Annamaria Vitelli is the head of PNC Private Bank Hawthorn, a multifamily office that works with ultra-high-net-worth individuals and families. Since joining PNC in 2007, she has served in various leadership roles, including as head of wealth strategy, advice and solutions.
Do you find that the legacy and values of a family business can get lost amid newer generations? What impact does this have on a business?
Yes. This can result from Generation One laying down edicts or requirements without taking the steps necessary to understand what Generations Two or Three are interested in or believe in. Often a family’s focus on day-to-day operations causes them to miss the importance of the qualitative side of managing a family and running a family business, which can lead to disagreements. Without strong systems to maintain communication and family values, disagreements between members can lead to discord. And thriving family businesses know that heading off discord is key to business longevity.
Your firm offers a Family Success Factors Assessment. What does this entail, and how have you seen it help families?
The confidential online questionnaire is aimed at helping families review key aspects of well-being and identify opportunities for growth and learning and generates both individual reports and an aggregated report showing the family’s overall score. It’s organized around seven areas, including responsible wealth ownership, family legacy and shared decision-making.
Clients have expressed that they have found the assessment to be very valuable, as it gives every member of the family a chance to be heard, with anonymity and without fear of reprisal for sharing their opinion. Most families find they don’t communicate as effectively as they thought they did, usually when a big disagreement or roadblock halts forward progress. In one recent example, an entrepreneur who had bought out his brother and had four of his children working in different departments used the assessment to provide a confidential, safe space for his kids to share openly about their vision and goals for the family business.
On the personal side, how do you help families — especially different generations within those families — become aligned in terms of the goals of the business and impact of their wealth?
In the case of a family business, what happens in the business and what happens personally are inextricably related. This means that first we need to understand the impact of the business on the family wealth and legacy. For example, changes made in the business — borrowing, restructuring, expansion, recapitalization — impact the overall family wealth. Then we can begin working with families to define and accomplish their goals. Our PNC Private Bank Hawthorn Business Owner Solutions team works closely with both our Corporate and Institutional Bank teams, who advise businesses, and with the Private Bank teams, who advise the owners and families. Coordinating advice across PNC gives each generation a complete picture of how their wealth is generated and the impact it has on them personally. They work hand in hand with the Institute for Family Success to identify opportunities to improve family alignment.
When setting up a new generation to take over a business, what are the vehicles you help them put in place to protect the future wealth of the business, in addition to the family legacy?
One approach that can be helpful in transitioning is having continuity of professional management. Having C-suite executives that are trusted and have institutional knowledge can help with employee retention and with the development and training of family members interested in taking on future leadership roles. Allowing the next generation to have nonfamily leadership, such as an advisory board, to advise them is a way to ensure that they have the support and advice structures in place to maintain the source of the family wealth. For families that choose this route, having an owner’s council and family assembly can be a useful way of furthering transparent communication and education on the role of an owner when not actively engaged in the business.
For families that have some family members seeking leadership roles and other family members who are not working in the business, there need to be structures in place to keep the family harmonious, such as using other family assets — like real estate or liquid investments — to level up the nonparticipating members and using the trust structures to reduce taxes.
How do you recommend families bring younger generations into the business? Do they assess talent?
We recommend that job descriptions are created for family members that have clear standards and qualifications, and standards for performance in the role. A best practice is to have family members report to someone who is not a family member and to use these standards to measure their performance and progress. Establishing a family employment policy or guide allows for standardization for all family members and mitigates the chance for perceived favoritism. This also tends to engender more trust on the part of nonfamily member employees.
A family employment policy may include bringing in the next generation very early at very low levels for them to learn the business from the ground up or requiring children to establish a record of accomplishment elsewhere first. Regardless of whether the child is going to be active in the business, there are steps families can take to ensure their children are good stewards of family wealth, like including them in family and business meetings — even if they don’t vote — from an early age.
What else does the Hawthorn Institute for Family Success do to help preserve the legacy of a family business?
The Institute for Family Success works in conjunction with the Business Owner Solutions team to understand the qualitative issues related to preserving the family legacy and business. They help clients to identify individual and core family values through engaging, fun processes that allow all family members to feel valued, respected and included. Business Owner Solutions then applies the family-related concerns when implementing structures to improve and preserve the family legacy.
Our initial engagement with a family is only the beginning of the process. We continue to work with families through periodic updates, and we coordinate family meetings and host retreats for similarly situated families to meet each other and learn from each other.