“no one wants to leave the irs more than they have to.”
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by rory henry cfp®, bfa™
for 卡塔尔世界杯常规比赛时间
an estimated 10 to 12 million boomer-owned businesses are expected to transition over the next decade. that’s a massive wave of planning, liquidity events, and legacy questions. yet experts say most owners don’t engage advisors until they’re well into the deal process.
“by the time they come to us, they’ve often already signed a letter of intent,” laments randy a. fox, cfp, aep, founder of two hawks family office services, on a recent panel discussion for contributors to my new book, holistic guide to wealth management. “that shuts the door on a lot of the strategies that could have helped them keep more of what they built,” fox added.
fellow contributor and panel discussion guest christine nicholson, author, business consultant, and exit planning specialist, has worked with hundreds of owners. she sees the same distorted view of reality cloud their thinking — owners mistakenly assume their kids will take over and believe their business is worth far more than it really is.“only 30 percent of family businesses make it to the next generation,” says nicholson. “and the ones that don’t? it’s usually because no one had the conversation early enough.”
of course, that’s more easily said than done. nicholson explains the concept of “role identity fusion,” in which a person’s entire identity is wrapped up in what they do. for a dedicated business owner, she said that makes succession hard and puts them at risk of burnout, broken transitions, failed deals, and strained relationships with family and spouses.
even more concerning, fox said that lots of money gets lost when business owners start their succession planning too late. “when you die, your money can go to one of three places—your family, your charity, or the government,” says fox. “you get to pick two, and no one wants to leave the irs more than they have to,” he added.
from where i sit, this is where cpas can provide real value: helping clients structure charitable remainder trusts or helping owners with things like parsing out personal goodwill and enterprise goodwill, or other various estate planning strategies. when clients don’t know those options exist, they miss the chance to maximize the take-home amount for their business.
fox shared an example of a client selling a c corporation in which all the assets were set to be taxed twice—once at the corporate level and again upon distribution. but after reviewing the situation, fox realized the goodwill had never been transferred to the corporation. “that’s his name on the trucks. that’s him on the radio. that’s his cartoon on the billboard. that’s not the company,” fox added. by treating that personal goodwill as an individual asset sold outside the corporation, fox said the owner avoided double taxation and was taxed at a lower capital gains rate. “that move alone saved him about a million dollars,” explained fox.
fox also emphasized the importance of preparing heirs for the responsibility that comes with inheriting substantial wealth. “if you don’t have the conversation, the money is just going to show up—and that never ends well,” he cautioned. whether it’s explaining the why behind a gift, involving children in charitable conversations, or aligning expectations around stewardship, these discussions are often overlooked.
as warren buffett famously said, “leave your children enough so they can do anything, but not so much that they can do nothing.” helping clients plan for wealth transfer isn’t just about minimizing estate tax—it’s about making sure the next generation is ready for what’s coming.
both fox and nicholson remind cpas that they don’t need to have all the answers in order to help transitioning business owners. what they need, they said, is a process that could include teaming up with a philanthropic advisor, an estate attorney, or a wealth manager. it’s what we call a “virtual family office” (vfo) approach, outlined extensively in my new book. for instance, in a vfo, the cpa remains the point of contact in the client relationship but brings in subject matter experts to go deeper when the client’s needs require it.
“owners don’t really want to retire. they want freedom,” observed nicholson.” but they also want meaning. if we can help them clarify what that looks like, the rest of the plan becomes a lot easier to put together,” she added.
as a cpa, that’s where you come in.
5 advis-ror® takeaways:
- most business owners start succession planning too late, missing valuable tax and wealth preservation strategies.
- family business transitions often fail due to delayed conversations and unrealistic expectations about valuation.
- “role identity fusion” makes it difficult for owners to separate themselves from their businesses.
- proper planning includes structuring assets strategically and preparing heirs for responsible wealth management.
- cpas can add value by coordinating experts in a “virtual family office” approach for transitioning business owners.
more about christine nicholson
christine nicholson is a multi-award-winning u.k. business mentor and a 2020 honoree of the top 50 women in accounting. she has authored four business books and is a regular keynote speaker about succession and exit planning. as a businesswoman who has built multimillion-dollar businesses over the past 30 years, she has worked with numerous business owners across various sectors, including helping one owner transition from bankruptcy to an eight-figure exit within 18 months. she has spent a few years accidentally running a zoo! her latest book, sell it, helps business owners get their business and themselves ready for the hardest part of the entrepreneur journey, leaving their business in the hands of others
more about randy johnston
randy a. fox, cfp, aep, is the founder of two hawks family office services. he is a nationally known wealth strategist, philanthropic estate planner, educator, and speaker. he is currently the editor-in-chief of the planned giving design center, a national newsletter and website for philanthropic advisors. he is a past winner of the fithian leadership award by the international association of advisors in philanthropy. fox was a founding principal of inknowvision, llc, a national consulting and marketing firm that developed estate and wealth transfer designs for clients of exceptional wealth. during his tenure, more than three hundred families were served, and more than $500 million was directed to philanthropic purposes. he served as director and faculty member of the inknowvision institute, which provided professional advisors with the advanced technical and interpersonal tools required to attract and work successfully with high-net-worth clients.
transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)
[00:00:44] rory henry: all right. hello, everyone. thank you for joining us. i have another couple of great contributors here on our ongoing series for the holistic guide to wealth management panel discussion. today i’m joined by christine nicholson. she is a multi-award winning business mentor, succession strategist. she’s also authored four books and is a regular keynote speaker about succession and exit planning. christine, thank you so much for joining us today.
[00:01:14] christine nicholson: no, thanks very much. it’s a real pleasure to be here and it was a real pleasure to contribute to the book.
[00:01:21] rory henry: yes. thank you so much. and i’m glad to have our next guest with us today. he is the founder of two hawks family office services. he’s a nationally known wealth strategist as well as philanthropic estate planner. he’s also an educating speaker. he’s currently the editor in chief of plan giving design center. so without further ado, let me introduce my friend, randy fox. randy, welcome to the panel.
[00:01:45] randy fox: oh, thanks, rory. nice to be here again. always good to see you. yeah. so let’s get started.
[00:01:51] rory henry: nice to meet you, christine. yeah. we had a little talk prior to recording here, talking about dikembe mutombo and all the works he’s done. so hopefully we can give our audience some entertaining content here. let’s start out, christine, and talk about the importance of estate planning. because i know in the book you stated or highlighted that only three in 10 family owned businesses make it to the next generation. can you talk about why that is and ways in which we can improve that for folks?
[00:02:18] christine nicholson: yeah, sure. i think when you’re a family business, there’s a kind of tendency to think that the next generation will just go with the flow. they will go with whatever you’re thinking as the primary generation. and that might have been the case for the last eight generations. it certainly was in my family. but it is not the way forward now. the current generation, they’ve got way more choice. so it’s really time to start thinking about now. and the earlier you do this, the better it is. first of all, what do you want when you leave the business, whichever way you’re planning to leave it? and then what’s the best way for you to then let go, confident that the next, and it doesn’t have to be next generation of your family, but it is going to be the next generation of something that’s going to take over your business. and actually make a plan for that. because if you wait and assume that someone is just going to step up, or you think that just when you shuffle off the perch, that somebody else will pick it up, then you, well, there’s that whole saying of if you assume you make an s out of you and me. and then never, ever has that been truer than in family businesses right now. and it isn’t ever going to get any easier.
[00:03:48] rory henry: yeah. i know there’s ego involved here. and rainy, i know you talk about in your chapter how many folks or business owners out there, when they’re doing succession planning, they feel like they’re heading to the elephant graveyard. so can you kind of talk about the mindset here when working with, or for practitioners when they’re working with business owners, how to shift that to welcome proper estate planning here?
[00:04:12] randy fox: exit planning, i’m sorry. it’s such a complex and complicated topic, rory, since every single individual business owner is a different human being. and they have different values and beliefs, and they have different goals and objectives. and what we’re seeing, at least in the first generation of the family business, they created it. it was their idea. they built it from nothing, probably working nights, weekends, holidays, missing out on family events, and built it into whatever it is today. if it’s something they’re willing to exit at some point, that means it has some value. but it’s more than a capital value. it also has emotional value. so getting all those pieces to line up and getting someone to let go is always a challenge. so it doesn’t come easy. it requires lots of conversations and lots of thinking before you even begin to talk about what’s the most efficient or most tax-efficient way to leave with the most money in the pile.
[00:05:25] rory henry: i know you talk about role identity fusion there, christine. that goes into a lot of business owners equating their self-worth with their business worth. in the book, i reference some behavioral finance work done by the klontzes and how our relationship to money is formed in our childhood. and one of the money scripts is called money status, where we can equate our net worth with our self-worth. but a lot of business owners equate their self-worth with their business worth. so you can elaborate on that and how we can separate the two and have them drive the increased enterprise value of the firm?
[00:06:05] christine nicholson: absolutely. i’m just going to go a bit off-piste for a second, though, because it’s a fundamental part of the human psyche. if we think about the three points of a triangle, we’ve got wealth being the physical, financial, the cash in the bank, or whatever you’re going to have cash in the bank from a liquidity event. so you’ve got the wealth being. and then you’ve got the health being. and one of the first things that business owners sacrifice when they’re chasing the wealth is they sacrifice the health being. and sometimes they do that very unconsciously, or they think that they’re bulletproof and they can ride through absolutely anything, because when they were younger, it could happen. and then you have the well-being. and for me, well-being is the seven inches between your ears. and that can be wrapped up in ego. within a business, it’s usually stress, sweat, and sacrifice is all, you know, they’re physical things, but they’re wrapped up in you are willing to make those sacrifices because of these seven inches. and when you put that triangle in the context of this fetishizing of entrepreneurship, where you only hear the success stories. so you’re now driving these three elements towards anything less than eight figures and i’m failing. anything less than something i can sell or hand over and i’m failing anything less than these icons that are basically worshipped, you know, idols that are worshipped on tv. and then you’ve got the, you know, you referred to the role identity fusion, which isn’t positively reinforced by both the fetishizing and by things like the, i think over there, you call it shark tank. we call it dragon’s den where someone will come on, present their business idea. and the first thing the dragons or the sharks will say is, well, it’s a great idea, but you’re not investable or it’s a great idea and you are investable. and of course, mentally, that from an entrepreneurship perspective, that means that you’re fusing the idea with me. that means i am going to be the most important thing in whatever business i create. and it’s, if we can separate that, if we could find an easy way of doing it, to be honest, if we could just kind of like build it into an essence, put it into some spray perfume, i’d be having the equivalent of lynx africa.
[00:08:57] rory henry: yeah, like love potion number nine, yet business potion number nine.
[00:09:03] christine nicholson: yeah, absolutely. but when you see these ideas and they’re literally being reinforced all the time when they’re actually false, false ideas, it makes it really difficult because it’s so easy to tag on to and hold on to something that feels comfortable because you’re seeing it reinforced all the time.
[00:09:27] randy fox: yeah, and if the business owner hasn’t made himself operationally irrelevant to his business, the letting go is so much harder.
[00:09:36] rory henry: yeah, yeah, absolutely. let’s talk about how we can help them let go and reconnect to passions because there’s a lot of research out and you probably know this too about retirement and how, you know, the biggest sign of well-being and retirement is relationships and the relationships we have with our partner and then finding passions outside of work. and i love the work of john garrett, who’s a podcast host, he has a book called what’s your and? and he talks about how we have all these hobbies and interests outside of work, but we don’t really bring that into the workplace. so can you talk about some of the work that you do with families out there, how to connect with their passions and not be so focused on the work? are you asking me? oh, it’s randy.
[00:10:22] randy fox: i was going to say which one is up. well, again, i think retirement from a business owner is almost the wrong word. many business owners are not capable of retirement. i think that they’re just, you know, that’s not who they are. i think people who work for some company who get a paycheck, you know, find it easier to walk away and do nothing because they haven’t loved what they’ve done their whole life. business owners doing what they do because they love it. they wouldn’t make all the sacrifices if they weren’t passionate about what they did. so really what we have to ask the business owner is where are you going to direct your energy and passion when you’re not doing this? and that could be a number of things. you know, my gig is philanthropy. how do we get them involved in causes bigger than themselves? you know, most of the business owners i know haven’t had time to learn to play golf. they you know, maybe they go fishing once a year with their buddies, but they’re not going to go retire and go fish for eight days a week. they’ve got to do something meaningful with the rest of their lives, as well as build and nurture the relationships that are going to sustain them through, you know, the balance of not going to the to the office every day.
[00:11:49] christine nicholson: and they need to find that way before they finish. yes, absolutely. it’s one of the biggest things that when i’m working with clients, i wore this this this fleece quite deliberately for today because it says trypophobia, the fear of not having something planned. and, you know, i mean, i live and breathe the concept of only working nine days a month myself now. it’s come down because it used to be 15 days a month and then it used to be 24 or seven. so, you know, i am trying to find purpose. so i’m going to do this in two ways. i have found purpose in other things, so volunteering, for example, and using entrepreneurship as a route out of homelessness or using entrepreneurship education as a route out of re-offending and not going back to prison. and they’re great things to have that give me great purpose. but i also then do things that i find purpose in. so i adventure hike, for example, i’m loving the background for randy’s because randy’s zoom thing, because actually already i’m thinking, where is it? how do i get there? and what is what is there to find? what is that? you know, what adventure is there? and it doesn’t have to be, you know, i’m not a thrill seeker. i’m just finding purpose in these activities that like minded people do. so i think it’s really important to start thinking about purpose way before you need to find it.
[00:13:31] rory henry: yeah, i know, randy, the book you talked about, planned giving and helping families out there find their purpose. you stated that, you know, families, especially the wealthy ones, aren’t necessarily looking for performance. they’re really asking for purpose. so can we double click on that and in ways in which we can help them find that through things like planned giving?
[00:13:50] randy fox: well, yes, and again, you know, taking taking some capital off the table and again, you know, the successful business owners have this fine balance. we have to have enough money for them to do whatever it is they’re going to do for the rest of their lives, spend it however they want to spend it, live the life they want to live. but usually there’s more than enough. and so and again, you know, this is just some of the business owner mentality. every business owner i’ve ever met, and christine, you can you can disagree with me, they hate paying tax. have you ever met a business owner who says, you know, sign me up. i want to pay more tax. i’ve never paid enough. so if we can direct some of the capital and, you know, we can we can, you know, regardless of your politics at this very moment, you know, we certainly are uncovering some looks like misspent capital. by our government, if we can say, look, if we could take that some of that capital that might have gone to some program you really don’t care about and direct it to to programs that you might care about and not only use that that money, but also all of your skill and your talent and the capability that you had to build this business into something. you know, what would that look like and what could you do, you know, to to make the world a better place? not that your business didn’t make the world a better place. it probably did. but, you know, how do you translate that into the rest of the time you have to do something meaningful? and, you know, that’s just one approach, but that’s an approach we we take all the time. and again, most business owners aren’t used to thinking that way. in fact, i probably get out of every nine introductory call, every ten introductory calls i get from an advisor, nine of them say my client isn’t charitable. that’s the first not that isn’t the fifth thing they say. that’s the first or second thing. you know, we want we want you to do planning, but they by the way, they ain’t charitable. yeah. now, you when you talk to them, they’ve sponsored the little league team. they’re on the board of their church. you know, they’ve run they’ve been in the pta. they’ve done all these things that are charitable. they just don’t think of themselves as philanthropists because those are words that kind of tie to rockefeller or gates or, you know, whatever generation you’re from. but the point of the fact is that they’ve given to their community their entire lives. they’ve provided jobs. they provided, you know, things in their community they care about where they go on the rotary club or, you know, the kiwanis club, if they’re still around, you know, they’ve been active. they care. how do you translate that into something bigger that is more sustainable? and again, it’s just. us advisors having better conversations with our clients and instead of talking about capital gains tax, talking about, you know, what do you really care about in your life? yeah. that’s the values-based exercise that i outline in the book that if we lead with values-based
[00:17:03] rory henry: planning, our businesses decisions, our personal finance decisions, and in essence, our life decisions can emanate from those values. no question. yeah. what’s kind of yeah, she talks a little bit here because i know, christine, you advocate for a multidisciplinary approach, really bringing a team together. i think it was in our last podcast or maybe it was the last podcast. i think it was in our last podcast, or maybe you put in the book that you said that many folks or business owners have comfort zone advisors, their buddy next door, right? their golfing buddy who advises on their finances. can you kind of talk about the importance of building that great team, virtual family office we call it in the book, to really drive growth?
[00:17:46] christine nicholson: i really want to reinforce what randy just said as well about the relationship aspects. so i always think of the business as it’s three layers. there’s the central layer is me, it’s around the individual, and then you’ve got the team and then you’ve got the company as a whole. but if you think about your life, then there’s you, then there’s your family, and then there’s your wider community, and that can be your business and your team. and somewhere between that family and your business, there’s this really narrow ring of, that’s what i call the trusted advisor ring. and these are usually, you’ve got to know, like, and trust them. but most of them will not have done anything to do with exit before, because that is a really small group of people. many will be having their financial advice from somebody who is really just selling them products and it’s just a commoditized arena. and therefore, given that you really, your knowledge comes from the people that you spend the most time with, and you don’t necessarily spend the time with the people who are going to do this one off thing for you. because, you know, typically most business owners exit one business. about 50% of them exit their business due to unplanned events, and they might have prepared for some of those unplanned events. i mean, i’m talking about, you know, death, disease, disability, divorce. you know, these are people that you can, where your wealth advisor is probably advising you around these four things, are hardly ever advising you about the 50, which is if you cannot work in your business, your business is likely to be distressed. it’s likely to be extremely distressed within 12 months. and then who do you go to? and it’s likely to be an extension of your comfort ring, you know, your comfort zone of people who are already within your trusted circle. and they are not likely, or very rarely, are likely to refer you to someone outside of that very trusted circle, which leaves many business owners devoid of the kind of really harsh advice. and it’s tough being told your business is potentially unsaleable, or it’s worth a whole lot less than it should be, or actually you probably need to completely restructure it because you’ve been employing all your mates for the last decade, and your business is totally unscalable because of that. you know, all these bad news things. your friends are unlikely to give you bad news, because it’s fairly common. like, i do it, and i’m very conscious of it, but i still do it. i default to shooting the messenger who’s telling me the bad news. and then i have to pull my ego back and say, actually, this person is giving me some reasonable advice.
[00:20:55] randy fox: and again, many business owners started with the guy who, you know, filed their incorporation papers and have stayed with them for 25 or 30 years and have outgrown, same with their accounting firm, typically. and certainly in all but the rarest of circumstances, those professionals, as good a people as they are and as loyal as they are, are not the people that get to the next level. they’re not going to get you out of the business. they’re not going to know how to handle the negotiations and the structure of the sale and all of the necessary things that will enable the business owner to go to the next phase of their life.
[00:21:45] rory henry: let’s speak about the structure of that sale for the audience, randy, because i know in the book you talk about dafs, chairman of trusts. you talk about pulled income funds. i know you’re big on the goodwill hunting and separating personal goodwill for enterprisable goodwill. so can you give our audience a little bit of meat there on how we could structure things to really have that tax efficiency, lifetime income and produce great outcomes for those clients?
[00:22:09] randy fox: and again, we look at every transaction completely as it’s standalone. it’s its own self. what’s the best way to get the result we’re trying to get? what we do find just as a, in general, the businesses we deal with tend to be s-corps because that’s what everybody’s been doing for the last, you know, 40 or 50 years. and no one wants to buy their stock. you know, s-corps sales are almost one in a hundred or something. one of the things that many transactions fail to look at is the owner’s personal goodwill. and i’ll give you an example. late last year, not the end of 23, actually, we had a gentleman who ran a very large plumbing company, built it. it was a very quintessential business owner, right? started with one truck, built it up to a very big business. private equity was coming along. he was getting to be the right age. and they, you know, it’s a $30 million, you know, cash money. are you ready? it was interesting because everybody was going, you know, he lived in california. by the time he took out the tax, it was a big hit. so, one of the things that no one talked about in his existing team, his cpa, his attorney, we were brought in by his financial advisor, who’s someone we’ve known for years and years and years, who didn’t really have a good idea. we proposed the idea of using his personal goodwill, which is an asset of the company, a zero basis capital asset. and we do, we have done this several times where we do a bifurcated sale. there’s one check written for the personal goodwill. there’s one check written for the rest of the assets. prior to the sale of the personal goodwill, and by the way, personal goodwill is a zero basis capital asset. we transferred that personal goodwill to a charitable trust that’s called a pooled income fund. charitable trust that’s called a pooled income fund. that personal goodwill was redeemed from the pooled income fund, which means there was no capital gains tax paid. and by the way, the client got a significant charitable income tax deduction to offset some of the tax on the rest of the sale. so, when you do, and i mean, it was such a case for personal goodwill, his caricature was on the billboards. they had a cartoon of him that made the ads. so, it wasn’t like, it was easily defendable as to a third of the sales price being his name, image, and likeness. he would make a great college basketball player. so, this is often overlooked in these complex sales transactions. and if you can carve up the sale, so we didn’t say take all your money and put it someplace in a charitable structure. that would be malpractice as far as i’m concerned. we said, what if we could carve off enough so that we could eliminate tax on a third of the sale, get a tax deduction, and by the way, you’ll get income from this asset for the rest of your life. that’s a pretty good win for the client. and that’s just one of the things we look at whenever we’re involved in, you know, what’s the best way to, you know, now that someone’s ponied up and, you know, put an offer in front of you, you know, is it, is it going to work? are you going to be able to live the life you want to live?
[00:26:10] rory henry: yeah. and christine, i know you said that, i’ve asked you before, when should we start exit planning? five years ago. well, she says we need to open a business. talk about, you know, the importance of it. like, let’s have, you know, the end in mind. i always say estate planning, exit planning, you really look at the end in mind and you can reverse engineer decisions from there.
[00:26:32] christine nicholson: yeah. i mean, the day, cause the danger is that, you know, when you’re starting up, you’ve got all that vigor and enthusiasm, but actually you’re totally focused on your first job, getting your first client. and then of course, you’re focused on the second job, getting your first client to pay you. and then before you know it, you’ve kind of got lost in this maelstrom, which means you actually forget that you started this for a reason. and there are three big reasons that get forgotten. you know, this financial freedom, the ability to make choices about what you’re going to do in the next phase of life. you know, living today like most people won’t because so that you can live tomorrow like most people can’t. and then you forget the other freedoms that you have, you know, the freedom of choice of how you spend your time because you’re drowning in, in the minutiae and the tyranny of firefighting in every day, because now your ego is just so tied up. and if i’m not there, then the business will fall apart. that’s absolutely not true if you set it up right. and actually the irony is that by calling it exit planning, it kind of shoot yourself in the foot because now you’re only thinking it’s the end, not the now. and it’s almost like we should really be including this exit planning in the startup plan. you know, the startup plan should be what on earth am i doing this for? and it should be reminding you every day. it’s almost like something you, you know, like an affirmation that you write on your mirror every day, because the absolute right time for exit planning is usually the day before something happens to you that stops you actually doing everything that you want to. so when you’re working 80 hours a week and every time you employ someone new, you just think, why am i hours going up the more people i employ? and then you’re signing off the payroll at the end of the month and you’re the last one to be paid. and you’ve forgotten all of the reasons why you went in in the first place, which is generally to make an impact and then to have choice and opportunity. and those choices generally relate to freedom. and those freedoms generally relate to time, location and money. and the only one you’ll focus on it that you tend to focus on because it’s so tangible is money. but i don’t know a single person who lies on their deathbed and wishes that they’d spent more time at their desk, like literally zero people, zero people.
[00:29:07] rory henry: yeah. and maybe i want to throw this over to randy here as we can kind of weave in inheritance and warren buffett always says, i want to give enough money to my kids so they can do something, but not enough that they could do nothing. so and i’m big on a statement of financial purpose in working with families to have that statement and mission statement that they can look to to have their decisions emanate from. so can you kind of talk about how we can have these conversations? i mean, money is such a taboo topic. you know, i write about in the book that we need to have open and honest conversations and bring the next generation along so they don’t just have a million dollars dropped in their lap that they can do anything with. so can you kind of talk about the importance of really starting those conversations?
[00:29:52] randy fox: well, a million or 10 million.
[00:29:53] rory henry: yeah.
[00:29:57] randy fox: it’s it’s it’s it’s very interesting. worked with a family a few years back, husband and wife, very successful family. and both were the presidents of boards of charities locally. and just as because they were passionate about their community and passionate about these organizations and they loved being involved and they had never, ever told their kids why. and it’s it’s you know, it’s it’s so puzzling to me that if there’s a value to transfer, if there’s something that you want to teach your kids about the responsibility to your community and the responsibility with your wealth, this was the golden opportunity. and yet they had never communicated that. and i think that just points to the fact that outside of sex, that money is probably the most taboo subject in our vocabulary. and i actually think that in 2025, that sex is actually less taboo. i agree. we do not, as a nation, educate our kids about handling finances, talk to them about the family and what the family stands for and the family. and if the family happens to be, regardless of the financial success, what money means to us, what we can do with it, what power it has. we we our kids get that by accident. and sometimes those messages aren’t good or healthy. so how in the world can we expect that if we’re and again, you know, it’s this dichotomy, right? we’ve got this money we’ve earned. where else are we going to leave it? but to our kids, but we don’t take the time to prepare them to receive it. and then you wonder, you know, just somebody sent me a video today. oh, it’s terrible. you got all these despondent kids because they inherited $10 million and they’re bored. well, that problem happened 20 years ago. it didn’t happen now. but the only way we can begin to mend this problem is to start those conversations today. dikembe mutombo, we were talking about earlier, why aren’t my kids in first class, right? they haven’t earned their way here yet. it’s exactly that. you know, i have a number of people say, oh, you know, i don’t want my kids to know we’re wealthy. well, wait a minute. you fly private. you have a 40 foot yacht. you think they don’t. and you’re driving an aston martin. you think they don’t know you have money. are they stupid? we know they’re not. so why don’t we just start to have dialogue about, you don’t have to tell them about the dollar amount, but you can tell them that there is money going to be left to you. and here’s what we, and here’s how we’ve structured things so that you’re safe from harm. and we want to make sure that you understand what these resources mean to you and what they’re, what you could possibly do with them, knowing that, you know, your need to go out and start a big enterprise maybe isn’t as great as other people’s, but what are you going to do with the rest of your life?
[00:33:27] rory henry: yeah. it’s having those conversations. and like i said, if we have those values-based conversations, we can help, you know, align the next gen with making better decisions on where they want to go. it goes back to that relationship with money conversation that i talk about through that book. you just had something to say randy?
[00:33:45] randy fox: we can do the best job of structuring and, you know, having asset protection and divorce protection and all of the things that, you know, to preserve the wealth for multiple generations. i mean, that’s kind of, that’s a given in what we can do. but if the children don’t have the guidance and motivation and the understanding, it’s just going to confuse them. doesn’t, it’s not going to make them happy.
[00:34:11] rory henry: yeah. and, you know, it’s going back to the, to the wellbeing, you know, aspect of what we do. i always say that folks trust us with intimate information, right? their business finances, right? and many times as practitioners, we might be the only people that they can have these intimate conversations with, with regard to their business, regard to, you know, their kids. and so we sit in a privileged position to be able to guide them to where they kind of, where they want to go in life based on, on, on our know-how.
[00:34:44] christine nicholson: i’m always amazed at the conversations that i end up having with business owners. like within minutes, they’ll, they’ll be saying, telling me things that they, they’ve been in business for 30 years and they’ve never discussed it with their wife or their husband. i mean, most of my clients are men. i wish that there were more ladies, but i tend to work with engineers and, you know, but they’ll literally be within two minutes telling me things that they had not discussed with their wife for the last 30 years. and then they’ll, they’ll be telling me things about their business. and i say, and i say, well, look, if you got hit by a car tomorrow, you know, and literally you were just poof, you didn’t exist anymore. how would your family cope with not only picking up the mechanics of the business, but then, you know, the, the, the service that the business does in your life in terms of providing not only income, but also the future capital wealth, you know, your future financial security. and they’ve never discussed that with anybody. and sometimes they’ve not even discussed it with their, with their wealth management advisor or their financial advisor at all. it’s just, oh, well, i think the business is worth about this month. an unqualified advisor won’t even question that. and it still always amazes me how there’s two numbers that always come out. if it’s a smaller business, they’ll think that they’re worth $5 million, even if they’re only worth, i say, typically less than $500,000. and then the next number is $30 million. and i don’t know where it is in the psyche. i have no idea. i can only assume that it’s a kind of inflation from the 1950s and 60s, where to be a millionaire was quite a state. yeah. so now it’s, you know, 30 million. and to be honest, it’s probably gone up since, since then. i mean, it’s now the whole idea of being a billionaire just seems so the thing to talk about. but it’s all very well having a billion. you have a billion in the bank by all means. but what do you do with it? because when it’s stuck in the bank, it’s not serving anybody. it’s not serving you. it’s not serving your family. and it’s not serving society. so i really agree with the, you know, the whole financial education across generations, people who are 60, and they still get their wives to run the finances of their household. if they had to pay a bill, they would be lost. but they run sizable businesses. and there’s just this disconnect between the different types of finance. and also the understanding of what keeps society running. what keeps society positive is the flow of cash, the flow of wealth between not only different generations, but different classes, different communities, and society as a whole.
[00:37:51] randy fox: and if you look in the united states, 80% of the jobs are provided by family owned businesses. and something like what is it 70 or 80% of the gdp? it’s not apple, and it’s not general motors, and it’s not amoco, or bp amoco. it’s these small businesses. well, this is the backbone of our economy. yeah, that’s what we cover. and again, you know, just to circle back, my partner actually had a client who created this entire plan so that his son could take over the business. and as they were sitting down to get everything executed, the son called my colleague over and pulled him aside. and he said, i never wanted the business. father had never talked to his son about whether or not he wanted the business. matter of fact, son wanted to move out of town and do something completely different. and so, you know, it’s that dramatic that the communication is so poor that we don’t even know what our kids want.
[00:38:59] christine nicholson: that actually comes back down to that role identity fusion as well, because there’s the whole situation, particularly in small and medium sized businesses and mid tier businesses, is if you own it, you have to control it. you have to be there. so ownership and being in attendance is fundamentally one and the same thing. if you psychologically can separate ownership, so it’s okay for the family to own it. they don’t need to be working in it. how many of you have got shares in part of your portfolios, particularly in your retirement funds? if you were working, you’d have a retirement portfolio. you’ve got an investment portfolio. and let’s say you’ve got bp shares. you’re not knocking on the door of bp saying, i’ve got shares. give me a job. and actually, they wouldn’t even leave. they’d go, get away from me, crazy person. and they’d send security out. so why do we have a different attitude towards our own businesses? and well, the answer is because we’re emotionally involved. and the first thing we’ve got to do is let logic in and get the emotion out. but saying it, dead easy. doing it, not so much.
[00:40:18] rory henry: not so much. well, this has been awesome, christine and randy. i appreciate you coming on and contributing to the book. do you want to have any final thoughts for our audience here? i’ll throw it to christine first.
[00:40:32] christine nicholson: yeah, if i can just advise people to do one thing, if they just do one thing tomorrow to really make a difference to their lives as business owners, it is mentally take that seven-inch step to divorce your emotional attachment to your business. and just think of it as a mechanism for generating and creating the wealth that is going to give you and your family and your community that future financial security.
[00:41:07] rory henry: i like it, i like it. randy?
[00:41:10] randy fox: yeah, you know, i think most business owners are business owners because they couldn’t work for anybody else. and i never could. and part of the reason that you want to be a business owner is for freedom. you know, and what many business owners forget is that they’re doing this for their own freedom and they become slaves to their business. and then the business runs them. and that’s not healthy, not healthy for anybody. so there’s just so many opportunities for people to change the way they think about their business and the way they think about their family and their lives. that there’s just a huge, and especially at this time in history with the baby boomer sort of aging out, you know, there’s so many businesses in transition and doing it wisely and doing it well is a lost art.
[00:42:17] rory henry: yeah, you stated there’s two trillion in dry powder sitting on the sidelines here. something like that. yeah, a little, yeah. so yes, there’s opportunity out there. i want to appreciate you. i appreciate you both coming on this discussion. like i said, it contributes to the book. if someone wants to reach out to find more or learn more about what you do, what’s the best way to do so? i’ll go to you, randy, first.
[00:42:39] randy fox: well, websites, twohawksfamilyofficeservices or randy at twohawksfos.com. that’s probably the easiest way.
[00:42:54] christine nicholson: and for me, it’s really easy. christinenicholson.co.uk, christine nicholson, all one word. and i mean, i talk extensively about the behavioral aspects, finding purpose, et cetera. but actually, it’s the practical things about getting out of the day-to-day, including not being locked in to your business. because that freedom word, it means so much. and yet for so many people, it’s kind of out of reach. yeah, but it’s not. the reality is, it’s right here. it is literally, the power is at the end of your fingertips. you’ve just got to take the seven-inch journey to get there. yeah.
[00:43:38] rory henry: when you feel purpose with some practical steps, you can live the life that you want. i appreciate you both coming on. i’ll put all that information in the show notes. i hope to have this chat again. thank you.
[00:43:49] disclaimer: rory, thanks for having us.
[00:43:49] christine nicholson: it’s fantastic. thank you. thank you.
[00:43:51] disclaimer: all opinions expressed by rob santos and rory henry on this website podcast interview are solely their opinions and do not reflect the opinions of arrowroot family office, llc, or their parent company or affiliates, and may have been previously disseminated on television, radio, internet, or another medium. you should not treat any opinion expressed by anyone as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their opinions. past performance is not indicative of future results.