The Baer family have lived through the full lifecycle of a business, from the foundation and growth, through transformation and reorganisation, to selling their controlling stake while staying close to the Group. Their unique insights have helped to shape Julius Baer’s approach in assisting other families. Here, Raymond J Baer, Honorary Chairman, shares his own family story and the lessons learnt through the generations.
Julius Baer started with one man and one small business. Over the years, the Bank started to grow, incrementally at first, but by the third generation expansion was picking up pace. The Baer family was growing even more rapidly. By the time discussions began on handing leadership of Julius Baer from the third to the fourth generation, the family was over 130 strong, with three living generations and three branches. The second generation had grown up within a quarter-mile radius of each other, and this closeness was of huge value to the business and facilitated smooth decision-making. The fourth generation
s, however, did not grow up in the same way. Instead, we were globally spread, had different educations, and there was less cohesion, despite the fact that we had many family gatherings. Simply put, we all had different outlooks on life.
It’s all about trust
In the run-up to selling our controlling shares of Julius Baer in 2003, our family discussions became increasingly tense. It was a very emotional time and everyone knows that when you mix emotions and business, it becomes difficult. For our family, one of the key questions was one of trust: did the third generation trust that the fourth generation could help the Bank develop further?
When you have built a business as a family, thinking about letting it go is very difficult.
In an attempt to find some alignment, we attended many family office seminars over the years at INSEAD, IMD, and Wharton. We also enlisted the help of Randel Carlock, head of the family business department at INSEAD, who conducted interviews with all of the members in an attempt to find the right conclusion for both the family and the business. Ultimately, the business simply couldn’t wait for our family to make a unanimous decision on who should lead the fourth generation, so the decision was taken to relinquish control and allow the bank to further grow and succeed.
The importance of family governance
Looking back, it was the right decision to have taken and today Julius Baer is a strong player in the market. It is a proud employer with fantastic people, and our family still plays a role. This is the best outcome we could have hoped for, but, if we are being quite honest, we made some mistakes when it came to family governance. We didn’t have any formal agreements in place for the handover from the third to the fourth generation, nor did we have any written rules outlining how family members should come into the business. The same prudence we used to interact with the Bank, we should have applied to the family governance.
At its heart Julius Baer remains a family business, and to us there is no business that is more important than family.
When you have built a business as a family, thinking about letting it go is very difficult. This was certainly the case for us. Sometimes, though, keeping things in the family is not always best for the next generation or for the business, which can be better served by having more distance from the family, but that is very hard to see for yourself. To have an outside advisor supporting the key decision makers of the family is incredibly helpful, but that cannot just happen as and when you need it. You need to build trust with that advisor, the family needs to know them and they need to know and understand the family, so the process takes many years.
Reflecting on lessons learnt
My advice to other families in a similar position to ours is to start extremely early. Finding an advisor and establishing the correct family governance is key, because it disciplines the discussions within the family. Everything becomes less emotional, more rational, and it may help the stakeholders to come to better conclusions. It can also help families to avoid reaching the point where they only come together because there is a business decision to be made – that is not good ground to stand on. There needs to be a multi-dimensional connection between the business and the family or else risk the falling apart of the two sides.
Life, business, investments, aspirations - what matters to you matters to us. This article is part of our Wealth Planning series, in which we have a close look at what lies close to your heart and how foresightful planning may help you achieve your objectives.
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Julius Baer's special report on Global Families looks at the driving forces behind the changes shaping life for global families today, how three different families around the world are dealing with these challenges, and the role that family-oriented services such as family governance can play in mitigating increased complexity.
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