IF JUDI CUNNINGHAM HAS her way, “shirtsleeves to shirt-sleeves in three generations” will soon be buried and forgotten as a reference to what’s often the long-term fate for family enterprises.

Until then, the adage remains relevant. Statistics tell us that only about 30% of family-led businesses actually survive past the second generation.

As founding executive director of the 11-year-old Business Families Centre at the University of British Columbia’s Sauder School of Business in Vancouver, Cunningham is well aware of the many traps and pitfalls awaiting these families. A family enterprise, she says, is “a very different and complex animal.”

A host of unique dynamics are at play that don’t apply elsewhere in business, Cunningham says. Consequently, she warns, financial advisors dealing with a family enterprise should know how to steer through these dynamics.

It also is extremely important at the national level because family businesses are central to Canada’s economy, Cunningham says. Families own or control an estimated 80% of all businesses in Canada and also are the largest form of global enterprises.

Unfortunately, many advisors – regardless of whether they’re in the financial services, investment, legal, accounting or other business sectors – are unfamiliar with the unique needs of family enterprises.

FRUSTRATIONS

Cunningham speaks from experience. She’s a second-generation member of a family firm and has witnessed first-hand the frustrations that families often experience when dealing with advisors.

That’s why, six years ago, the Business Families Centre expanded its mandate of helping family enterprises by founding the Family Enterprise Advisor Program (FEAP) which is specifically designed to help the professionals who help family enterprises.

“We realized the Business Families Centre wasn’t really helping families,” Cunningham says, “if we were not helping the people families turn to for help – the advisors. Advisors are certainly trying to do the very best for their clients, but often they just don’t know what their business family client needs.”

Cunningham says that in family enterprises, for example, there’s a much more direct interplay between owners and operators than in other types of businesses. And, as well as business relationships, there are highly complex personal family relationships. These relationships also can include family members who are not involved in day-to-day business operations but who are shareholders. Other family members may have no direct connection with the enterprise other than being beneficiaries of the wealth created by the company, but they also may play a role in how the business is run.

In non-family companies, Cunningham notes, the owners and other shareholders usually are much more distanced from the company operators.

“Within business families,” Cunningham says, “often there’s a lot of unnecessary conflict and strife. Many times, the families need advisors’ help in thinking through these unique obstacles to arrive at business decisions. But [the families] don’t get that help.”

Advisors, she adds, should realize that this aspect of family enterprises is their problem as well.

And that’s where the FEAP – a group of courses and a practicum taken in two- or three-day sets over about 10 months in Vancouver or Toronto (www. familyenterpriseadvisor.com) – enters the picture.

“This program helps advisors move from merely doing transactions to becoming more of a strategic resource for clients,” Cunningham says. “It also teaches [advisors] that no advisor is an island; advisors need to draw on the expertise of other advisors.”

NEW DESIGNATION

That’s why, in typical program classes, you’ll find advisors from various disciplines – finance, investing, legal, accounting and others – sitting side by side. Together, program participants are taught about special family enterprises’ needs as they relate to subjects such as governance, working with other advisors, getting better information from clients and succession issues.

Says Cunningham: “The program really is designed for the professional advisor who wants to do more for a family enterprise client.”

The FEAP also has major career benefits for advisors. First, it’s the primary prerequisite for the new family enterprise advisor (FEA) designation offered by the one-year-old Institute of Family Enterprise Advisors (www.ifea.ca) in Vancouver. Graduation from FEAP is followed by completion of written and oral exams given by the institute. Cunningham notes that having the new FEA designation tells a potential client with a family-run enterprise that the advisor understands the client’s special planning needs.

Program grads also acquire an invaluable network of advisor resources in other fields, Cunningham explains: “I tell students that 50% of what they learn will come from the front of the classroom and the other 50% will come from fellow program graduates in the classroom.”

David Sung, president of Vancouver-based Nicola Wealth Management and a FEA candidate, is one such graduate.

“Business families are one of the most sought-after groups because they’re usually high net worth clients,” Sung says. “And there’s no lack of advisors approaching them, so this program sets you above the pack.

“It also gives you additional tools,” he continues, “including how to work on a multi-disciplinary advisor team and a deeper understanding of family enterprise client needs.”

Full cost for the FEAP is slightly less than $14,000, but, as Cunningham says: “Most participants tell me it’s worth its weight in gold and that they wished they’d had it 20 years ago.”

© 2012 Investment Executive. All rights reserved.