Family-owned brokerages that are creating a plan for perpetuation may wish to consider a formalized approach, such as a “family board” structure, to have the tough conversations about who will be doing what when senior family members withdraw from the brokerage.
Conducting regular family board meetings – including meeting agendas, reports, etc. – has certainly worked for the family of Michael Stack. His family-owned brokerage, Archway Insurance Inc., was recently named the 2013 Nova Scotia Family Enterprise of the Year by the Canadian Association of Family Enterprise (CAFE).
“In our case, we have half a dozen family members directly involved in the brokerage, so we’ve had to have those tough conversations,” said Stack, who is vice president of Archway. “Who will be the next president? Who will have the final say?
“What we’ve done in our case is that we’ve gone to a family board-type model. We don’t have an official board, per se, but what we do is we get together and we collectively make decisions about where we feel people fit into the puzzle.”
Stack said the family board structure was recommended by a business counsellor while the brokerage was undergoing planning for perpetuation. (continued)#pb#
The method provides a forum for the family to have difficult discussions about roles and responsibilities at the brokerage. It does this in a collegial forum in which a consensus can be achieved. The meeting and discussions are focused around an agenda, so there is less chance of a family member being left in the dark about – or “selectively” remembering – conversations affecting the future of the business.
The board structure also helps to separate the difficult business discussions from the personal family relationships.
“Regular family board meetings make it work,” said Stack, vice president of Archway. “Tough conversations that you need to have done are done in that formal arena, with everyone’s input, and it’s not something you need to talk about at Thanksgiving dinner or Christmas.”
Stack said the board structure is particularly effective with a relatively small number of family business owners. Spouses and relatives of the brokerage owners are welcomed into the Stack family meetings, since the future of the business has a direct financial impact on their livelihoods.
Garry Stack, Michael’s father, started the brokerage in November 1985, when Garry left his banking career and took a leap of faith and bought into an insurance company in Nova Scotia. He expanded operations in 1988 when he purchased a brokerage in Shelburne and partnered with another local broker, Warner Comeau. Leaving his partner in charge of the Yarmouth and Shelburne operations, Garry moved to Amherst in 1992 with his family to continue to grow the business in this area.
As the company has grown over the past decades, so too has the involvement of family members. Garry’s wife, Jane, now works in accounting. Garry and Jane’s three children are all involved as well.
Michael is the firm’s vice president and his wife, Chastity, is the account manager.
Garry’s daughter, Gina, is a regional manager and head of marketing for the company.
Robert, Garry’s youngest son, is a commercial accounts manager in Halifax.
As the family membership in any brokerage increases, it becomes more difficult to keep the ownership family-owned. This is due to many factors, including just keeping up interest in owning the brokerage, and potentially the broadened base of family members participating in the business.
“I have two children, my sister has two children,” Michael Stack said, by way of example. “They will get married, the web will broaden out. Garry Stack, my father, was a 100% owner. He’s splitting it out into three – my sister, my brother and I. Of course that will splinter again, right?
“As you go along, it does get tougher because a number of potential shareholders and family members that exists could be a lot larger. That would be a tougher situation to deal with.”
And hence the importance of thinking ahead about how to perpetuate the brokerage, said Stack, who recommends a five-year time horizon. Brokers lacking a plan are often the ones who will sell the business outside the independent broker channel, taking the best offer that comes along. And while Stack does not judge how brokers choose to get out of the business, by planning ahead, he said, they might be able to come up with creative financial plans to keep the brokerage inside the channel.
