Should You Hire Family Members?

The positives of hiring family

There are three key ways you can turn hiring family into a positive experience for yourself, your family, your clients, and the rest of your organization.

1. Avoid entitlement

It’s likely you’ve had team members around you for a long time. How do you think they’ll respond if you bring in a son or daughter who has less experience and immediately leapfrogs them?

Protect your firm’s culture. Being thoughtless about the position you give to a younger generation family member is a surefire way to wreck one you’ve carefully built over decades.

When you bring in a family member, give them a position that aligns with their experience, so they aren’t gifted a role or title. If they have prior, relevant experience, then great! You’re a step ahead.

However, if they don’t have much experience, make them earn it. Giving a 23-year-old just out of college a C-level title in your firm is sure to be met with resistance. However, much you love your kid, be sure they have the experience and knowledge necessary to help your firm in the long run.

2. Keep clients comfortable

If you’ve owned your own firm for years, I’m sure you’ve had many conversations where you and clients both talk about your children. If you bring a daughter or son into your firm, your clients have probably heard your stories about them for years! Now, depending on your child, those stories could be good or bad, but let’s hope they're on the good side.

Your clients may feel an immediate bond with the new advisor you’re bringing on and feel like they know them personally if they’ve already heard about them for years.

3. Engage next-generation clients

There is a high likelihood that your clients have children who are a similar age or stage of life as your own children. When you bring in a child as an advisor, you can use that to your advantage to help your firm grow with next generation clients.

With the estimated $68 trillion wealth transfer that will be taking place between generations over the next decade, interacting with a client’s children needs to be on every advisor’s agenda.

Bringing in a young generation advisor, and especially one who you’re related to, can give you an advantage during this momentous period. Imagine your client’s children meeting your own, and then approaching the conversation from a perspective of “our parents enjoyed working together for 20 years, let’s see if we can keep that going.”

Instead of starting as strangers, there is an element of wanting to keep a lineage and connection alive.

The negatives of hiring family

Just as there are three key ways you can turn hiring family members into a success story, there are also three key ways it can derail your carefully constructed growth.

1. Unhealthy dynamics

Unhealthy dynamics can flow in either direction. A parent can be condescending and not allow a son or daughter to truly make their mark in the business because they are set in their ways.

Or a younger generation can easily become frustrated and antagonistic because they have ideas for how to solve issues through technology and not respect the methods that have worked for their parent over the years.

You need to have an awareness of your relationship with your family before adding on a business relationship. If you aren’t close with a child now and think business will bring you closer, you’ll likely find out under difficult circumstances that business complicates those relationships.

2. Lack of internal resources

Even if you have a strong relationship, you may not be the right person to mentor the next generation.

In many advisory firms, your firm, you and your child may be better off having someone else from your team act as their mentor and train them on how to do things in the business.

This structure allows you to keep yourself separated from directly managing your kid, and it gives your child some necessary freedom to grow and explore within the company without having to report every one of their actions to you for approval.

Not having another team member who can act as that mentor can create additional strain on what can already be a tense working arrangement for many families.

3. Inaccurate expectations

Sometimes a son or daughter may assume that they’re in line to get the business when a parent retires only to discover that their parent has another plan.

In other cases, a parent assumes that their child wants to own the business but they’re happier working elsewhere or not taking over complete ownership.

In both cases, conversations should happen early and often. When decisions are made, they should be done in writing so that no one can claim uncertainty later.

A final thought on financing

The last issue when transitioning an advisory firm from one generation to the next may be the most difficult of all: financing.

As a firm owner, are you comfortable with different sale structures in case your child can’t bring the type of down payment to a deal that another more experienced advisor might be able to?

Buying and owning a business comes with a great deal of pressure. Passing your firm onto the next generation might require that you find another owner so that multiple people have a stake in the business and it doesn’t all fall onto a single child’s shoulders.

Above all, look at how you can honor your family’s legacy in your business. That may mean that the next generation continues it after you, but it might not.

When you’re creating a financial plan for a client, you know that every family’s needs are different. Your family is no different.

Ryan Shanks is co-founder and CEO of FA Match, a Longmeadow, Massachusetts-based recruitment platform for advisors.

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