Marius Čiuželis on Traditional & Alternative investmentsInvestor / Advisor / Social Entrepreneur
During my professional career as a wealth manager I had a privilege to work with the first and second generation of wealth creators. We discussed quite many angles of their wealth starting from the sources of accumulation to expected or targeted investment performance, however, one theme was extremely rare. It is succession planning. Succession planning is a process. It's not like flipping on a light switch, or even changing a light bulb one time and then ignoring it. Succession planning is, you might say, a full contact sport, because it requires the current leadership of an enterprise to really roll up their sleeves and dig into the details of the business. The purpose of the effort is to thoughtfully identify and develop a comprehensive strategy for the transition of management, ownership, and control of a family enterprise, but unfortunately many families don't focus on succession planning proactively. They treat it reactively once a triggering event has already occurred, such as the death of the family patriarch or the retirement of a family business CEO. It's worth for families to think of succession planning as beginning much, much further out than that triggering event, because the trigger isn't when you plan, it's when the plan you have gets implemented, and its effectiveness is tested. The plan is what you develop before during calmer times. For business owners that haven't yet started succession planning, what is the first question they need to consider when thinking about eventual succession? The first question is always the same, and that is, what is your goal for undertaking the succession planning in the first place? In other words, what direction are you headed in? Fundamentally, family owned businesses can be transitioned in really only a handful of ways. First, you can pass on a business to the younger generations in the family, thereby creating or continuing a multigeneration family business. Second, you can sell the business either through a private sale or listing it on a public exchange, so basically realizing liquidity while transferring ownership and control outside the family. Finally, there are some hybrid options, which sometimes might include something like transferring ownership to key employees or the like, but basically, those are most fundamentally the end results here. So, next, though, it's important to assemble a team because succession planning is multidisciplinary, and you're going to need multidisciplinary expertise, and then thinking about your team, you might draw upon key employees or existing family or business advisors, members of the family or external advisors who specially work with families on transition and governance, but consider though that eventually you'll need your plan to include a variety of important elements including business, estate planning and wealth or liquidity management issues. So, entering these questions alone and what direction you're heading in, and who do you want to serve on your team can often take quite a bit of time, and families need to think about their goals and flesh these questions out more fully long before they knock into their attorney's office to draft a new operating agreement or trust structure. Those goals are the driver or the foundation of everything else, and it's worth taking time to get that part right. From what size on and type of business is it worth it or needed to do a succession plan? If the goal of succession planning is to ensure a smooth transition from one generation to the next, then any business, regardless of the size of the type that has that goal in mind, should engage in succession planning. Really, the size of the business, the value of the business, and even the industry that the business operates in is largely irrelevant for this purpose. It has everything to do with the family. How transparency and communication comes into the process? Is everyone involved? Communication is absolutely fundamental to this process. In study after study, the key characteristics of families who have successfully maintained family wealth for three generations or more, it boils down to three things, and those are communication, organization, and a shared set of beliefs or values, and interestingly, demonstrating those three traits is even more predictive for maintaining family wealth successfully than it is employing strategies for tax minimization or maximizing investment returns. This is not to say that you must be fully transparent about your questions or concerns for future succession from day one - pitting children against one another is not an effective plan for identifying a CEO. Instead, by failing to communicate with interested parties, or choosing perhaps to involve only those who are employed by the family business in family meetings, is a recipe for discontentment and discord among those who are excluded, and eventually, that dynamic paves the way for potential litigation among family members in the future. What about family philanthropy? How does it play a role in the succession planning process? Family philanthropy is one of the best ways to engage younger generations. Those who work in philanthropy like to say that philanthropy are your values and actions. So, what better way to teach your children or grandchildren what you believe in than by actually acting on those values together through shared philanthropy? Even if they're too young to hold a decision-making power, why not allow them to listen into the meetings where grant-making decisions are made. As an example, a family may allow the youngest generation to actually recommend nominal sized grants at one of their meetings. Family may challenge the children, as young as 10 years old, to come up with a cause that each of them cared about. The ideas might go to wanting them to give to their local school, supporting animals, which is of course very popular among young kids, and actually then helping to improve a local park. The kids then gain a deep sense of satisfaction from this process and feel more closely connected to the family’s philanthropy, and the parents end up learning something about their children and about how they perceive the world, so it’s truly a win-win.
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Marius Čiuželis on Traditional & Alternative investmentsInvestor / Advisor / Social Entrepreneur
Some quotes first: 1. Activist investor Jeff Ubben has left ValueAct Capital, the $16bn hedge fund he founded, to launch a new environmental and social impact investment company. 2. „Companies, as governed today, with investors asking for more current returns and more buybacks and so forth, aren’t working for society or nature,“ he said. „But I have to prove that there’s a return [in long-term impact], because otherwise . . . you’re not really changing anything.“ <..> „Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximised their margin. They’ve bought all their shares back . . . There’s nothing there. Every industry has about three players.“ 3. Having an impact fund and a traditional fund under the same roof at ValueAct was „confusing“ for investors, Mr Ubben said. Those who opted for the impact vehicle worried they were leaving returns on the table, and those who opted for the flagship fund worried that about being portrayed as environmentally or socially „unconscious“. „I don’t think these two strategies peacefully coexist,“ said Mr Ubben. Second, that was the essence. If RE investments are driven by "location", "location", "location" mantra, then in "ordinary" investing it is not only "return", "return", “return" anymore. I have been following for the last few years already an emerging and quite fast growing trend in hedge funds space to invest if not "for" then at last "with" social and/or environmental impact in mind. And that will benefit all of us. Even those who are far away from investing. https://www.barrons.com/articles/activist-investor-jeff-ubben-departs-valueact-to-focus-on-esg-51592936937
Activist Investor Jeff Ubben Departs ValueAct to Focus on ESG
www.barrons.com

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Marius ČiuželisInvestor / Advisor / Social Entrepreneur
Gabija, ačiū! 👏
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Marius Čiuželis on Traditional & Alternative investmentsInvestor / Advisor / Social Entrepreneur
7 investment lessons from Mom. Part 1. When economies and financial markets clearly go separate ways with economies all over the world searching for a bottom while financial markets flirting at their all time highs it's worth to refresh some basic rules how to safeguard your investment portfolio. And who is the best adviser if not... your Mom? I am sure your Mother has a saying, or an answer, for just about everything… as do most mothers. Every answer to the question “Why?” is immediately met with the most intellectual of answers “…because I said so”. Seriously, Mother is a resource of knowledge that serves us well over the years. They may teach us the basic principles to staying safe in the world of financial investments too. Below you will find some basic rules every Mother teaches hers kids: read and re-read them. Then read again. I am sure they will help you to become a better investor. NB The wisdom I'm sharing with you I found and kept for the future needs few years ago while browsing the internet. It was originally written by Lance Roberts, Chief Editor of the “Real Investment Advice” website, however, the link is not working anymore so enjoy it here. It’s a long read but worth your time. 1) Don’t Run With Sharp Objects! It wasn’t hard to understand why she didn’t want me to run with scissors through the house – I just think I did it early on just to watch her panic. However, later in life when I got my first apartment I ran through the entire place with a pair of scissors, left the front door open with the air conditioning on, and turned every light on in the house. That rebellion immediately stopped when I received my first electric bill. Sometime in the early 90’s, the financial markets became a casino as the internet age ignited a whole generation of stock market gamblers who thought they were investors. There is a huge difference between investing and speculating, and knowing the difference is critical to overall success. Investing is backed by a solid investment strategy with defined goals, an accumulation schedule, allocation analysis and, most importantly, a defined sell strategy and risk management plan. Speculation is nothing more than gambling. If you are buying the latest hot stock, chasing stocks that have already moved 100% or more, or just putting money in the market because you think that you “have to”, you are gambling. The most important thing to understand about gambling is success is a function of the probabilities and possibilities of winning or losing on each bet made. In the stock market, investors continue to play the possibilities instead of the probabilities. The trap comes with early success in speculative trading. Success breeds confidence, and confidence breeds ignorance. Most speculative traders tend to “blow themselves up” because of early success in their speculative investing habits. The speculative trader generally fails to hedge against the random events that occur in the financial markets. This is turn results in the trader losing more money than they ever imagined possible. When investing, remember that the odds of making a losing trade increase with the frequency of transactions being made. Just as running with a pair of scissors; do it often enough and eventually you could end up really hurting yourself. What separates a winning investor from a speculative gambler is the ability to admit and correct mistakes when they occur. 2) Look Both Ways Before You Cross The Street. I grew up in a small town so crossing the street wasn’t as dangerous as it is in the city. Nonetheless, I was yanked by the collar more than once as I started to bolt across the street seemingly as anxious to get to the other side as the chicken that we have all heard so much about. It is important to understand that traffic does flow in two directions and if you only look in one direction – sooner or later you are going to get hit. A lot of people want to classify themselves as a “Bull” or a “Bear”. The smart investor doesn’t pick a side; he analyzes both sides to determine what the best course of action in the current market environment is most likely to be. The problem with the proclamation of being a “bull” or a “bear” means that you are not analyzing the other side of the argument and that you become so confident in your position that you tend to forget that “the light at the end of the tunnel…just might be an oncoming train.” It is an important part of your analysis, before you invest in the financial markets, to determine not only “where” but also “when” to invest your assets. 3) Always Wear Clean Underwear In Case You’re In An Accident This was one of my favorite sayings from my mother because I always wondered about the rationality of it. I always figured that even if you were wearing clean underwear prior to an accident; you’re still likely left without clean underwear following it. The first rule of investing is: “You are only wrong – if you stay wrong”. However, being a smart investor means always being prepared in case of an accident. That means quite simply have a mechanism in place to protect you when you are wrong with an investment decision. First of all, you will notice that I said “when you are wrong” in the previous paragraph. You will make wrong decisions, in fact, the majority of the decisions you will make in investing will most likely turn out wrong. However, it is cutting those wrong decisions short, and letting your right decisions continue to work, that will make you profitable over time. Any person that tells you about all the winning trades he has made in the market – is either lying or he hasn’t blown up yet. One of the two will be true – 100% of the time. Understanding the “risk versus reward” trade off of any investment is the beginning step to risk management in your portfolio. Knowing how to mitigate the risk of loss in your holdings is crucial to your long-term survivability in the financial markets.

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