Surly, often profane Logan Roy, protagonist of the popular HBO series Succession, didn't mince words. The show chronicled the wealthy, New York-based Roy family as they fought, connived, and strategized to determine which of Logan's three children would eventually take over the family business—first before and then after his death. Yet despite Logan's blunt candor, he didn't do anything to communicate with or prepare his children or his company for his inevitable passing.
The Roy family's situation isn't that uncommon. Indeed, only about a third of family-owned businesses actually have a succession plan in place, according to a 2021 survey by consultant PwC. That leaves the other two-thirds at risk for the sort of drama that could fill an hour-long television show every week.
While television often exaggerates for dramatic effect, the overarching themes and storylines in Succession very much echo real life, says Susan Hirshman, director of wealth management at Schwab Wealth Advisory, Inc. She offers five takeaways from Succession for anyone looking to pass a business along to future generations:
Formal governance can preempt a free-for-all.
With a formal family governance system in place, families can make decisions more easily and reach faster agreement on important questions. To develop a framework for governance, you should assess everyone's appetite for risk and debt, review compensation structures, define how and when family members should work in the business, outline how to deal with conflict, and create a viable set of operating rules and procedures.
In the absence of governance policies, you risk a Succession scenario. Susan observes, "On that show, the siblings made decisions with a 'what's best for me' mindset, not what would have been best for the business and the family." Such an attitude diminishes trust—not only among family members but also the senior employees and shareholders.
A succession plan should be thoroughly researched and documented so that everyone involved has access to the same information and knows what to expect (including outside shareholders and board members, if applicable). It should outline a variety of scenarios and the intended plans for each, with the proper legal and other paperwork.
In the television show, Logan Roy passed suddenly with no concrete succession plan in place. Vaguely written notes discovered after his death didn't offer much clarity about his final wishes, and the family tension and drama only escalated.
In real life, a family in this situation might face more than just hurt feelings—they could also face significant estate and income taxes if the deceased failed to transfer their wealth in a strategic and timely manner. There are a variety of ways for senior generations to gradually transfer wealth while maintaining some degree of control over the family business. Often, earlier is better.
How your Schwab wealth advisor can help
Your Schwab wealth advisor can connect you with a trust and estate specialist, who can help with business succession and estate planning.
Set your children up for success.
Business founders must take an objective look at children and family members and consider tough questions. Is working in this business the right thing for everyone? Do the children have the training and temperament to follow in their parents' footsteps?
For the Roy children, "they definitely thought they were entitled to run the family business—but Logan did not lay the groundwork for them to succeed," Susan says. He never taught them the principles of good leadership or decision-making, and never involved them enough in the day-to-day running of the company for them to be good stewards of it. "That yearslong, on-the-job training is crucial to a smooth transition of leadership in any business, let alone a family company."
The constantly bickering and scheming Roys couldn't communicate productively—which is a substantial part of succession planning, Susan says. Families must be able to talk honestly about the business itself and their feelings about it.
"Be transparent in the decision-making process and allow for a healthy, open dialogue," Susan says. Often, she sees senior generations struggling to decide which of their children to leave the business to—and not asking the kids what they want—only to find out belatedly that the children would prefer to sell the business than run it themselves.
Consider creating a mission statement.
As part of succession planning, Susan recommends establishing a family wealth mission statement that presents a unified view on the wealth's origins, the advantages and challenges of sustaining it, and how it should be managed and directed for the benefit of both today's and future generations.
It is, in essence, a roadmap that gives future generations a unique perspective into the family's approach to wealth. "We believe that creating a family wealth mission statement can increase the likelihood that both the wealth and the family legacy will be sustained," she says.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
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Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.0723-39Z6