Family feud drives home need for succession plans

When Chris Wanken’s dad, a branch manager affiliated with Raymond James Financial Services Inc., fired him last March, it ignited a smoldering family dispute that experts say might have been avoided with better planning.

The Wankens’ story is the stuff of nightmares for any family but particularly hits home for those running an advisory business with a sibling or parent.

In the past year, Chris Wanken and his father, John, have fired arbitration claims and counterclaims at each other that center on their business relationship at Beacon Financial Advisors of Addison, Texas. Making the family dispute more painful, Chris Wanken was sued last month in Texas state court in Collin County by his father, who is seeking custody of the son’s two children.

Family businesses of financial advisers and registered reps typically make clients more comfortable with financial planning be-cause they see the process play out in the family ties of their advisers, industry observers say. Simply put, a family of happy advisers working together comfortably and in good spirits is dynamite marketing for a firm.

But the agendas of family life and business life can easily seep into one another, and if unchecked or left unnoticed, that combination may have a devastating effect.

“To understand a family business, you have to constantly think about the family side of conflicts and the business side of conflicts,” said James Grubman, a psychologist who has worked with advisers.

PLAN FOR FUTURE

Steps families of advisers can take to avoid a mess go beyond simple succession planning, said Mr. Grubman, whose practice is based in Turners Falls, Mass. “You have to ask: What happens if dad gets hit by a bus tomorrow? And the son? And the mother?”

Another expert agrees that advisers need to plan for the future.

“First, make sure a succession plan is spelled out and understood by the parties,” said another industry analyst, who asked not to be identified. And the plan must have two elements, he added: one for an immediate crisis and the other for the long term and retirement.

Family businesses need to make distinctions between people and policy, Mr. Grubman said. “In many family businesses, decisions are person-based. Family businesses neglect making decisions based on policy.”

Chris Wanken alleges in his arbitration claim that he was essentially an equal partner in Beacon Financial Advisors and that his father turned his back on that agreement and put a black mark on his son’s brokerage records because the latter was terminated for “job performance.”

Chris Wanken also sued Raymond James for failing to supervise his father. The St. Petersburg, Fla., firm said the claim “is without merit and is a family dispute between father and son.”

John Wanken, in an arbitration countersuit, claimed that his son was not a partner but “did what was asked and required of him as an employee,” at least in the early years of the business relationship. From 2003 until Chris Wanken was fired in 2008, his father paid him 50% of net profits on revenue at the firm, excluding insurance commissions, for which the latter received 30%, according to the elder Wanken’s claim.

There is no doubt that the devastating stock market has had a traumatic impact on both advisers and clients, along with their families, industry observers said.

“I’ve seen family tensions escalate in the past year,” Mr. Grubman said. “There’s a general atmosphere of fear, anger, frustration and betrayal.”

Chris Wanken said in an interview last Wednesday that after his mother, who also worked at the firm, died in 2007, he and his father realized they had failed to make adequate plans for the future of their business.

They had operated as a team for seven years, building the firm to about $80 million in client assets, but never put their business agreement on paper, Chris Wanken said.

Unfortunately, that lack of planning played a significant part in a bitter family rift, he claims, which resulted in his father’s firing him six months after his mother’s death.

A PAINFUL LESSON

The father and son are now enmeshed in various bitter legal disputes.

“I loved my father and trusted him. Working with family, it’s awesome,” Chris Wanken said. “And clients love it. It creates an instant contingency plan.”

But Chris Wanken has learned an extremely painful lesson over the past year. In business, “you have to treat family as you would anyone else,” he said. “Families can have arguments. Take the business and money part out of it, and lay the agreement out in black and white.”

“It’s not unusual that this happened after the death of the matriarch,” Mr. Grubman said. “If you lose a key player such as a mom, you may not be able to work things out.”

Mr. Grubman said that mothers often play the role of “chief emotional officer” in family business, and although she may not be directly involved in the business, her impact offstage is still great and needs to be considered.

“She is an adviser to the business, working behind the scenes,” he said.

John Wanken did not return calls to comment. But his lawyer in the arbitration claim, N. Henry Simpson of Dallas, said his client “looks forward to having the matter resolved in his favor.” John’s attorney in the custody case, Melinda L. Eitzen of Plano, Texas, did not return a call to comment.

Chris Wanken is scheduled to appear in court today in the custody hearing.

E-mail Bruce Kelly at [email protected].

Related Topics: ING Group, Raymond James & Associates Inc.