Julie Genjac [00:00:07]

John. I’m really excited about the conversation that we had with Dave today. He shared so much insight on the nuances and intricacies of family business owners and certainly opened my eyes to characteristics and ideas that I hadn’t even thought about before. Two of those were the topics of curiosity and empathy, not two things that I typically associate with owning a family business. What did you think when he brought up those two key themes and thoughts?

John Diehl [00:00:39]

Well, if you think about the art of conversation, right, those two elements, no matter who we’re talking to, can be family members, friends, business associates. We know that curiosity is a genuine curiosity, not curiosity, because I’m trying to gain something, but just I’m interested. That’s how we communicate that I’m interested. So especially when it comes to this topic of family business owners, a lot of times there’s an intimidation factor. But I think if we just step back and we’re just simply curious about that person, that might be the necessary first step.

Julie Genjac [00:01:14]

I couldn’t agree more. And he also shares the top three challenges that family business owners face. So I think it’ll be worth a listen for sure. Today, we’re joined by Dave Specht, who currently serves as the director of Global Family Business Institute at the Drucker School of Management. He is an ambassador for family owned businesses and writes delivers keynote speeches and develops programs on topics related to family business. He has a consulting firm called Advising Generations prior to this role. Dave developed the Family Business Management Program at the University of Nebraska and served as the National Development Manager for the Family Dynamics Program at Wells Fargo Private Bank. Most importantly, he is a husband and father to six children.

John Diehl [00:01:59]

And Julie, I should bring up that after listening to today’s podcast that people are interested in learning more. He actually authored a book called The Family Business Whisperer. That really can be a really good resource. But, you know, hey, before we get ahead of ourselves, why don’t we listen in on the conversation that we had with him today? Hi, I’m John.

Julie Genjac [00:02:24]

And I’m Julie.

John Diehl [00:02:25]

We’re the hosts of the Hartford Funds Human Centric Investing Podcast.

Julie Genjac [00:02:30]

Every other week, we’re talking with inspiring thought leaders to hear their best ideas for how you can transform your relationships with your clients.

John Diehl [00:02:39]

Let’s go. Dave, thanks for joining us on the Human Centric Investing podcast, where we’re really looking forward to your thoughts on what I think is a very interesting and maybe differentiating topic for many of the financial professionals who are who are listening today.

Dave Specht [00:02:57]

Thanks for having me, John. Glad to be here.

Julie Genjac [00:02:59]

Dave, I know you have a lot of expertize and family owned businesses and a lot of the financial professionals that John and I are speaking with day in and day out across the country are interested in hearing more about how to break into the family owned business clientele. Obviously, it’s a specific niche and requires a fair amount of care and thought. Would you share with us your thoughts on financial professionals and how they might start to engage in those conversations, especially if that is in a client segment that they’ve served in the past?

Dave Specht [00:03:34]

Yeah. So again, that the most important thing is, is to be curious if an advisor is curious about the family owned business and curious about the journey that that family is

on, they’ll be able to serve them. When you think about the family business as an opportunity set,

clearly there’s there’s these families have for one case, they have life insurance needs, especially those that are perpetuating from one generation to the next. They have liquidity issues. They have a rising generation that they’re trying to to teach and raise. So there’s just so many different ways that a financial advisor can serve these families. There’s so many financial possibilities with these business owning families that I think it just makes a lot of sense for an advisor to get started, though, it’s really important for them to look at this family business as a system. So there’s really kind of three, three main systems that come together when it comes to a family business. The first is the family system. So anyone that’s a family member would fit kind of squarely in that family system. The second is the business system. Well, let me go back in the family system. That’s basically a system of unconditional love. Julia have six kids. None of my kids actually had to do anything to become valuable to me. So that’s the family system. It’s that system of unconditional love. The second system is a business system. And this this is different because it’s competitive, it’s market driven, and it’s kind of what have you done for me lately? Can you be valuable to the company? And then the third system for advisors to be aware of as they’re serving these business owning families is the ownership system. So if you think about it as a Venn diagram, Julie, these three systems are coming together. Some individuals are family members that have ownership, that do not work in the business. Non-operating shareholders, advisors need to know what are the dynamics that they face with those particular individuals. And then they can also see what are the opportunities, what are the products that that group will likely be interested in and need. Other groups are family members that work in the business but don’t yet have ownership. They have different, very different questions. That’s typically the rising generation, you know, how will I get ownership? So an advisor has an opportunity to play a pivotal role in the decision making of that business owning family. And then if they ask great questions along the way with that business owning family, there’s just tons of opportunities. Again, it depends on kind of the the set of products that the advisor and their team offers. But the family business is a fantastic target market for financial advisors.

John Diehl [00:06:23]

So Dave, how important is hearing you talk about these systems? The thing that keeps running through my mind is to caution the financial professional not to take the bait, right? Which might be to go right to the financial questions. Do you often find, unless the client is presenting you with a specific situation of financial situation in the business or in the family, do you find it’s better to start these conversations about kind of where the business came from or kind of what it represents to the family? Do you kind of stay more emotional in your initial approach or do you kind of poke at some of the financial diagnostics in terms of that business?

Dave Specht [00:07:05]

It’s a great question. I personally begin with story, so I want them to tell me about how did this business even begin? I mean, you’ve arrived at this place, you’re successful.

But tell me the back story. Like tell me about when it was first started. If it’s second or third generation, like tell me about your parents and what what kind of things they went through to to build the business. Tell me about how you survived the transition from second generation to third generation. And what are some of those what are some of those learnings along the way? So again, if you can get them to tell you a story about. About their struggle, about conquering something that’s tough. You you have a real opportunity to serve them because most advisors never get there. So if you can begin early with a curiosity about their journey in the story, the the needs that they have and some of the liabilities that that they have, they’re going to become evident to the advisor, because that’s that’s typically as an advisor, how we’re trained is to spot issues. And so we need to just pump the brakes on solving for them and really accelerate into curiosity mode about who they are, about their business, about what they worry about and things like that.

Julie Genjac [00:08:28]

You know, Dave, you mentioned their needs. And as I think about these business owning individuals, there’s the individual and then there’s the business and they sort of have these two lives that obviously every single day they’re trying to balance between how do you start to differentiate between the two or bring them together? I’m just curious about your thoughts on that because it just feels like that. It’s a very complex and very, I’m sure, stressful role in so

many ways. And how can a financial professional really be a resource to that individual who’s trying to juggle all of these things and hopefully do all of them well, but probably is exhausted to some degree.

Dave Specht [00:09:09]

Yeah. So the first thing to do, Julie, is to name it, and I like to call them simultaneous roles. So the first thing to do is to ask them, you know, you’re serving so many different roles in your life. Let’s talk about all the roles that you’ve that you have and if you can get them to name them. I’m a dad, I’m a husband. I’m on the board at such and such hospital. I go to I go to this church, whatever it is, and then ask them, be curious, like how do you navigate those those roles? And then specifically in the business, you know, you may be a dad and a husband or a mother and and a wife, but, you know, your child also works in the business. What are some of the struggles of of kind of wearing multiple hats? And how do you navigate that and let them talk? Let them talk. And again, the advisors need to show a great deal of empathy, you know, when it comes to making decisions, you know, with employment of your child, you know, what do you have on when you’re talking about compensation or or evaluating their performance? And so even thinking about, you know, that what had are you wearing gives them a frame to look at the complexities that they’re dealing with. And if you as the advisor, are the first one to kind of really empathize with them about their simultaneous roles and help them to kind of navigate those roles with some sanity, you’re going to position yourself as someone that’s valuable, someone that they can tell things to that they haven’t been able to tell other other people. And then again, you’ll have the opportunity to serve them in that opportunity to serve them as is where there’s going to be.

There’ll be products and there’ll be other services that you can that you can offer.

John Diehl [00:10:52]

Dave It would seem to me that it might be advantageous for the financial professional to kind of think of themselves as a business person, a small business person themselves. Look, many of us work on perhaps a team. We may have partners. We may have hired staff. We may have. Have you ever used your own story in kind of leading into some of these conversations? Like, man, we’ve had a really tough time hiring, you know, recently. It’s just hard to find the right person. You ever run into that in your business? Do you ever leverage your own experience as a business person to kind of align yourself with that business owner?

Dave Specht [00:11:31]

Yeah, often. And I would say if you’re really courageous, leverage your personal experience to, you know, especially when you know that they have children. You can talk about, you know, I have a 16 year old and, you know, the first time we tried to talk to them about money, it was kind of this or that or the other. And then again, be curious, how are you talking to your kids about money and how are you influencing their relationship with money? So not just on the business side, I would say on the personal side as well, because if you can get to some of the personal again, there’s there’s a there’s a feeling there that that’s of a relationship and a friendship there. And yeah, you want to have a professional relationship with them. But if you care about their most precious assets, which are their kids and their family, then again you’ll have an opportunity to serve serve their business.

Julie Genjac [00:12:23]

One thing I’m thinking about, Dave, as we think about, you know, a typical individual client, right? They have a maybe a spouse or partner. They have children, you know, friends, other extended family, maybe work colleagues. And, you know, that’s kind of their network. But if you think about that individual, I mean, that’s also a small business owner. All of a sudden you have employees that are part of that network or their universe and may be partners in the business, whether they’re maybe family partners or maybe non-family partners. And so all of a sudden it feels like their bracket is getting wider and wider in terms of these relationships and, again, nuanced interactions. Could you share with us a little bit about how some of those dynamics can sometimes play out when a financial professional starts to really peel back the layers and get to know these these business owning individuals that maybe share some guidance or thoughts there, just because I would imagine that those conversations probably start to unfold fairly rapidly as the relationship progresses.

Dave Specht [00:13:26]

They do. First of all, as an adviser to a business owning family, we need to realize that a lot of a lot of these business owners continue to run the business because they love the people that they work with. Many of them, so many of them spend more time with their employees than they do their own families. And that’s a little bit sad, but it’s the truth. I’ll just share one story, Julie. There was a gentleman I was working with in the Midwest. He received an offer to sell his company kind of out of the blue, and it was way more money than he had ever dreamed the company would be worth. And he was working with me and trying to figure out, should I do it? Should I not? Ultimately, Julia, he decided to not sell it because he wasn’t sure how his employees would be treated when once the sale was done and he wanted to be relevant in the community.

And he felt like if he didn’t have that company that had 400 employees in that small little town, that he would someday, that he would basically become irrelevant. So as you serve these business owning families, we need to be thinking about. The emotional part of what it means to be an owner and the relationships that they have with their employees and the relationships that they have with the community are so valuable and they’re oftentimes overlooked by advisors. So I would just say, again, we need to look at the whole that whole system, those those three systems, how they come into play. And as you’re thinking about, you know, a business owner selling again, we need to just layer on the empathy of what are your greatest fears? Because a lot of times, again, they are worried about how it’s going to be received. Am I going to be seen as, you know, greedy for selling this, especially if my if my employees aren’t treated well or some are are let go? So as an advisor, you have an opportunity to be be the empathetic one that has some inside information about what they’re dealing with that they cannot share with someone else. And if you can help them navigate that kind of emotionality of a transaction or a transition, they’ll forever be loyal to you.

John Diehl [00:15:42]

Dave How important is it to understand, especially in regards to the business issues, the centers of influence, the attorneys, the accountants, the other professionals that may assist that business owner? How how quickly should I be thinking about introductions, understanding who these people are, what they do for their family? Or do I just let that kind of roll out naturally? And I guess if I haven’t focused on family owned businesses in the past, I’ve more dealt with individual clients. Do I need to think about building a stable of professionals myself before I begin engaging in those conversations? It’s like a chicken or egg problem, right? But maybe one leads to the other. But what do you recommend in regards to kind of understanding those other professionals serving that family?

Dave Specht [00:16:32]

Well, I would just say, if you’re going to serve family business, you need to be a courageous collaborator. And so what that means is you do need to figure out early who’s in their life. Who’s a high performing professional that they’re with. Have they? Have they really outgrown that, that person or that firm? I mean, typically, it’s kind of the bookkeeper that they’ve graduated and maybe the skill set is not there, but they’re loyal. That’s another thing you’ll find with these business owning families is they’re so loyal that oftentimes they won’t leave a professional to upgrade. And so we need to be careful in how we make that recommendation. But it’s absolutely crucial that we know who the other advisors are and that we develop a relationship with them because it’s such a multifaceted approach. When you’re going to try to perpetuate a family business, you’re going to need legal help, you’re going to need accounting help. You’re going to need if you don’t do insurance in house, you’re going to need that that person. So you need to know who they have. And you absolutely need to develop a stable of people that you can call on when the family needs to upgrade one of their professionals. And again, if you’re not ready, then, you know, you don’t have anything to offer them. And many times it’s the relationship that you can connect them with that takes them to the next level. That might be of the greatest value that you can bring in that moment. So you absolutely no need to know early who they’re working with and know if you have any kind of competing interests with those people, because that will affect your ability to actually do work with that family. And then you do need to have a stable of advisors kind of on call CPAs, attorneys that you trust, that you’ve vetted so that you can bring them to bear in the in the moment, because oftentimes during these transitions, they need someone right away. So do the do the work on the front end to find those people?

Julie Genjac [00:18:32]

I would imagine I’ve never owned a business or been part of a family business, but I would imagine that for those that have they through the years have been approached by so many different individuals trying to sell them something. Right, whether it’s insurance or financial advice or product, just solutions from A to Z, I would imagine that that’s just a kind of a daily rotating conversation. How can a financial professional break through some of that noise, especially for those family business owners that maybe have been burned in the past or become very skeptical or cynical that that individual is merely reaching out just for dollars. Any guidance there or best practices or great frameworks or strategies that those that have been successful that you might be able to share with us today for financial professionals that want to continue to sharpen their sword in terms of making sure that they’re really connecting with business owners in a genuine way.

Dave Specht [00:19:34]

So there’s there’s two things, and I’ve talked about them one before, but the first one is curiosity. If you’re genuinely curious that that will they will feel that. And then the second is process. What kind of process what processes do you have that make you different from everyone else that has products to sell them? So if there’s a process that you work through to understand the business owning family, to be able to serve the family unit and not just have a product to sell, that really differentiates you. So again, curiosity and processes are really crucial.

Julie Genjac [00:20:10]

Dave If you could synthesize the top two or three issues or challenges that business owning individuals and families face, what might they be?

Dave Specht [00:20:19]

Sure, happy to. The first one is shared ownership. It is such a challenge to share ownership. And as you get to the second and third and fourth generations, you know the complexity of sharing that ownership, how do you make decisions? You know, are we are we pursuing growth or is it cash flow that we’re pursuing? That’s the number one thing that I think advisors should become really good at is asking questions around shared ownership and how that’s working for families. The second one I would say, is communication. You know, our families creating safe spaces where they can regularly have conversations about money, about the family business, are they having family meetings? So that’s the second one is communication. And then the third one is just preparing the rising generation. You know, we spend money to manage our investments. We spend money on a lot of things. Are we spending any time or even resources to strategically prepare the rising generation for the for the challenges that they’ll face? So those those are the three things shared ownership issues, communication across the family, and then preparing that rising generation in a very strategic way. Those are those are three three top challenges.

John Diehl [00:21:38]

So, Dave, it’s time for us to put you on the spot, because Julie and I are naturally curious people, and our process includes something we call the Lightning Round. I mean, after all, we’re on the Human Centric Investing podcast and we’re curious outside of the topic we discussed today to learn a little bit more about you. So I’m going to ask you a series of questions, and I want to hear the first thing that comes into your mind so that we can learn a little bit more about who Dave is. So you ready?

Dave Specht [00:22:06]

I’m nervous. It.

John Diehl [00:22:09]

Don’t be nervous. All right. Here we go. On a scale of 1 to 10, how good of a driver?

Dave Specht [00:22:16]

Eight and a half.

John Diehl [00:22:18]

What’s your favorite holiday?

Dave Specht [00:22:21]

My favorite holiday is Christmas. I have six kids and just the magic in their little faces is something that I just love.

John Diehl [00:22:29]

Are you a morning person or a night owl?

Dave Specht [00:22:34]

I’m a morning person. I wish I could sleep more. But, you know, early mornings I wake up and my mind goes, and so I just need to get by, get out of bed and get to it.

John Diehl [00:22:46]

Dogs or cats.

Dave Specht [00:22:50]

Kids. We don’t need dogs or cats we have six kids.

John Diehl [00:22:57]

What is something you could eat for a week straight.

Dave Specht [00:23:02]

For a week straight. I love lasagna, but I don’t know what I could eat for a week straight.

John Diehl [00:23:10]

All right. Some more beach house or lake house?

Dave Specht [00:23:15]

Lake house. I like the quiet. I like the quiet of the lake house.

John Diehl [00:23:20]

Last one, iPhone or Android?

Dave Specht [00:23:24]

I’m an iPhone guy.

John Diehl [00:23:26]

Yeah. There we go. Well, thanks for participating in The Lightning Round. Always great to hear those answers. Giuliani Five questions or comments for Dave.

Julie Genjac [00:23:36]

So thank you so much, Dave, for joining us here today on the Human Centric Investing podcast. And you’ve given us so much to think about in terms of breaking through to family business owners and how to genuinely connect with them. And, and at the end of the day, give them incredible advice to help them and their families. So thank you again.

Dave Specht [00:23:55]

Thanks for having me. It’s been fun.

Julie Genjac [00:23:59]

Thanks for listening. So The Hartford Funds Human Centric Investing Podcast. If you’d like to tune in for more episodes, don’t forget to subscribe wherever you get your podcasts and follow us on LinkedIn, Twitter or YouTube.

John Diehl [00:24:13]

And if you’d like to be a guest and share your best ideas for transforming client relationships, email us a guest booking at Hartford Funds dot com. We’d love to hear from you.

Julie Genjac [00:24:24]

Talk to you soon.

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