Governance Bites #125: family office or family council, with Sandy Kimpton

In this episode of Governance Bites, Mark Banicevich sits down with family governance expert Sandy Kimpton to discuss a crucial topic: what is true intergenerational success?
Discover why family governance is about more than just wealth management; it's about developing human capital and preserving your family’s legacy and values. Sandy explains the power of "operating with intentionality", providing practical steps to align family and business. Learn how a long-term family perspective differs from short-term business thinking  and why an independent voice on a family council is essential.
Website: https://kimptonandco.co/
In this episode of Governance Bites, Mark Banicevich sits down with expert Sandy Kimpton to demystify family governance structures.
They explore the critical differences between a Family Office, which focuses on managing assets, and a Family Council, which nurtures relationships, values, and long-term unity. Sandy explains why these structures aren't just for the ultra-wealthy but are essential for any family wanting to prepare the next generation for inheritance and ensure longevity. Discover how the right choice fosters trust and prevents future conflict.
#FamilyGovernance, #FamilyOffice, #FamilyCouncil, #Governance, #FamilyBusiness, #SuccessionPlanning, #WealthManagement, #IntergenerationalWealth, #LegacyPlanning, #FamilyValues, #NextGen, #NZBusiness, #GovernanceBites

Transcript

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Hi Mark, I'm Sandy Kimpton and I work with families around and across governance structures with a professional business career behind me, and a whole lot of life experience and drawing on the exper iences of my past. So today we're going to talk about family office and family councils and looking at those different structures. Over to you. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you've just heard again, I have the pleasure of spending time with Sandy Kimpton. Sandy, thank you very much for your time. It's interesting, we were speaking just a moment ago, and I kind of got the impression that you're dealing with very high net worth families that are, you know, "Do I take a family office or a family council? What do I do with my $20-, $30-, $40 million?" That's not necessarily the scale with whom you work? No, I certainly do work with those people, but equally, my personal vision is really to see an entirely new layer of intergenerational wealth occur here in New Zealand. And we, as a country, we're 98% small to medium-sized situations. Well, that's businesses, but you know, there's a lot of people who look, just like you and I do, Mark, who have worked hard, we've achieved a situation where our kids get whatever, a bit more than we did as growing up. We live in nicer suburbs, nobody thinks about what to spend, well, I don't think too hard about what they're spending at the grocery shop. Those kids are primed to inherit a large, somewhere, probably from $100,000 to a few million dollars. Are they really prepared for that? Are they, where are the life skills in that learning and grace? That's an age group, that's a situation that I'm really keen to see us put New Zealand in a better space in the overall landscape. I understand, because as a parent, it's always a bit of a challenge that, you know what you learned through the struggle you had growing up. My parents weren't wealthy, they were very, they gave me every start they could, all the support they could. Wealth wasn't one of them. And I think, how do I instill those lessons on my children when, as you say, my wife doesn't have to look too hard when she goes grocery shopping. She's careful, she's not frivolous, but she's not having to say this is my limit and I can't spend any more than that, which my parents had to. So yeah, there's a real challenge there isn't there? Yeah, and so bringing that into today's topic, that's where I think all of our families should be having in place at least a layer of family council. Now that's not a big formal structure, it's not an expensive situation, it is, but it is operating with intentionality around the things that are about developing the people as much as, you know, you've got the people developing the wealth, or the business, or the portfolio, or whatever you and your wife are doing that. Yeah. But it's about the other stuff. Right, right. So the first question you've kind of alluded to a little bit there, the difference between a family office and a family council. Could we actually take each of those in turn? What do we mean when we say family office, and what do we mean when we say family council? Sure we can. And so a family, I'll start with a family office. It's fundamentally asset focused. And relevant for families at a certain size. And arguably sort of international best practice would put that at circa $200 million US,$500 million kiwi [NZ dollars]. That's where you're paying a small staff of people to manage an asset portfolio for the family. Correct, you're likely to have a bit of some sort of CFO [Chief Financial Officer], investment strategist or analyst, you know, those kind of guys, right. Right. Might be a risk guy, wealth guy might even have a COO [Chief Operating Officer] over that family office. You're looking at investments, it's all about the assets. Yes, right. Right. So we talk a lot about family offices in New Zealand, but I really question how relevant it is to many of the people it's being talked to about. Now, anyway, but that is what it's about. It's about managing the money, - Wealth. - the portfolio. Now I'm going to pull you up on "wealth". Wealth is money. You're talking financial money. I'd like to, I really would say that there's a lot more about wealth than money. Right, yes, yes. And so family council? Family council. Family council is where you are looking at the long-term family desires and wishes and plans. So that family council is an informal group that operate in a formal basis. They are the custodians, if you like, of the long-term family mythos, the way, who we are, what we, you know, in a generalised view, what we believe in, what we stand for, what our values are. Family Council is very relationship focused, It's really about developing that human capital, it's sitting in place, the kind of roles of the family council might be things like, okay, let's just look at the life skills we want for all of the children in our family. I use an example, someone said, "Well, we want everyone to always be a good Kiwi." What does being a good Kiwi mean? Mean. Okay, well, let's set up structures where we can have everybody has the opportunity to go on Spirit of Adventure or Outward Bound or canoe down the Whanganui River. Right. Whatever those things are. Let's also have a structure where those who have a business, if there's an inkling towards business, we've got an education fund that enables that to happen. What do we really want for the current generations and the future ones, and then how do we ensure that plans. Right, right, so about dealing with the whole whanau [family], all of the whanau - Correct. - rather than just the day-to-day. Are there any other structures that could be considered by a family business? You might then look at advisory boards around the business or a formal governance board. So that's around the business aspect of it. But, and you might have a set of trusts, you know, and I often hear people say,"Oh, it's all sorted in the trust." But how does that help teach the kids how to continue on that great tradition of the family holiday that's been planned for the last 30 years that isn't going to happen without mum and dad there, - Right. - or the parents or the partners there? And so often, so that family council sort of sits almost across those various structures and gives some sort of direction into, "We'd like the assets," might be a direction to a family office."We'd like the assets to become more sustainable, a more passive income streams,"because we see this happening in this next generation." It might say to the advisory board, "Be aware. We see a horizon, a time horizon for this business of," or "Be aware," or relationship might go up and down, "Gosh, we're going to need X person,"is there anyone in the family that has a passion for coming this way, and how can we have a plan?" So often within a family council you might have a set of interns sitting there learning various things. From within the family. From within the family for a 10-year period. So you can have those advisory boards, those governance boards, they're generally focused around the business. And they sit alongside all these other structures. Right. Why is it important for families to understand these distinctions when they're designing their overall governance structure? It's important to understand what the intention is. And if the intention is to absolutely just get that best out of that family business, then it might be a formal governance board, or it might be an advisory board. If it's about seeing longevity in the family, maybe it's more of that family council space. If, "Who cares about the family, they can do what they want," maybe it's just a family office, and let's just worry about the money and distribute it all and not care who's in that room in 75 years time. So, it's around what do you really want to achieve and then what is the best structure for doing that. Right, right. What are some of the pitfalls of choosing the wrong structure? Well, it's the opposite of those things, right. And so one that's always really, I think, quite disheartening is where there is the structure to ensure that everyone's getting lovely distributions, but there's never been any intentionality around developing relationships between the kids. So each kid has sort of looked, is off on their own merry path, and that's fabulous for the kids. But when something significant happens, death in the family or any of those things, there is no backdrop of experience on how they make decisions together. Yes, yeah. So it feels like the family council, as you describe, is very much around keeping the family together, identifying their values, and making sure that the family's still around as a family in 75 years' time. And then your family offices around managing the assets that the family may own. A family business will have its own governing board, whether it's an advisory board or a formal board or even just working with a mentor, whatever that may be. Good summary, Mark. You did much better succinctly than I did. Right, so as you described, they're all very different roles to play. And I think very much where your passion lies is in that first part around making sure that the family continues to exist and the family's role is very much there and the relationships are strong, which is really exciting. And I think that's well said, and I think, there is often a view in New Zealand of,"Oh look, they'll be fine. They'll work it out. But we forget that the world's different, the situations are different the kids are growing up in schools with different things. And significantly, the income disparities in the country are different now - Yes. - as you described at the beginning. Yeah. And one of the other things that brings to mind is, you know, I work with a lot of small businesses around their own governance. And, particularly taking them on the journey of the importance of governance, of stepping back and looking at the business every now and again and saying,"How's it all going from a wide perspective?" And performing some oversight, looking at the risks, looking at the strategy, those kinds of things. And we do that all the time with businesses, but we don't do it enough with our families, do we? No. And that's essentially what you're talking about. And mostly life, particularly here in Auckland, is just logistics."How do we get, who can get the shopping? Where can we get, oh,"these three kids need to be in these four different directions." Yeah. When do you sit and talk about, "What do we really care about, guys?" Yeah, right."What's our definition of success?" Yes, yes. And you're right, that's the piece that family governance structures can really create, and can add to non-family situations, is being intentional. At the risk of you already having answered this question, the next question that I've got for you is how does a family council contribute to governance, unity and long-term decision making, both within the family, and also within the family's businesses? Two things, maybe three as I talk about them, but one is that sense of decade planning, understanding of, "We want more than what's just around the corner now.""We, as a group, agree that we want to, I want my kids to know each other like, or"my grandkids to know each other with my siblings grandkids just the way we did." Yes. So there's that piece of connection. The second, actually, I'm just going to get you to repeat the question, sorry. Well, you've answered one part of it. I think the other part of it is how does the family council contribute to the governance of the businesses? It's by, again, that ensuring the family's long-term wishes are maintained. Yes. And I would actually really stress within this whole piece that it's not about keeping everybody the same. And I make a statement often: it's about every individual flourishing in their own right. And so what you're always wanting to do is find the alignment at the core levels, not at individual levels. So as individuals we may really differ on some key aspects. Yes. But at a fundamental level you actually do have some alignment and you dig in and you find those. And so that's the same for those businesses is being able to, that family council can bring that longer term family desire into this,"Look, we're not going to just keep throwing good money after bad. We want it to perform and do this."We want it to provide for." What is the, it creates a layer of an intentionality, so that the people sitting around the table for the family business go,"Hang on this isn't success at all costs."This isn't something we're going to do, and then the kids in two generations are embarrassed about." An international example might be, if you were the kids of the Slacker family right now [Oxycotin scandal], how proud are you of the business? Maybe some family thoughts could have gone into that at an earlier stage. Yes, yeah. I want to focus a little bit now on the family's businesses. What are the key risks of setting up the wrong structure or not being intentional around the choice of structure? If you're thinking about simply just being, so I would answer specifically as a governance person in businesses, I think it's all when you're in a governance structure with business, you are always fundamentally in charge. I'm a chartered member of the Institute of Directors of New Zealand. You're charged of the Companies Act of ensuring the best interests of - Of the company. - the company. And so you always need to do that. There's always a slight sort of, not conflict, but you know, you're always conscious in a family business that it's the needs of the business and, sorry, the needs of the family in alignment with that business needs to. And being very aware that that is your role for those. So example of where that can then go terribly wrong is where suddenly you've got a completely incompetent family member running this business. How did that happen? How are you doing your role as any layer of governance across the business when you haven't got the right people in the right roles. Yes. So there's an example. Yeah, absolutely. And that actually ties in really well with the next question I have for you around clarity of roles. How does the clarity of roles improve decision-making, trust, and more so, continuity across those family generations? The piece that really is helpful is when the future generations have had experience working together, and they've learned to trust each other. And so when you have, one of the things that I'm often doing is working with families and we're actively planning some things that the kids can do together. Because we often will look after that child, and you know being very excited that they're running off and doing X Y and Z. And we're actively doing the same with all of your children. But they need to learn how to work together, too. They need to learn how to plan the family holiday that just doesn't centre around them. It also centres around their brother or their sister or their But you want those family owned vacations to still be equally great. Yes. And so it's learning to make decisions where they think and work together, they learn to value, just like we do in a business where we'll put everyone through some sort of personality profiling so that team learns how to work together. Yes. You almost do similar views with the family. Yeah, right. And to finish answering that question properly, that's how you improve the long-term decision-making. It's through the cross-family relationships. Correct. And it's building that trust. It's building. And when you're coming together in decision-making, it isn't a decision, and I've seen some terrible decisions of,"This business just has to be sold because I want the money and you don't," and that's just turned into a conflict. Yes. Which happens way too many times. So that's bad decision, when the decision making is based on a bunch of individuals sitting around the table, literally just looking after their own interests. Or sort of each other, but they don't really know each other. Yes. That's where some of these things play in a lot better because you're developing the depth of relationships and trust. Right. Okay. What lessons from family governance structures can non-family businesses or boards learn? That relationships matter and cultures matter. In non-family businesses, we talk about culture all the time. It's actually the same thing as we're talking about with families, that relationships matter. You are going to work better, you are going to be more successful if everyone around the table actually has a voice, everybody is able to bring input. If there is an underlying simmering, the decisions are never going to be - Things break down.- as wholesome as they could have been. So that sense of people matter, relationships matter, whether you call it relationships, or you call it culture. That's what you learn. It's just more obvious in families, - Right. - but it's still true. And the other is that sense of interns. And that long-term planning. And I know as a professional, I always went into a role going,"Okay, who's my successor?"How do I work my way out of this?" And it's because personally, I always thought there would be something more fun to do. Once I've learned it, I wanted to move on, right. Yeah. In a sense. Or always have something new and exciting to do. So, you never need to be fairer for someone coming through. And just like we would do in a family, where you've got a 10-year plan, have that in your businesses, as well. And then you're not just replacing someone who's half you, you're replacing someone who's you and a whole lot more. Yes, yeah, right. I've got one final question for you that's a very generic question. You've got a strong background in executive level management. As you mentioned before, you're a chartered member of the Institute of Directors, so a strong governance background, as well. What's the best governance advice you've received in your career? I'm going to give you two answers. You probably only asked for one, - No. - but I'm going to give you two. The more the better. As an overall governance thing, is around keeping your ego at the door, and remembering that the board speak as one. And so it's not about who, it's about drawing consensus out of the board table, is what really good governance is about. And that environment where everybody is able to contribute, and together you are arriving at a conclusion that you can all buy into at some level. So that's a piece that I'd, a broader governance piece. The second is in relation specifically to families. And that is, enjoy the environment, enjoy the situation, and sometimes the privileges that affords. Always remember you're not family. Cool, Sandy that's been really cool, thank you so much again for your time. I'll look forward to chatting again soon. And to seeing you next episode. Thanks Mark and always great to have a chat with you. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel, where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe and share the videos and podcasts.