The Business of Family - Spencer Burke - The St Louis Trust Company Multi-Family Office [The Business of Family]

Spencer Burke - The St Louis Trust Company Multi-Family Office [The Business of Family]

10/12/20 • 55 min

Spencer is a Principal with The St. Louis Trust Company, a multi-family office for 50 families in the United States managing in excess of US $10 billion, where he heads the Family Business Advisory Practice. Spencer is also an Adjunct Lecturer in Family Business at the Olin Business School at Washington University in St. Louis.

Standout Quotes:

“Multi-family businesses are acts of inadvertence in the initial years or the initial generation, they're usually a force of necessity, and then it becomes more opportunistic as the family gets bigger, and by the time you get to the 3rd generation it's more process-driven and ultimately becomes strategic” – Spencer Burke
“At the end of the day, it's not about having a board and all that, it's about the quality of the people, the vision, the culture and purpose of the organization; that's what creates great companies of all kinds and family business is just a large subset of great companies in the world” – Spencer Burke
"In the United States, you can own 100% of the votes and not own any of the economics of a company" – Spencer Burke
"I don't think there's anything better to own than your own company and the ability to compound earnings" – Spencer Burke
“When it is time to sell the business that's great, that's not a failure” – Spencer Burke
“The key to happiness is, don't let other people be the measure of your success; If you're not happy doing what you're doing, go do something else” – Spencer Burke

Key Takeaways:

Some families walk away from a wealth of knowledge because they don't know what they're getting; although they need the advice, they just have the wrong person giving it to them
Multi-generational family businesses are acts of inadvertence in the initial years or the initial generation, but get more opportunistic as the family gets bigger, and by the third generation, ultimately becomes strategic and process-driven.
“Hygiene" refers to some cost-free measures that can be set up in the beginning to increase your chances of getting beyond the 2nd and 3rd generation, however, if not taken care of, you have no chance of success
The key characteristic shared by enduring companies whether family business or not is "Total Control by One Person”
In most families where there are issues, how the socio-emotional wealth is getting shared is just as prominent as how the money is being shared.
To succeed over long periods (100 years), successful families have extracted a great deal of wealth out of the business so they have the resources to protect the business when necessary.
The 3 fundamental factors that may impede the success of a family business; the Family tree is the first because it tends to grow faster than most business
One of the number 1 keys to family business success is "Set the policies for the future when there are no names attached to them".
The matriarch of the family is usually the keeper of family harmony, the patriarch of the family is usually the keeper of running the great business, but the patriarch more often than not, does not have the power in that family.
The three interest groups represented in a family business; the people in the business, the people that own the business, and the people that are just in the family neither as owners nor in the business.
The key to happiness is ‘don't let other people be the measure of your success; If you're not happy doing what you're doing, go do something else’

Episode Timeline:

[01:28] A concise overview of Spencer's professional background
[07:55] Spencer's thesis on starting a multi-generational family business
[10:50] Instead of a Family Business Course, Spencer calls his course Ownership Insights
[11:36] Common characteristics shared by enduring companies whether family business or not
[14:19] The concept of Spoils of Ownership
[16:35] The 'tyranny of the internal rate of return' versus 'creation of real wealth'
[20:41] The 3-circle diagram in family business education depicts Family, Business, and Ownership, with how they interact.
[22:32] The 3 fundamental undertows that affect a family business
[28:57] The continuum of behaviors; a Business Family and a Family business.
[35:20] The tradeoff between running a great business and maintaining family harmony
[38:00] How is family harmony maintained as businesses progress through multiple generations?
[53:40] A letter from Spenc...

Standout Quotes:

“Multi-family businesses are acts of inadvertence in the initial years or the initial generation, they're usually a force of necessity, and then it becomes more opportunistic as the family gets bigger, and by the time you get to the 3rd generation it's more process-driven and ultimately becomes strategic” – Spencer Burke
“At the end of the day, it's not about having a board and all that, it's about the quality of the people, the vision, the culture and purpose of the organization; that's what creates great companies of all kinds and family business is just a large subset of great companies in the world” – Spencer Burke
"In the United States, you can own 100% of the votes and not own any of the economics of a company" – Spencer Burke
"I don't think there's anything better to own than your own company and the ability to compound earnings" – Spencer Burke
“When it is time to sell the business that's great, that's not a failure” – Spencer Burke
“The key to happiness is, don't let other people be the measure of your success; If you're not happy doing what you're doing, go do something else” – Spencer Burke

Key Takeaways:

Some families walk away from a wealth of knowledge because they don't know what they're getting; although they need the advice, they just have the wrong person giving it to them
Multi-generational family businesses are acts of inadvertence in the initial years or the initial generation, but get more opportunistic as the family gets bigger, and by the third generation, ultimately becomes strategic and process-driven.
“Hygiene" refers to some cost-free measures that can be set up in the beginning to increase your chances of getting beyond the 2nd and 3rd generation, however, if not taken care of, you have no chance of success
The key characteristic shared by enduring companies whether family business or not is "Total Control by One Person”
In most families where there are issues, how the socio-emotional wealth is getting shared is just as prominent as how the money is being shared.
To succeed over long periods (100 years), successful families have extracted a great deal of wealth out of the business so they have the resources to protect the business when necessary.
The 3 fundamental factors that may impede the success of a family business; the Family tree is the first because it tends to grow faster than most business
One of the number 1 keys to family business success is "Set the policies for the future when there are no names attached to them".
The matriarch of the family is usually the keeper of family harmony, the patriarch of the family is usually the keeper of running the great business, but the patriarch more often than not, does not have the power in that family.
The three interest groups represented in a family business; the people in the business, the people that own the business, and the people that are just in the family neither as owners nor in the business.
The key to happiness is ‘don't let other people be the measure of your success; If you're not happy doing what you're doing, go do something else’

Episode Timeline:

[01:28] A concise overview of Spencer's professional background
[07:55] Spencer's thesis on starting a multi-generational family business
[10:50] Instead of a Family Business Course, Spencer calls his course Ownership Insights
[11:36] Common characteristics shared by enduring companies whether family business or not
[14:19] The concept of Spoils of Ownership
[16:35] The 'tyranny of the internal rate of return' versus 'creation of real wealth'
[20:41] The 3-circle diagram in family business education depicts Family, Business, and Ownership, with how they interact.
[22:32] The 3 fundamental undertows that affect a family business
[28:57] The continuum of behaviors; a Business Family and a Family business.
[35:20] The tradeoff between running a great business and maintaining family harmony
[38:00] How is family harmony maintained as businesses progress through multiple generations?
[53:40] A letter from Spenc...

Previous Episode

Emily Griffiths-Hamilton - Building Your Family Bank to Owning an NBA & NHL Team [The Business of Family]

Emily Griffiths-Hamilton brings three generations of experience to the subject of wealth and family-business transition planning.

Her maternal grandfather, veterinarian Dr. William Ballard, was one of North America’s greatest dynamic wealth creators. Her father, Frank A. Griffiths, FCA, built a highly successful sports and media empire. Emily herself, along with her brother Arthur and their partners, has been the co-owner of a National Hockey League (NHL) team, the Vancouver Canucks; a National Basketball Association (NBA) franchise, the Vancouver Grizzlies; and a state-of-the-art-arena.

Emily’s professional training, expertise and unique first-hand experience have given her a deep understanding of the benefits of clear, considered wealth and family-business transition planning.

Today, she is passionate about providing guidance to individuals and families for the effective multigenerational management of family wealth and family businesses.

Emily is the author of two excellent books, Build Your Family Bank and Your Business, Your Family, Their Future, which look closely at the core causes of wealth erosion and failed transition plans and offers a set of strategies for building successful wealth transition plans that will benefit many generations.

Standout Quotes:

"A legacy lifestyle to me is really anything where anyone is enjoying an affluent life based on someone else's earnings"
"Earning a voice at the table is critically important as the families get larger because not everybody is necessarily around the table making decisions for the family bank but the family council may be elected members to represent different parts of the families"
"Life is the reflection of the Choices that you make between your Birth and your Death (life is the C between the B and the D)"
"The choices that you make are going to be a reflection of the decisions that you make, and if you really want to make the best decisions, think about swapping judgment for curiosity"
“Curiosity can open your eyes to a world of unlimited imagination and infinite possibilities”

Key Takeaways:

The process of creating the family wealth was infused into the family DNA added in each generation.
The issue in a legacy lifestyle is enjoying a lifestyle that someone else is earning the funds to afford you, the cautionary note is to watch for the creep of entitlement issues.
The traditional approach to wealth transition planning including tax deferment and trust funds fail 70% of the time.
As long as your human and intellectual components are still strong, the Family bank will keep standing.
Reasons why 70% of families at each generation fail at wealth transition include a breakdown of communication and trust (60%), the unpreparedness of heirs (25%), lack of shared vision (12%), and failure of professionals (3%).
Earning a voice at the table is critically important as the families get larger.
Family bank is not a legal term, it's a philosophical term; it's whatever the family defines it to be.
5 reasons to put a Trust in place in Canada: Control, Creditor Protection, Privacy, Probate and Tax.
Research shows that within 7 years lottery winnings are usually gone which is the same with inheritances.
If you want to make the best decisions, swap judgment for curiosity

Episode Timeline:

[00:49] An overview of some of Emily's work.
[02:20] How the initial family wealth was created and sustained through the different generations as part of the family DNA.
[05:20] Emily explains the clear distinction between Ownership and Management.
[05:31] Her contribution to the Family DNA of wealth creation is the Role of Stewardship.
[08:26] The event leading up to the ownership of the Hockey team reflected a sense of commitment to the community.
[10:30] Emily narrates the experiences that inspired her career choice of a Family Enterprise Adviser.
[15:35] The legacy lifestyle defined, with examples from Emily's childhood.
[19:26] The value of work and its role in Family wealth creation.
[21:11] The concept of a Family Bank is most appropriate for anyone doing succession or wealth transition planning.
[22:05] The Foundation and Components of the Family bank approach.
[27:04] Reasons why 70% of families at each ge...

Next Episode

Jim Grubman - Immigrants and Natives - Adapting to Wealth [The Business of Family]

Dr. Jim Grubman has provided services to individuals, couples, and families of wealth for over 30 years. His work with clients at many levels of affluence - from the “millionaire next door” to The Forbes 400 - has earned him a reputation as a valued family advisor.

Jim is the author of Strangers in Paradise: How Families Adapt to Wealth Across Generations and co-author with Dennis Jaffe, PhD of Cross Cultures: How Global Families Negotiate Change Across Generations, offering ground-breaking explanations of how individuals and families can adjust to wealth effectively.

Standout Quotes:

"At the affluent and perhaps high net worth level, it's not that families leave wealth, it's that wealth gets distributed" – Dr. Jim Grubman
"People come to wealth without preparation for how they're going to sustain it in their family and that's really why it is so difficult for families" – Dr. Jim Grubman
"Most people just focus on the money and they forget adaptation" – Dr. Jim Grubman
“Everybody wants to get to the land of wealth but they don't realize what is going to be like once they get there and what their life is going to be like, the new problems that they're going to have and the adjustments in identity” – Dr. Jim Grubman
“Many inheritors are really disenfranchised citizens of the land of wealth, people think they have money but they really don't, it's in trust, tied up in partnerships... they don't control most of the wealth that is associated with them” – Dr. Jim Grubman
"Don't chase happiness; Happiness is a result, it's not a goal" – Dr. Jim Grubman

Key Takeaways:

Cross-cultural adaptation is much harder than people anticipate when they make the journey to wealth
In trying to adapt to a new environment, 2 dimensions make the greatest difference: the degree to which people hold on to or let go of connection to where they came from, and the degree to which they take on or resist getting involved with the new culture
Many of the things that are necessary for the business of family are completely unknown to the people coming to wealth.
Many inheritors are really disenfranchised citizens of the land of wealth, they don't control most of the wealth that is associated with them.
The 3 main cultural prototypes: HFD Dignity culture/individualist culture (the West) Face culture/harmony culture (East/Asia) Honor culture (across several countries)
The natives of global wealth get transformed into the 4th culture; a hybrid blending where they have roots in Honor or Harmony culture with strong influences from individualists and understand the struggle that their families have gone through cross-culturally
Is the 4th culture the destination for all of these different cultures?
One of the most difficult transitions for families is to move from a strong focus on the individual to understanding how much you have to build skills, processes, and structures for the interdependence of significant wealth. Honor and Harmony culture are much more prepared to understand interdependence.
The 3 main questions on adaptation; What from our background still serves us that we can keep? What from our background no longer serves us that we need to let go of? What from our new circumstances do we need to take on for the journey ahead?
Chase purpose; happiness comes from a fulfilled life

Episode Timeline:

[00:48] Mike introduces Dr. Jim Grubman and describes some of his work
[01:54] Dr. Jim narrates the history behind his involvement in Family wealth psychology
[04:16] The concepts of 'Coming to wealth' and 'Coming from wealth'
[10:19] The contrast between statistics that 80% of the wealth is created in the current generation and the amount of family wealth that is lost from generation to generation; where is all the wealth going?
[16:09] How do immigrants to wealth acquire the mental template to transition into the new culture?
[19:03] The known strategies that people go through in trying to adapt to a new environment.
[20:56] What individuals go through in making the journey to wealth
[26:08] Do the models and strategies for wealth preservation differ for those native to wealth compared to those coming to wealth?
[29:10] The main types of cultures as categorized in the book 'Cross Cultures'
[44:39] Jim's recommendation for G1s or wealth creators starting a healthy transition to G2
[47:00] Are there new trends emerging?<...