had a major flaw being that he was the only person who could use the structures he was creating for clients. He understood that the responsibility of a professional is to make clients more capable and liberate them but he had made them less capable. He started focusing more on ideas to make families more independent and also shared these ideas. Jay started to shift away from legal structures which were focused more on the 'How?' questions, and move towards the 'Why?' questions which had more impact on families. He also spoke publicly on different platforms about it and the message was well-received, encouraging him to start his book.
• With the clients however this approach was challenging, but Jay understood that if he simply did what clients asked, it would not help them achieve their goals. He learned to wait for clients to gradually open up to the approach. It had also become needful for Jay to have a beginner's mind with this new approach, not assuming he had all the answers as usual but showing concern and the desire to help families.
• Wealth comes from the Anglo-Saxon term "Weol" which means "well-being"; Financial capital is a form of wealth but it is not wealth. In trying to figure out the assets of a family to understand them better, a Balance Sheet has proved to be a humane tool.
• Using this tool, there are 4 qualitative forms of capital; the first is Spiritual Capital. This refers to a common purpose where every member of the family by affinity seeks to enhance the other's journey of happiness. The next is Social Capital; can you make really good joint decisions together over a long period of time? To make good joint decisions, there has to be Intellectual Capital, meaning the family has to ...

Bradly J. Franc (“Brad”), is the creator and author of the Amazon best-selling book entitled The Succession Solution: The Strategic Guide to Business Transition. His firm The Succession Coach LLC, works with business owners to create as well as execute on their succession plans.

Brad is an attorney, entrepreneur, and business strategist who specializes in the transfer of family and closely-held businesses. He is also a former board member of Catalyst Connection.

Brad began his professional career by becoming a CPA and working for the international accounting firm now known as EY. From there, Brad became an entrepreneurial strategic business adviser and a business lawyer representing every aspect of the closely-held business.

Standout Quotes:

• "Writing is the highest form of thinking" - [Brad]
• "It's not that there's a particular process but you pick a process" - [Brad]
• "The longer you wait, the fewer the options you have, with respect to succession planning" - [Brad]
• "You can't do strategic planning unless you understand the company's culture" - [Brad]
• "It is incredible how many times people think they know what they have, and they don't" - [Brad]
• "Conflict is good, it gets things out" - [Brad]
• "All progress begins with honesty" - [Brad]
• "Most people overestimate what they can do in a year, they underestimate what they can do in ten" - [Brad]
• "If you want to improve something, measure it, if you want to improve something exponentially, measure it and have a report on it" - [Brad]
• "Succession planning is a form of strategic planning" - [Brad]
• "For things to stay the same, things must change" - [Brad]
• "I try to tell that next gen, 'your job is to increase the value and to maintain the values' " - [Brad]

Key Takeaways:

• Bradley is the author of the Amazon bestseller "The Succession Solution" and his firm, 'The Succession Coach' works with business owners to create and execute their succession plans. Brad is now an entrepreneurial strategic business adviser and a business lawyer representing closely-held businesses.
• Brad had started as a CPA with the goal to reduce taxes, and later he went on to go to law school. He realized he was helping but not solving the problem so he merged strategic planning with Estate and Succession planning which formed the Succession Solution.
• Initially, his goal was to simply put down the strategy so he could convince himself that it was feasible, however, he realized someone else could also benefit from reading it. This was how he went ahead to write his book, The Succession Solution.
• After starting a business that had made losses for two years, Brad employed strategic planning and the difference was clear; the business bounced back.
• There are 3 types of succession; Succession of Knowledge, Management, and Ownership. It is unlikely to be able to ensure the succession of management and ownership without the transfer of knowledge. However, more often than not. Succession involves the transfer of ownership with closely held business owners.
• The Succession Solution: Brad usually starts by discussing with the significant stakeholders to understand what is on the ground before getting fully involved. He also ensures the family is willing to cooperate and gets commitment upfront.
• The 6 stages of the succession plan: The first stage is the Purpose stage; identifying the basic values, the vision, and the "Why?". Next is the Discovery stage; understanding where they are before starting. The third step is the Challenge; to identify their strengths, opportunities, and most importantly, the obstacles. Most of the time what people want to get from the 6 steps is certainty because uncertainty creates anxiety.
• Brad emphasizes that conflict is good however, how that conflict is managed is critical. Communication and trust are the reason most companies fail.
• The fourth stage of the succession plan is the Mission stage. This is where the group sets milestones and creates strategies to overcome the obstacles previously identified. The Annual stage is next, and here the group decides steps that need to be taken within the next 12 months, to get closer to the milestones already set. The last stage is the Quarterly Review stage where the question is "what do we do in the next 90 days to get closer to the objective for the Annual stage?"
• The conversation of succession planning is a function of the board, hence, while members of the younger generation can have a personal conversation with their parents as the business leaders, it is fundamentally expected that the board is well suited to answer these questions. It is also helpful to talk to the profe...

Joe is the owner of Cardinal Senior Management, an operator of assisted living communities in the Untied States. Joe started the company with his business partner in 2015 and hopes to continue their growth in the coming decade with a focus on affordability and decentralized leadership. Joe lives in Grand Rapids, MI with his wife and 4 year old son.

Standout Quotes:

• "Unless someone's livelihood and their family’s livelihood depends on what you're doing, you're not an entrepreneur" - [Joe]
• "Unfortunately, the US gets a reputation for not caring for our elderly the way a lot of other countries care for their elderly" - [Joe]
• "If you want your family interacting with you in the US, I would recommend having daughters or making sure that you're close with your daughters-in-law" - [Joe]
• "No one really cares what you have to say, it's your actions and your consistency" - [Joe]

Key Takeaways:

• Joe Pohlen is the owner and Partner at Cardinal Senior Management, an operator of assisted living communities in the U.S. with a specialty in affordable assisted living.
• Joe started his career in Student Housing which was doing well but he wondered if that was his purpose in life. Knowing a few people who were working in assisted living and doing well, Joe started to figure out how to get into this field with his partner, Chuck. He started his journey and grew successfully.
• Joe manages assisted living facilities where inhabitants pay ahead covering housing, activities, and care; the big challenge, however, is that more seniors lack the financial resources to move into the facility. The solution to this would have to involve the federal government. For families who cannot afford the cost, they would first be moved in with a roommate, and Medicaid will be involved to pay a lower price to help retain the care of the elderly. There are plans to implement other strategies to help improve the care for the elderly especially for those who do not have the financial capacity required.
  
• The majority of decisions in a family are made by the oldest daughter and also most visits are usually from daughters, hence it pays to build good relationships with the daughters to encourage visits from the families.
• Families also need to have conversations about steps to be taken to address issues related to the welfare of the elderly in different scenarios. People move into assisted living for two reasons, one is that they decide it's the right thing for them, and the second is when they lack a choice in the matter because the decision has been made for them. Those who decide on their own have a more successful experience.
• Joe and his wife had previously decided not to have a kid but they changed their decision in the lockdown, deciding to adopt a kid who they were strongly emotionally drawn to, without anticipating it. He hopes his son will learn from him especially through his actions.
• From experience, Joe observed that most families hand down wealth to the next generation very poorly and it often fails, hence he has always planned to spend his wealth rather than go through the same ordeal in trying to pass it down. His focus is on giving more of an education to equip his kid with the right tools to live successfully.
• Joe's letter to his kid: "You are enough, your accomplishments are not the definition of who you are. Your mom and I love you. Continue to treat people how you want to be treated. If you go through this world doing the right thing even when it's hard, it will work out just fine for you"

Episode Timeline:

• [00:50] Introducing our guest for today, Joe Pohlen.
• [01:41] About Joe's background
• [05:27] How did you build your team to provide care rather than just storage?
• [11:56] How do you handle families that cannot afford the cost of assisted living care?
  
• [18:20] How do you encourage more frequent family visits?
• [21:06] How can a family discuss the topic of assisted living for their elderly?
• [26:44] About Joe's personal and family life.
• [38:50] Joe's letter to his kids.

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Special Guest: Joe Pohlen.

Dave Specht is the Director of the Global Family Business Institute at The Drucker School of Management. Dave is the author of, "The Family Business Whisperer." Prior to joining the Drucker School Dave helped lead a Family Dynamics team at one of the largest Private Banks in the United States where he trained over 2,500 advisors. Dave is married and he and his wife have 6 children. His personal mission is to, "Preserve Families and Perpetuate Businesses."

Standout Quotes:

• "The path to helping families is not in having the right answers for them, but it's about having the right questions for them" - [Dave]
• "Clients know if you're genuinely curious about their lives, or you're genuinely trying to get into a transaction with them" - [Dave]
• "What is your ambitious pursuit, what is it that wakes you up in the morning that you want to chase?" - [Dave]
• "Ultimately if we can stay grateful, entitlement can't sneak in... gratitude and entitlements are incompatible roommates" - [Dave]
• "One of the bigger challenges that families of wealth have is creating a rising generation with ownership mentality" - [Dave]
• "Most of the family wealth that we see lost is due to breakdown in relationships, not poor investment planning" - [Mike]
• "Fair does not mean equal" - [Mike]
• "You either define what it means to be wealthy or you will be defined by your wealth by others" - [Dave]
• "One of the biggest mistakes advisors make is discounting the spouse or not involving the spouse early; they're the ones that are going to nudge the process forward" - [Dave]
• "Your worth is not measured in dollars and cents" - [Dave]

Key Takeaways:

• Dave is the Director of the Global Family Business Institute at the Drucker School of Management. He is the author of "The Family Business Whisperer". His personal mission is to preserve families and perpetuate businesses.
• After selecting Family Business Management as an elective to finish his Masters, Dave realized that several nonfinancial issues were keeping families from making good decisions and this piqued his interest.
• Dave worked for a few years with a broker/dealer till he decided to focus more on working with the families directly. He later worked on his own in Family business consulting while creating a Family Business Program at the University of Nebraska.
• Asking Inspired Questions: What question are we going to ask that will get the person storytelling so we can learn what they care about? This idea was inspired by the effort he had put into the questions he asked his kids to understand them better. Dave describes the framework for Inspired Questions: Avoid yes/no questions; ask open-ended questions that lead people to tell a story. Secondly, don't ask questions you know the answer to. Lastly, ask questions that don't have a right or wrong answer. Having genuine curiosity is much more important than just seeing the interaction as a transaction.
• Although not from a wealthy family, Dave had learned some dynamics of wealth from his family, watching and understanding their actions in regards to finances.
• Dave encourages his kids to have an ownership mindset and not limit themselves, even while keeping the values of a good honest job. What is your ambitious pursuit? If we focus too much on giving the best to our children, we may only pass on valuables rather than values.
• Raising children amid wealth (The 3Gs): Gratitude, Goals, and Grit are tools Dave recommends. Gratitude prevents a sense of entitlement. Having goals helps kids translate lessons learned as they grow while having a worthy pursuit more valuable than money. Grit involves knowing how to say No to your kids, when yes is always an option. How do you bail your kids out when they have trouble?
• Driven by his motivation to have as large an impact as possible in the world, Dave wrote his book titled "The Family Business Whisperer", targeted at both families and their advisers.
• Families often don't train the next generation to become owners because we don't want them to fail while we're watching. However, part of this training can be done by co-investing with kids to meet some of their smaller needs. Additionally, building a working shared ownership mentality among kids can be difficult but is necessary, so it helps to start with small shared decisions.
• It is important to start to see wealth in the different forms it takes, from mone...

Chris Powers is the Founder and Executive Chairman of Fort Capital and the host of The FORT podcast. Chris is a serial entrepreneur with more than 16 years of real estate development and investment experience. Since founding Fort Capital, the company has invested over $1.4B in Class B industrial, commercial, multifamily, student housing, and residential and land development projects.

His drive to always remain curious, desire to connect with and learn from others led Chris to start his podcast, The FORT. In the FORT, Chris talks with leaders of businesses across real estate and a variety of industries and dives deep into ideas and topics that are not regularly discussed. Chris covers each guest's story and explores in detail the critical moments that led to success, failure, growth, and confidence. He has successfully published over 200 podcast episodes.

Standout Quotes:

• "You only are going to be on this earth one time, you really are not coming back again after the first time; let's make the most of it" - [Chris]
• "Everything that you were mad at your parents for when you were a kid, is everything you respect them for when you're an adult" - [Chris]
• "Money never mattered to my dad, being content and serving others did" - [Chris]
• "I think it's a very special thing in life to really want to be good at something" - [Chris]
• "If you're a parent and you actually can't give your kids the things they want, it makes it almost easy; what's tough is when you can give them what they want and you choose not to" - [Chris]
• "How can you expect someone that grew up with everything easy and given to them, to ever have that burning desire" - [Chris]
• "Kids don't learn by words, they learn by actions, so I can say everything I want to my kids but they're going to be watching what I'm doing" - [Chris]
• "You don't keep families together, particularly with the amplification of wealth, if you're not intentionally practicing the values" - [Mike]
• "We're living in a really cool generation where I think we're going to be able to tell our stories to our kids like nobody's been ever been able to do it before" - [Chris]
• "There's just very few people that matter in this world that you remember because of how much money they had, it's really about what they did... you will be defined by how much people remember you" - [Chris]
• "The majority of businesses that do really well hit singles and doubles over and over"
• "When's enough enough?... it depends on how big of an impact you want to have" - [Chris]
• The first great business decision you're going to make is who you marry" - [Warren Buffet, Chris]
• "There's things in life that are either giving us energy or taking away energy" - [Chris]

Key Takeaways:

• Chris Powers is the Founder and Executive Chairman of Fort Capital. He is also the host of the podcast, "The FORT", as well as a serial entrepreneur with over 16 years of experience in Real Estate Development and Investment Experience. Chris is a first-generation entrepreneur with stories that shaped him down to his relationship with his children.
• Chris's dad was a lawyer who valued education, however, after 13 years of being a lawyer, He decided to become a doctor. With two kids and a wife at home, He left law and started medical school at the age of 39 which took place over 8 years with a financial toll on the family. The experience during those years created the foundation for the impression Chris has about money, feeling fortunate to have been more deprived of things than his peers. Chris also learned the importance of doing things in life that give fulfillment.
• Because of the experience of not having money over those years, Chris became an entrepreneur at a young age to get the money he needed. However, Chris has a fear that his success allows him to skip the chances to deprive his kids of the things they should be deprived of.
• Following the passing of his dad, Chris witnessed a turnout at the funeral and stories that depicted the level of impact people felt while his dad was alive. Although it was a traumatic unexpected event, Chris felt equipped at the time to take the reins in the family because his father had trusted him very early on to do things. This taught Chris that there's a level of transparency that is healthy with children, for them to start learning early on how the family operates.
• "If you study people who are extremely successful in life endeavors, there is a common thread among them where they were in a position to really want something while growing up". This has made Chris understand that it is hard but necessary t...